The AIG story got more appalling all day Tuesday. I got stuck early on this paragraph from a New York Times story about state Attorney General Andrew Cuomo's finding that 73 AIG employees received bonuses of $1 million or more:

"Mr. Cuomo did not name the bonus recipients, but the numbers are eye-popping, given A.I.G.’s fragile state. The highest bonus was $6.4 million, and six other employees received more than $4 million, according to Mr. Cuomo. Fifteen other people received bonuses of more than $2 million, and 51 people received bonuses between $1 million and $2 million, Mr. Cuomo said. Eleven of those who received “retention” bonuses of $1 million or more are no longer working at A.I.G., including one who received $4.6 million, he said."

Another 41 AIG employees who left also got retention bonuses, Cuomo said.

After a day of debate that mostly seemed to conclude there was little President Obama could do to claw back the bonuses, late Tuesday night came word that the Treasury Department would require AIG to at least repay the $165 million doled out in bonuses to 418 AIG execs before it provides the next $30 billion in bailout funds to the insurance firm turned gambling parlor. Treasury Secretary Timothy Geithner told House Speaker Nancy Pelosi he would also insist that "going forward, future AIG bonuses will conform to the strict compensation limits laid out in the [American Recovery and Reinvestment Act]." But it looks like the company won't seek to get the bonuses back from the failed execs who got them.

Will this be enough to quell the populist outrage the AIG bonuses inspired in both parties this week? That's not clear yet. Like it or not, the bonuses have become Obama's problem. The Washington Post reported Tuesday that the mess is costing Obama needed political capital to push his economic and financial reforms. I didn't like the Post's analysis, but I think it's probably true.

Sure, it's easy -- and correct -- to say the first TARP didn't cap executive pay or bonuses because the Bush administration blocked such proposals. But it's also true that Geithner knew generally about AIG's retention bonus policies months ago -- and arguably should have known details --  but never raised hell until Obama himself turned up the heat.  (ABC's Jake Tapper is reporting that the administration says Geithner didn't really know about the bonuses until a week ago, because he recused himself from AIG matters while his confirmation was pending because of his dealings with the firm as head of the New York Federal Reserve Bank.)  This scandal could turn out to be another example of the way Geithner is too chummy with the guys who caused this mess to be able to rein them in.

Meanwhile, a bizarre subplot is developing in which Democrats are pointing fingers at one another for letting the AIG bonuses go forward. Over the weekend some Obama administration officials seemed to be putting the blame on language Sen. Christopher Dodd added to the stimulus bill; Dodd denies it, and Glenn Greenwald and Jane Hamsher lay out evidence he's telling the truth. The Huffington Post is fronting a story that says Oregon Sen. Ron Wyden tried to get his own language in the stimulus bill to cap bonuses by bailed-out firms, but someone mysteriously removed it.

It's clear the bonuses are radioactive for anyone in government who knew or should have known about them. That's why it was appalling to see the Times' Andrew Ross Sorkin argue that the U.S. has to pay the bonuses at least partly because we're hostages to the criminally amoral leaders of AIG. The best reason for taxpayers to stomach the bonuses, Sorkin argued, is that:

"A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it. A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it. So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company."

Of course, that argument ignored the fact that 52 of the retention-bonus babies have already left the company, anyway. It also ignored Andrew Leonard's great argument here: AIG's derivatives traders might be the guiltiest of all guilty parties in the great credit-industry meltdown, since they abdicated their risk-management role and in fact helped spread risk around to firms unable to evaluate it.

I felt most of Tuesday that I'd rather see AIG break the bonus contracts, under Treasury duress, and let the penalized execs sue. Wouldn't it be great to get to depose some of these brainiacs under oath?

But now none of that may be necessary. It seems that AIG has been publicly shamed into giving the money back, as the firm's name became nearly synonymous with "Madoff" as shorthand for greedy, amoral business behavior. Will this be enough for Obama to regain the moral and political upper hand in this crisis? I hope so, because he doesn't deserve the fallout from the Bush administration's bungling first of the economy, and then of the TARP plan to save it. Will it be enough to rescue Geithner from mounting criticism that he's been too close to the economy's bad guys to reform them? Stay tuned.

I'm on vacation until next Thursday. I'll blog in an emergency, but otherwise I'll see you next week.

I loved the way White House press secretary Robert Gibbs dismissed former Vice President Dick Cheney's outrageous claims – for the second time – that President Obama is somehow making the nation less safe. "I guess Rush Limbaugh was busy," Gibbs said in response to Cheney's insults. "So they trotted out the next most popular member of the Republican cabal."

I expected more outrage about Cheney's divisive and baseless charges. Since when do former vice presidents pounce on a new administration so quickly? Since never. Cheney's continuing his political hatchet man role, so why shouldn't Gibbs hit back?

