There has been much justifiable anger and political posturing over payments for failure by bailed out insurer AIG. The bigger problem lies elsewhere.

While the bonus payments are, as former SEC Chairman Harvey Pitt put it, "impossibler to justify", and should be reclaimed by all means available, we must not lose sight of the bailout payments to banks made through AIG that duplicate bailout payments made directly to the banks.

Some $50 billion has been paid to banks through the AIG bailout. Dirt Diggers Digest sets out the details:

"The bonus controversy erupted just as AIG was forced to reveal the identities of the parties that were the biggest beneficiaries of the federal government’s massive bailout of the insurance company last fall. Billions of federal dollars flowed through AIG to make good on complex financial transactions with major banks. The institutions included ones that also received bailouts or capital infusions, including Goldman Sachs ($12.9 billion from AIG), Bank of America ($5.2 billion) and Citigroup ($2.3 billion). It also included foreign banks such as Société Générale ($11.9 billion), Deutsche Bank ($11.8 billion), Barclays ($8.5 billion), UBS ($5 billion) and BNP Paribas ($4.9 billion).

U.S. taxpayers were in effect preventing losses at firms that were also getting direct public financial assistance. The likes of Goldman Sachs, Bank of America and Citi were in effect double or triple dipping at the federal trough. By keeping the identity of the parties secret until now, AIG saw to it that these deals did not get considered when the bank bailouts were being debated. It also kept U.S. taxpayers in the dark on the extent to which the AIG rescue was actually a bailout of foreign banks."