And it’s all far worse than you might think.

Sorkin offers an answer to a question I’ve been asking for a while: Who wants to hire those supposed AIG financial geniuses? They brought one of the world’s largest insurance firms to its knees and put the entire economy at risk.

Well, guess who does want them — and apparently is even fighting for their services?

It’s the companies that want to bet on AIG’s demise, using the expertise of the former employees who put together its house of cards in the first place. From Sorkin:

A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.

A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.

So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company. In the end, we may actually be better off if they can figure out how to unwind these tricky investments.

Let’s see if I understand this: We have to pay to keep in place the people who put together ruinous financial deals, only because they are the only ones who understand how to unwind them – and they’ll take that information and use it against their former company, and American taxpayers, if they don’t get their millions in bonuses.

This goes far beyond the pale. If the government can’t act because of the sanctity of compensation contracts — I still don’t fully buy this explanation, but that’s for another day — there are still things the rest of us can do.

Let the sun shine in. Fire up the FOIA requests. Support New York Attorney General Andrew Cuomo as he goes after the names of those getting the bonuses. I talked about this on Monday — let the friends and neighbors of those holding AIG and the American taxpayers hostage with their bonus demands know exactly who they are.

I guess Wall Street must have operated this way for years — take what you can for yourself, screw over the company you left behind, get a pat on the back for your cleverness — but things are different now. We’re in a crisis that is increasingly draining away public funds that could go to other uses, and we all have the right to know what’s going on with our money, and who is benefiting from it — especially for personal gain rather than the public good.  And if it’s true that AIG employees want to go elsewhere and use their knowledge to tank the company if they don’t get their money, then let them stand up and admit it. I’m not talking about vigilantism. Just the more powerful weapon of public shame, like what happened in Houston after Enron fell. Maybe it won’t be so socially acceptable to strut your ability to rip off your former employer and your country anymore.

And going forward, the Obama administration must put a stop to this. Non-compete clauses are common in the corporate world. Take a bonus from AIG in its inevitable next round of bailout funds, and sign on the dotted line that if you leave the company you won’t use your knowledge to work for its demise. AIG financial products employees should probably sign such a clause regardless of whether they receive a bonus, because it’s the right thing to do.

If anything good comes out of this financial crisis, maybe it will be the return of shame. Don’t count on it, though. Wall Street’s probably already gearing up to fight off financial reform. We should be smarter about this, moving forward. Follow the money that gets spent by the financial industry to fend off new rules and regulations.  Stop letting firms that taxpayers are keeping afloat make all the decisions behind closed doors. Make compensation and bonuses an open book. The lesson from this AIG mess isn’t just about derivatives and credit default swps. It’s much simpler: Don’t allow the public to get blindsided again.

Mr. Obama called A.I.G. “a corporation that finds itself in financial distress due to recklessness and greed.”

“Under these circumstances, it’s hard to understand how derivative traders at A.I.G. warranted any bonuses at all, much less $165 million in extra pay,” Mr. Obama said. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”

White House officials said that the administration is not looking to take A.I.G. to court to stop the company from paying out the bonuses. But they said the Treasury Department would be trying to figure out what they can do to block A.I.G. from making the payments within the legal confines of A.I.G.’s contractual obligations to the executives.

I’m not really sure how that last strategy may work. As Hilzoy points out, those AIG derivatives experts may have tied everyone’s hands. It may be that only the people who put credit default swap agreements together know how to unwind them. If so, demanding bonuses could be a form of blackmail. From Hilzoy:

If I ran someone down in a car on a deserted road, it would take a lot of gall for me to ask him to pay me an exorbitant price to take him to the hospital since there’s no other car around. When you run someone down, taking him to the hospital is the least you can do, and payment shouldn’t so much as enter the picture.

Likewise, when you run the world financial system and the American taxpayer down, it takes a lot of gall to ask for not just a performance bonus, but a retention bonus as well. Any remotely decent person would stay and try to unwind the damage s/he had caused, if s/he was the only person who could do so, and would be content with his or her salary. (After all, it’s not as though people in financial services are generally underpaid.)

If the people in the AIG Financial Products felt this way, they could have made all these legal issues about contracts vanish by simply declining their bonuses. And they could solve the retention problem by agreeing to stay around as long as they’re needed, at their existing salaries. Instead, they are using our predicament to extract even more money for themselves. And that’s obscene.

Maybe we should begin listing the identities of the AIG financial products employees who accept the bonuses. If they can’t hide their actions — and  their friends and neighbors come to know exactly what kind of people they really are — maybe some of this nonsense will end.