You guys aren’t going to like this, but you know who I feel sorry for? Edward Liddy. That’s right. He’s the guy the government appointed to run AIG after Hank Greenberg and his gang set it up to crash and burn. Today Greenberg popped up on television like a vicious Mini-Me to pile on the dead bunny.

Greenberg left in a scandal in 2005 after setting up the business unit that got AIG into all of its trouble. You know that operation. The Financial Products group that came up with all those cute derivatives backed with now-toxic instruments. And here he is this morning, jabbering away like a wise elder statesman. Pfui.

This was only slightly worse than the drubbing that Mr. Liddy took at the hands of the suddenly irate congressmen in Washington on Wednesday. Many of our senior legislators had good points to make, no question about it. The situation is dire, and certainly subject to Federal review, as it was years ago when the SEC was supposed to be regulating the industry. Most of the politicians acquitted themselves well. But at times the hectoring got out of hand, to the point where you might have thought, if you were a cynical type of person, that these members of Congress were trying to come up with the quintessential sound bite that would land them on the evening news. Sure enough, at the end of the day, it was the showboat from Massachusetts whose “have you no shame!” diatribe did get the most airtime. I guess he knows his business, too.

Of course, Edward Liddy isn’t blameless. He obviously made some very bad decisions. But he is only the last in a series of managers – both at AIG and elsewhere – who has done so. It’s pretty evident noxious stuff has been going on everywhere for years. The culture of compensation of which he was a part is so deeply ingrained in corporate culture now that even Tim Geithner, the guy who is supposed to oversee the bailouts, didn’t pop up a huge red flag when he first heard about AIG’s contractual obligations to its disgraced lunkheads. 

Worst of all, for the poor doofus on the stand, is the thought that you’ve got to know is running through his head as everybody is saying nasty things about his mother: “I’m doing all this for one dollar a year.” 

Man. I would do it for less than five. As long as it came with a guaranteed bonus.

So now Congress is going to go after the AIG bonuses, responding to the rage that most sentient beings are feeling right now about the whole question. One suggestion is that the Government simply impose a 100% tax on the sums received by A.I.G. bonus heads. This would seem to be a logical extension of the Government’s current policy of taking about 52% of all my income. Still, it’s a dramatic solution to the problem.

I’m just as mad any anybody else at those numbskulls at A.I.G., of course.  It really stinks. You have to wonder how a “retention bonus” is meant to affect the performance of a manager who has already left the organization. Like, that’s just stupid.

If you want to give me some bulls**t rationale for why you’re going to suck up billions of dollars and spew it out to your colleagues and pals, come up with something credible or at least appropriately truculent, like “We did it. We’re keeping it. If you don’t like it, fire us and pay us our contractually-mandated severance packages.”  That at least is a truthful presentation of the executive mind-set.

Still, you have to worry a little about the policy implications. Does the government – even in pursuit of fairness and equity – have the right to implement new, punitive laws against individuals who have displeased it, and Us? New laws that prevent such things happening in the future, no question. But laws that retroactively impose justice kind of make me nervous for some reason. 

In the case of A.I.G., the government owns 80% of the company now, so it’s easy simply to assert that We the People can pretty much do what we want. And maybe we should. There’s no question that taxpayers didn’t fork over all that money so that individuals could haul it away in shopping bags as they exited the building they helped to wreck.

But you’ve got to think that Business is in for a really rough ride from here on in. Sweeping in on the heels of what all these moron financial types and other brain-damaged economists have wrought will be  a host of new laws, new regulations, new ways to protect the nation and its citizens from the greed and collective criminal mind of Wall Street, its denizens and its running dogs. And we deserve whatever we get.

Newton’s Third Law states that every action produces an equal and opposite reaction. He was talking about physics. But it’s equally applicable to less scientific stuff as well.

Terror, for instance, breeds repression and a more surveillant society, one more concerned about safety and security and less about personal liberty.  In the wake of 9/11, this country did many things out of anger, fear and a desire to hold those guilty accountable. Some were reasonable. Others, in retrospect, were not.  Equal and opposite reactions are not always as good as they first may appear. 

Bernie Madoff is not the only criminal who prowled Wall Street. In many ways, he’s just the fall guy, a dramatic extension of the way business was done every day in the big craps game. In these A.I.G. guys, we have a perfect example of the global business culture that ran things for a long time and still does. Their very presence cries out for retribution, and Newton must be served.

The ongoing AIG mess provides us with an interesting sidelight today – the use of an excuse that is no longer acceptable in the unwired global universe in which we now live. The unacceptable excuse is still unfortunately in wide use among public relations professionals who represent disgraced or beleaguered executives. Here it is, from today’s New York Times: 

Since November, A.I.G.’s financial products unit has been led by Gerry Pasciucco, a former vice chairman of Morgan Stanley who was brought in by Mr. Liddy with instructions to wind down the unit. Company executives said they faced a need to keep skilled professionals in the business unit, which traded trillions of dollars worth of financial derivatives, because it would take great expertise to shut down the business in an orderly manner and without causing more turmoil.

Christina Pretto, a spokeswoman for A.I.G., said Mr. Pasciucco was traveling on Monday and was unavailable. But she said that since his arrival, the company had reduced the volume of its financial positions by more than 25 percent, starting with the “complex and difficult-to-manage positions.”

Now, Mr. Pasciucco, the AIG executive running the bonus-hungry unit of that clueless insurance company, may be in Timbuktu, or in Katmandu, or simply in a Ramada Inn in Fresno, but I assure you that no matter how far he has travelled, how distant his locale, how remote his whereabouts, he can be reached by cell phone or BlackBerry. Be he at the bottom of the ocean! Or perched atop a Himalayan peak! He can be found.

