For those of you who may have just read the headlines and listened to the featured story blurbs on the news regarding insurance giants IAG with passing interest, I will try to give you a simplistic version.

Let’s start with the basics. Who or what exactly is the American International Group?

Well, AIG is by their own information “a world leader in insurance and financial services” and “the leading international insurance organization with operations in more than 130 countries and jurisdictions.”

Heady stuff, right? I mean, we are talking about the worldwide leader in insurance services and one of the largest financial services organizations on earth as well. We are talking here about the real money. Not just big money, but ‘real’ money. The kind of money that moves governments and shakes nations.

The folks at AIG are just one of many financial services companies that have undertaken huge losses and faced dire straights as the American economy has gone into reverse over the past year. They blame their particular problems largely on what are called ‘credit default swaps” (CDS) in the industry.

Now a CDS is basically a financial instrument representing the exchange of risk, that some entity will default on their debt.

For instance, you own company ‘A’ and it is at risk of defaulting on its debt payments because the economy is turning sour and your business is drying up.

Now some other company ‘B’ owns a bond investment in your company. They see you are in bad shape, and they want to hedge their risk against you going belly-up. So they go to the operator of a ‘hedge fund’ and basically purchase insurance, that CDS, against you defaulting.

A ‘hedge fund’ operator is someone who takes on the risk of a company defaulting in the hopes of making a profit, since most companies over time have historically not ended up actually defaulting. They obtain that profit when the managers of company ‘B’ pay interest to the hedge fund operators.

Should your company ‘A’ never actually default, then the hedge fund loses nothing and gains all of the interest it has been paid by that ‘B’ company. If you do actually default, then the hedge fund loses because they have to pay the full amount of the CDS to company ‘B’ covering the loss in their investment with you.

The worse position that your business ‘A’ is actually in, the higher the interest rate that the hedge fund will demand from company ‘B’ for that CDS insurance.

So with the AIG situation, there were huge amounts of actual defaults, massive losses, and they would collapse without government intervention. This would mean the loss of one of America’s and the world’s major suppliers of capital and insurance funding, and what some said would be a major blow to the national and world economy.

Of course there are many others who dispute this, who believe in the free market system, and believe that if you run an operation poorly or with risk that is too high, then you pay the price when you lose just as you make great profits when things are going well.

The theory is that even if you do collapse and disappear, someone will emerge to step into the breach and take over that business need. But those of us free market individuals are not in charge right now. The power in America has shifted to a more socialist viewpoint espoused by new President Barack Obama and the Democratic Party.

Rather than allowing AIG to collapse and pay the price for its risky business, they decided to give it a ‘bailout’, or what was spun in positive terms as part of a ‘stimulus’ package. The government basically gave AIG the money to cover its losses and stay in business.

But then AIG kept adjusting the amount that is said it had lost, and the government ended up bumping up the payments twice, until our government had given AIG a total of $180 billion dollars.

Listen to that in the voice of Doctor Evil: “One hundred and eighty billion dollars!” From the government. That means from you and me, because the government gets its money from us in the form of taxes to begin with.

So now you and I, ‘We the People’, literally own approximately 80% of the American International Group.

So when AIG got all that money to prop up their business and stay afloat, what did they do with it? Begin to invest it safely back into their operations and the markets, making them and the entire system stronger? Put it out into the world financial system and kick-start a recovery?

Uh, no. Within days of receiving their first government funds, AIG sponsored a little company weekender bash at a swank California hotel with a price tag on the soiree’ of nearly a half million dollars.

Now this is a direct slap in the face to the American people, but it wasn’t nearly the worst of AIG’s greedy spending spree. The company then began to dole out hundreds of ‘bonuses’ to individual employees totaling approximately $165 million dollars.

Bonuses! Most them going to employees in their financial products division, the exact same people with oversight of the very products that allegedly drove AIG into this mess in the first place.

Now correct me if I am wrong, but people usually get a bonus for doing something good for the company? Something profitable? The theory being that any bonuses are coming out of that increased profit, right?

Okay, just wanted to make sure that I did actually understand what a bonus was supposed to represent.

So that is what has been happening in all the headlines that you have been seeing and hearing regarding AIG. On finding out about these bonuses, politicians and the media have shown righteous anger.

You should care, and you should be angry as well. Because it is into your pockets that President Barack Obama and his Democratic Party cohorts are about to dig in order to get the money to pay for all of this ‘Socialism’, the government takeover of what should be private industry business.

If you voted for Obama because you wanted ‘Change’, I hope that you knew exactly what that meant. It didn’t just mean a change from Bush, who you hated. George W. Bush was leaving office anyway, his term was up, there was going to be change in any event.

But the type of change you voted for was to change the very fabric of America, from a world-leader in a capitalist system to just another experiment in socialism, which has always failed everywhere it has been tried.

The people at AIG are simply greedy and were looking to get nice chunks of your money out to their top executives as quickly and quietly as possible. They likely felt there was so much floating around that no one would really notice.

We did notice, and now we should demand that at the very least the ‘bonus’ portion of the monies be returned to us. Of course this whole thing could have been avoided had we just not given them the money in the first place.