"Too big to fail" has become an acronym and so part of the cultural lexicon. Can we at least stop it being a permanent feature of the economic system?

Scholars from the Brookings Institution argue that actually many supposedly TBTF institutions could in fact be allowed to fail without serious economic repercussions. What is needed is a commitment not to bail them out.

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A tentative deal has been struck between the United Auto Workers union and carmakers that revises a 2007 collective bargaining agreement.

The agreement remains subject to ratification by members, but could pave the way for Chrysler's survival.

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The UK's shadow Chancellor has said he aims to break up nationalised banks that are too big to fail and may block others from becoming so big.

It does seem like an obvious answer to banking executives and their politician apologists who argue that the government should not let markets take their course in weeding out for the scrap heap banks that have been taking on too much risk.

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French Prime Minister Francois Fillon has announced a government decree banning executive bonuses and stock options at all firms receiving bailout money.  The measure is criticized on the left as a superficial gesture.  Public unrest is growing in France as its economic crisis grows, and such "gestures" may be aimed more at crowd control than at actual justice. 

Expatica: "As the economic crisis bites, sending French jobless soaring to nearly 2.4 million, the government fears that anger in the workforce could spill over into social unrest.

President Nicolas Sarkozy's government has sought to channel resentment by talking tough on executive pay after more than a million workers took to the streets for the second time this year to contest his policies.

Investment bank Natixis, which received EUR 2 billion in government funds, is in the eye of the storm after admitting to paying EUR 70 million in bonuses to some 3,000 employees.

Natixis, a subsidiary of Caisse d'Epargne and Banque Populaire, currently being merged, reported a net loss of EUR 2.8 billion for 2008 and is laying off 1,250 workers in France and abroad."

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European governments are stepping in to cap bankers' pay as public anger rises in advance of the G20 summit.

Four senior executives at French Bank Société Générale (SocGen) paid back their share options under government pressure. The Netherlands finance ministry has followed with pressure of its own on banking major ING, citing the need for a change of culture.

Meanwhile in Germany, according to a Bloomberg report, Deutsche Bank CEO Josef Ackermann took a 90 percent pay cut last year following the worst set of financial results in 50 years.

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A senior labor party politician has demanded an investigation into whether Royal Bank of Scotland non-executives were threatened for doing their job.

According to the allegations about the financially distressed, bailed out bank:

"at least three of its former non-executive directors may have been intimidated and threatened with the sack for asking searching questions about its financial affairs

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The intervention by Lord Foulkes, who is also a member of the Scottish Parliament, comes amid fears that the bank will be exposed as Britain's equivalent of Enron"

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Yves Smith at the Naked Capitalism blog responds to the administrations sweeping (less targeted) executive pay proposals.

"The House proposal, remember, confiscates bonus income (including, potentially, non-cash bonuses!) for everyone making over $250,000. It would only impact a handful of companies in particular, but the total number of affected employees would run well into the thousands.

Contrast that with Obama's nascent plan, which, according to the NYT, affects executive pay. "Executive" tends to be code for the top guys listed in the proxy: CEO, CFO, General Counsel, COO, those types. To placate House members who want more sweeping restrictions, the administration says it would regulate "all financials" and possibly other publicly-traded companies---not just those receiving the biggest bailouts.

The House's version is superior for two reasons: It hits the right companies and is appropriately draconian."

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Former New York Governor Eliot Spitzer gives his take in Slate on the "hidden conduit bailout".

"this raises two critical questions. The first is why did $12.9 billion of taxpayer money go from AIG to Goldman? What risk—systemic or otherwise—was being covered? If Goldman wasn't going to suffer severe losses, why are taxpayers paying them off at 100 cents on the dollar? As I wrote earlier in the week, the real AIG scandal is that the company's trading partners are getting fully paid rather than taking a haircut.

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The second question, of course, is why was Goldman wise to AIG's declining position two years ago, but nobody else appears to have known.

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This issue cries out for immediate government inquiry. Maybe one or two of the more than two dozen government entities now beating their chests about bonuses can redirect their energies to this much larger issue confronting us: Who signed off on this $80 billion bailout—now approaching $200 billion—and why?"

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Connecticut state Governor M. Jodi Rell has asked the consumer protection agency to see if the AIG bonuses could be held void under consumer law.

The agency was instructed to subpoena documents relating to the bonus payments in order to see if a case could be made under the Unfair Trade Practices Act that the payments were against public policy. The payments have sparked anger because they were made by  Connecticut-based AIG Financial Products despite receipt of taxpayer bailout funds.

The Hartford Courant reports that the Governor:

"noted that AIG has cited a state law in justifying the use of federal bailout funds to pay the bonuses. "Since the company cited Connecticut law, they will have to live by Connecticut law," Rell said."

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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."

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