A.I.G. — the American International Group has become arguably the most interesting public figure of corporate governance in this economic crisis, with President Barack Obama resenting their company for theft-like behaviour with regard to the recent bailout funds provided to them by both the U.S. Treasury and the Federal Reserve.

“Excuse me, I’m choked up with anger here,” said President Obama, demonstrating some light humor, but intensifying the fact that this President in many ways, has lost his cool about the issue; and to most, rightfully so.

The company, who has paid out more than $165 million in taxpayers money destined to keep the company alive in executive bonuses has come under fire from both public and private officials who feel their move has been ethically dubious. New C.E.O. of A.I.G., Edward Liddy, told shareholders and politicians simply that his hands were tied, the previous C.E.O. had entered agreements which contractually bound the payments thus far — an explanation which has relieved Mr. Liddy from much of the negative spotlight; but not an explanation that will relieve the company itself.

New York State Attorney General, Andrew Cuomo, is demanding details regarding who received bonuses from the company, while President Obama and Treasury Secretary Timothy Geithner head the battle to use “every legal method available” to attempt to place a block on these payments.

“We were disturbed to learn over the weekend of AIG’s plans to pay millions of dollars to members of the Financial Products subsidiary through its Financial Products Retention Plan. Financial Products was, of course, the division of AIG that led to its meltdown and the huge infusion of taxpayer funds to save the firm,” said Cuomo.

Perhaps the question, however, is why A.I.G. is receiving bailout funds. The answer you’ll hear from many mainstream economists and the political establishment is simply that “they’re too big to fail,” suggesting that a failure of the company would cause such a large ripple effect that the economy would be in ruins. A fact which could be very true — A.I.G. acts as an insurer and guarantor on many banks financial assets, and without A.I.G., these companies would be open to liabilities in their losses, as well as the implicit loss in value from assets which are left uninsured.

The Federal Reserve Board said back in September 2008, that “a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance.”

A disorderly failure, as in, one that the government didn’t structure — this one little phrase has led many investors to believe that in fact, A.I.G.’s government “help” is only destined to slow down the failure of the company — prevent situations that may arise in a sudden failure, like a firesale of all it’s assets.

This first bailout, from the Federal Reserve Board (through the Treasury) provided the company with $85 billion in a 24-month term loan facility at a rate of the Libor exchange rate plus 8.5 per cent; in exchange for 79.9 per cent equity in the company, shattering investor share value. At this point, new C.E.O. Edward Liddy was installed as replacement to former C.E.O. Robert B. Willumstad. This, however, was not enough.

Two months later, the company found itself in further trouble — the government expanded the available loan facilities and renegotiated the terms, now providing the company with up to $150 billion, in which $30 billion was included for the government to purchase collateralized debt obligations which may pose a risk to the bank’s asset sheet. This additional facility, many analysts believed, acted more as a “coddling” to the company than assistance to the economy — A.I.G. had been given the funds to gracefully fail, and yet, worries were raised yet again that the company’s failure at this point could cause a catastrophic economic future.

“The economy and capital markets remain in turmoil, and we are taking additional steps to preserve the value of our businesses and maximize the ultimate proceeds for the benefit of all stakeholders, including taxpayers, ” said new C.E.O., Edward Liddy.

To put things in perspective, A.I.G. lost just under $100 billion in 2008 as a whole, $61.7 billion of that in the last quarter. The company has received an estimated $170 billion in government aid.

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