A few things seem reasonably clear:
1. The administration can't force AIG to abrogate the bonus contracts; they're claiming their hands were tied by Congress (and Chris Dodd in particular); they're not going to claim or invent any new legal authority here.
2. The administration will subtract the bonus money from the latest $30 billion loan extended to AIG.
3. Congress will pass a law levying an excise tax; it will probably apply to a range of companies -- not just AIG; the law will be challenged in court.
4. The Fed and the Treasury did not -- could not -- review all of the employment contracts.
5. The singular focus on executive compensation restrictions after the fact obscures -- though does not excuse -- the atmosphere during the House/Senate/White House negotiations on the stimulus bill.
6. Watch for the Treasury and the Fed to begin a new review of contracts for top executives/performers/traders at major banks/financial institutions. It's not clear what the government can do, but they don't want to be surprised
This administration is going to have to use their arbitrary -- not capricious -- powers to consipicuously hurt -- wailing and gnashing of teeth -- some of the entitled rich. The sooner they do it, the less they will have to.
They can choose to hurt some Jews, some Wasps, or some Harvard MBA, Yale Law ... whatever. But, they better do it soon to re-establish that there are no noble entitlements in this republic.
The US Constitution does not include a "Hold Harmless" clause, not for the Republicans or the Democratic elites.
The singular focus on executive compensation restrictions after the fact...
Um, a lot of us were talking about the lack of executive compensation restrictions at the time. So I'm not sure I see it as "after the fact".