Looks like the AIG derivatives wizards are going to get their bonuses after all. Per the Journal:
Treasury has determined there is no way the government can actually extract the money from the individuals who already received the bonus payments. The government would face lawsuits with the potential of significant damage payouts and lawyer fees that could easily exceed the cost of the bonuses.
Instead, the administration said it will use a $30 billion installment of bailout funds approved March 2, to bring some pressure to bear on AIG. The official said before AIG can draw down funds from the $30 billion, new rules would be written into AIG's contract to ensure no government money goes toward paying financial-products division bonuses. The cost of bonuses already paid would be recouped for the taxpayer.
Hard to see how this satisfies the public's bloodlust. Unless the banks are somehow able to recover on their own, I think receivership/nationalization is more or less inevitable. There just won't be any other way to pry more money out of Congress. See, for example, this additional detail from the Journal:
On Monday, nearly 80 House Democrats wrote Mr. Obama to say they were pleased that he intended to block the bonuses, and hinted that a failure to do so would have consequences. "For the sake of the President's ability to continue to take the steps that may be necessary to rebuild our economy, there must be a stronger response than simply decrying this development," the lawmakers wrote.
--Noam Scheiber