Allowing those $165 million in bonuses to go out is a mistake. The retort by the lawyers is that AIG could face lawsuits if they did not go ahead with the bonus payouts. Even if the payouts represent less than 1% of the bailout money given to AIG, it's not the amount so much as it is about a company giving out any bonus when it's asked for taxpayer bailout.
The Obama Administration missed one huge opportunity to leverage Americans' moral outrage of AIG against the threat of these lawsuits. You would have to be a fool to file such a lawsuit against the interests of the American Taxpayer, essentially acquiescing to public scrutiny and anger.
A contract may be legal and binding, but the moral outrage is even more powerful.
Instead, the Obama Administration just suffered its greatest toll on their moral high ground and political capital.
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