Epstein: “It was not that these traders had such unique skills in managing derivative contracts that they could not be replaced by other people but that they knew the business’ crucial secrets, including the identities of he counterparties to the credit default swaps and the vulnerabilities in their positions. The implicit threat: they could use the secrets to which they were privy to trade against AIG’s positions as it attempted to unload its $1.6 trillion dollar portfolio.”

deSantis: “I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.”

So, per Epstein and Kimball, AIG Management did the prudent thing by giving in to the “implicit” blackmail and paying it’s AIGFP traders not to leave and take proprietary information to their competitors; and, per deSantis, those people left anyway before the bonuses were paid.

Kimball normally makes a lot of sense, but in this case, it looks more and more like he and many others of a conservative or libertarian bent have been taken in by the swindlers at AIG. The traders at AIGFP had to know that they were taking on irresponsible degrees of risk. They had to know that the business cycle would eventually turn and their absurd levels of leverage would create havoc. They did it for outlandish compensation knowing they could walk away when the bills came due. I’ll avoid the blind pig and acorn analogy since it might be misinterpreted, but Maxine is on the right side of the issue. Outrage is the appropriate response.