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The question of the AIG executive bonuses is a very complicated one. On a moral and ethical level, the immediate answer is that any bonus paid out of government funds should be comprehensively and immediately repaid. However, it has been said by the current management structure at AIG that these bonuses are contractually required and so legally must be paid.

As a "Wall Street Insider" for nearly 20 years I have been the beneficiary of the customary practice of the annual bonus, although not in the amounts received in the payouts in question. The financial industry has, for many years, rewarded its participants by the distribution of profits to its employees.

But it should always be remembered that the key word here is that bonuses are the distribution of "PROFITS". In the recent heyday of the financial industry five and six figure bonuses have become the norm and they have been expected by the employees of the financial companies. This has not always been the case.

During the 1980's and early 1990's there were many years when Wall Street firms were not highly profitable and the bonuses were curtailed. I have had first hand knowledge of this situation and while I was not happy about the lack of bonus I was realistic enough to understand that the company cannot spend money it does not have. Then we entered the boom of the mid and late 1990's. With the increased flow of money, the relaxing of the regulatory requirements and the acceptance of the more risky investment instruments came the corporate desire to find, hire and retain the best and the brightest in the financial world.

In order to attract talent to their doors companies began writing guaranteed bonuses into contracts of employment. Four and five figure signing bonuses became the norm for a new employee joining a financial company and a guarantee of five and six figure annual bonuses for the first 3 or 5 years of employment has become commonplace. So commonplace were these bonuses that, to my knowledge, in many cases they were spent before they were received.

What has been missing from these contracts is the proviso that the company must be profitable and that the amount of the payout will be adjusted according to the level of profitability. But in the era of profligate credit spending, the thought of spending what one does not have is not an extraordinary concept.

As a recipient of a bonus I can imagine the angst of the AIG personnel at the thought of returning the money that has been worked for throughout

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