CNN iReport

http://finance.yahoo.com/tech-ticker/article/210269/Bonuses-an-1.2B-Outrage-But-Bailouts-of-AIG's-Trading-Partners-100-Times-Bigger;_ylt=Aj_KTlbTH1EFESN.M38rYklk7ot4?tickers=GS,AIG,BAC,C,DB,BCS,XLF

As outrage over the AIG bonus scandal continues to grow, it's dawning on a number of Americans that the real outrage is the backdoor bailout of AIG's counterparties, including Goldman Sachs, Bank of America/Merrill Lynch, Citigroup and a host of European banks.

As discussed here yesterday, while the $1.2 billion of AIG bonus money is offensive, it pales in comparison to the over $100 billion of bailout money that went in the front door of AIG and right out the back door to its counterparties.

I don't often or always agree with The Wall Street Journal's opinion page but they are on to something here: "President Obama joined yesterday in the clamor of outrage at AIG for paying some $165 million in contractually obligated employee bonuses. He and the rest of the political class thus neatly deflected attention from the larger outrage, which is the five-month Beltway cover-up over who benefited most from the AIG bailout."

"Cover-up" is a strong word but I would agree the outrage over the AIG bonuses has served as a convenient distraction to this weekend's revelations about which AIG counterparties benefited from the bailout, and to what levels.

The whole sordid episode raises several questions that need to be addressed by politicians and policymakers:

It's about six months since the first AIG bailout; why has it taken this long for the names of these counterparties to be revealed? (Related: Is Barack Obama really being more transparent than his famously secretive predecessor?)

Why wasn't it explained clearly to the American people that "rescuing AIG" really meant "bailing out its counterparties"? And, if so, why didn't we just give the money directly to AIG's trading partners?

Why is the U.S. government continuing its policy of "making whole" counterparties and institutional bondholders of bailout recipients, instead of requiring those investors (who entered into those deals freely and without a government guarantee) to at least take a "haircut" and share in the taxpayers' pain?

Why didn't former Treasury Secretary and former Goldman Sachs CEO Hank Paulson disclose that his former firm would be one of the prime beneficiaries of the AIG bailout?

When is Tim Geithner, reportedly the prime architect of the AIG bailouts (among others), going to take responsibility for this disaster?