The contemporary business climate in which we now suffer presents us with many complexities, many indignities. One of them is, unfortunately, the ubiquity of digital communications. This has many benefits, and an equal number of personal liabilities. One of them is the demise of certain excuses that used to make life more tolerable. Included are such now out-of-date chestnuts as “I’ll read that when I receive it tomorrow morning and get you an answer on it by noontime,” which was killed by the fax machine, and “I can’t get there until Tuesday so let’s postpone the meeting until then,” which was laid low by teleconference technology. And now, I’m afraid, spokespeople of executives who wish to hide from the media, the government or their estranged spouses must now come up with a replacement for “He’s traveling right now and cannot be reached.”

How about, “Hello? I can’t hear you! I’m going into a tunnel!”

Let me ask you a question: If you were a passenger on the Titanic, and somehow managed to wangle your way ahead of the women and children onto a life boat, would you demand to take your luggage?

I don’t think that’s a far-fetched comparison. Here we have a massive company that hit a huge iceberg – this one of its own devising – and just as it’s about to sink under the water it receives a timely and enormous rescue… and the guys who ran it into trouble in the first place are now leaving the boat with their silverware, furs and jewelry intact.

Of course, these are insurance guys. I don’t know what we all expect of them. In my experience, insurance guys are trained to justify just about anything.  Last month my health insurance company told me that a 5 a.m., six-hour visit I made last summer to the Emergency Room of my local hospital was not covered because it was not an emergency. It’s not that hard for people trained in that kind of reasoning to tell themselves that they’re entitled to their legally-promised bonuses.

The thing that’s interesting in this case is how many AIG executives seem to have mandatory boni in their contracts. In my experience, perhaps the top five guys in any corporation usually have that kind of protection. Here we seem to have an entire executive class that has the clause in their deals. I guess wish I had their attorney or worked in an industry that while it is so rigorous with others is so generous with itself.

There are, I suppose, only two solutions to this problem going forward. The first is for Congress to immediately pass a law that any firm that receives bailout money will be under certain constraints:

• No bonuses not approved by the taxpayers;
• No boondoggles to which the taxpayers are not invited;
• All executive expense accounts to be reviewed by Warren Buffett.

The other solution is more difficult: Trust in the people who run our financial system must be restored… one step at a time.

Wall Street thinks its problems are related to objective measures such as debt, equity, long and short selling, broken models, secular issues afflicting certain key industries. That’s nonsense. The reason why everybody is off of the investment train is a lot more simple. People hate Wall Street and the business people who work in or around it. 

It’s not hard to see why. It’s pretty clear that as things stand the interests of Wall Street are not those of working corporations and the people who are employed there. Americans are enraged and disgusted because they were sold a bill of goods and now they see the light. At the end of the great, decades-long confidence game the Street has run, we are all out of that commodity. No confidence, no investment.

How to restore that trust? I can think of one thing that could be done immediately. It’s not easy. It’s totally counter-intuitive. It will never happen. But it would be an excellent gesture. 

The AIG guys should renounce their bonuses. Their management and the government have no legal standing to do so. They’re going to have to do it for themselves. For all of us.

I say this in full knowledge of how improbable and difficult this would be. I know a whole lot of people, myself included, who depend on their bonus to live. It’s not a frill. It’s part of our compensation that we wait for, plan for, put our kids to school with. We don’t have yachts. We don’t have polo ponies. We have mortgages and child support and elderly cocker spaniels who have kidney trouble. That’s what our bonuses pay for.

But most of us don’t work for companies that have screwed up the entire economic system of the world. Most of us don’t work for corporations that require the People to step in and save their butts.  

The effect of such a renunciation would be immediate and dramatic. “Gee,” people around the world would say. “Maybe American business people aren’t total ethical morons after all.”

It’s a first step. Somebody has to take it. Why not the proud, courageous insurance men and women of AIG, standard-bearers on our collective  march toward a new tomorrow?

I was sitting in the big conference room the other day while the market was crashing and rolling and exploding in mid-air like some CGI Bruckheimer special effect. The dudes around the table were so heavy it’s a wonder we all didn’t fall through the floor and down on the heads of the folks a level below. The mood was somber, of course. “Down six,” one graybeard would say. “Down eight,” another would reply. I don’t know what metric they were talking about, but I didn’t want to. You don’t question faces like that. 

The topic of that day was Merrill (MER) and Lehman (LEH). People were pretty shocked. “What’s going to happen to Morty?” one said to another. Morty is an analyst who everybody knows. Nobody knew. There was some consternation about the fact that, at that point, nobody wanted to buy Lehman. All that value and history, up in smoke. Too bad. So sad. 

There was a silence around the table as everybody worked the BlackBerry. Then one of them murmured what was on everybody’s mind. “… and then there’s AIG,” he said. They all looked up. And their faces were white. Whiter than usual, even. 

I don’t know much about economics, really, certainly not as much as the MIT risk analysts who got us all into this mess in the first place, or the prognosticators who didn’t see it coming, or the specialists on the Street who are thanking their lucky stars that windows in this day and age are hermetically sealed. But I do know that today’s news that the Fed is rescuing AIG (AIG) is very welcome. 

I know there are critics who say that bailouts reward bad behavior. I imagine there are a lot of experts who could tell you why this is unwise in the long run and all that. But Armageddon has been forestalled for at least one more day. I appreciate that, don’t you?