Rage against AIG is all the rage. The Washington Post reports on its front-page:

President Obama's apparent inability to block executive bonuses at insurance giant AIG has dealt a sharp blow to his young administration and is threatening to derail both public and congressional support for his ambitious political agenda.

That might be a bit hyperbolic. Is there anyone saying, "I won't support Obama on health care or clean energy because of AIG?" But the uproar over AIG is real. Senator Chuck Grassley, an Iowa Republican, has even suggested that AIG execs kill themselves, a la disgraced Japanese leaders. Stephen Colbert wielded an actual pitchfork on his show.

It's obvious: AIG has become the scapegoat for the economic collapse. Members of Congress who have been loathe to name names previously are now rushing to blast AIG. Senate Majority Leader Harry Reid has vowed to introduce legislation to kill those lousy bonuses. Of course, the company and its reckless executives deserve condemnation and scorn--and maybe jail cells. But the amount of the bonuses is minuscule compared to the amount of taxpayer money that has been poured into AIG by the Federal Reserve; in fact, it's about one-tenth of 1 percent of the AIG bailout.

It's easy to get upset about the AIG rewards. Just as it it's easy to get upset about Bernie Madoff. But focusing on either is something of a distraction. The real issue is not the AIG exec money-grab. It's how the system permitted AIG to jump so far off the rails and how the American taxpayers have been placed on the hook for AIG and so many other financial firms. Members of Congress and media pundits should spend as much time pondering financial reregulation and scrutinizing the various bailouts (to determine if they are indeed worthwhile) as they do demonizing AIG executives. For instance, the Federal Reserve since the collapse of the market has loaned $800 billion to $1.2 trillion to assorted banks, and it has refused to identify these institutions. That secrecy ought to prompt at least 5 percent of the outrage stirred up by the AIG bonuses. But it hasn't.

The AIG bonuses are truly outrageous. But they're chump change compared to what else is happening. No doubt, many bankers and Big Finance leaders are delighted to see AIG suck up this much oxygen. That means there will be less heavy breathing about all the other outrages still under way.

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