Instead, though, a lot of the outrage, or at least tut-tutting, has been at Gibbs. In MSNBC's "First Read" today, Chuck Todd asks: "Is Robert Gibbs' open disdain for Cheney acceptable to a president who promised to move beyond petty political squabbling? And does the president agree with Gibbs' description of the loyal opposition as 'the Republican cabal'?"

Let me try to answer both questions: I'm sure Obama is fine with Gibbs' take on Cheney. Remember how often he used to joke on the campaign trail about his sadness at finding out his secret relative was Dick Cheney? Or rail against "Scooter Libby justice"?

To Todd's second point: Gibbs' reference to the "Republican cabal" wasn't tarnishing the entire GOP opposition -- though I'm not sure any of it can be described as "loyal," since they are clearly blocking Obama's plans for political and not policy reasons. (Remember all the louts who voted against the stimulus and budget, for instance, and then touted the programs and earmarks that helped their districts when both measures passed?)  Gibbs was referring to the cabal of GOP hatchet men -- Limbaugh, Glenn Beck and clearly Cheney -- who have been impugning Obama's competence and integrity from Day One.

Gibbs knows what he's doing: Cheney is the despised public face of torture, and of disdain for human rights and the rule of law. I will always remember that Todd Purdum Vanity Fair profile of Cheney, which featured him, after all of his heart surgery, oversalting his steak and cutting the whole thing into small pieces before tearing into it with gusto. I loved that image: I imagined him doing something similar with the Constitution.

I wish the Obama White House would go beyond politically trash-talking Cheney, though, and investigate whether he can be prosecuted for war crimes.  A girl can dream. Until then, I believe Cheney is fair game for Gibbs and anyone else in the White House, and pundits should stop acting like prissy hall monitors when the Obama team hits back.

Our tech team worked overtime this weekend on some upgrades, but an unanticipated hitch brought the site down for a few hours. It also meant we lost some letters posted in the early hours. We apologize: We don't like losing any of our work, or your work, and we know how much your letters mean to you.

The upgrade will mean a more stable Salon in the future, but we're sorry for the inconvenience this morning.

I was on CNN's "DL Hughley Breaks the News" this weekend with Peter Beinart and former McCain flack Nancy Pfotenhauer, and boy, did she bring the lies. She went into a list of the right wing's discredited claims about "pork" the stimulus bill contained, culminating in something I've never heard on TV before: If you look at the $1.2 trillion in the stimulus bill and just passed budget, President Obama is spending "$1 billion an hour." I pushed back, and Media Matters has the video: Watch (text continues below):

We were actually "debating" another silly right-wing talking point: Is Obama doing "too much" in his first 55 days? Not captured in the video was my favorite moment of the night: I got a big hand for saying it's time for the rich to pay their fair share of the tax burden again. Obviously DL has a more populist audience than a lot of shows, but it was nice to hear a round of applause for a progressive tax system, in any setting.

I'm alarmed by the way the Obama administration has been hyping the slight uptick in good news about the economy in the last few days. Yes, the Dow had its best week since November, Citigroup and Bank of America say they expect to make money this quarter, GM won't need an immediate infusion of tax dollars, and retail spending seems to have stabilized, at least for now. On Thursday Obama himself told business leaders that the crisis is "not as bad as we think," and on Friday National Economic Council director Larry Summers said the spending numbers were "modestly encouraging signs" that the stimulus might already be having an effect.

As someone who has repeatedly defended Obama from GOP efforts to blame him for the current crisis and to deride the "Obama economy" only 55 days into his presidency, I think the administration could be playing a dangerous game. Live by the week's economic news, die by it as well. If the Dow dives next week, or retail spending dips again, does that mean the stimulus failed?

I think the administration got rattled by Wall Street criticisms that Obama was at risk of talking down the markets and, at minimum, simply wasn't paying enough attention to them. I thought that was the right course, actually — he needs to take a longer view, and the Dow isn't necessarily the most important indicator of economic vitality. And just when some of Obama's critics are starting to get called on their market boosterism — boy, has Jim Cramer's stock taken a dive this week — unfortunately, their nagging seems to have had some effect.

I thought Larry Summers sounded a little bit like Cramer when he insisted there's never been a better time to buy, which Andrew Leonard captured earlier today, hailing possible big gains from investment in construction and the stock market. And not surprisingly, Cramer was impressed by Summers' speech and took it as evidence that the administration is listening to guys like him. “I think they got some religion when they saw the market go down so much,” Cramer said on CNBC today.

I think it's important that Obama project optimism that we can turn this problem around — and indeed, that we've already begun to — with his economic stimulus package, banking reforms and mortgage efforts. But to hail the earliest signs of progress in a battle that's likely to take months, if not years, seemed like a rare Obama political mistake. We'll see. I'll be talking about Obama's first 55 days in office on the CNN's "D.L. Hughley Breaks the News" Saturday at 7 PT/10 ET and Sunday at 8 PT/11 ET.

War Room got all the newsworthy bits of embattled, rattled RNC Chairman Michael Steele's surreal interviews with conservative Cal Thomas and GQ's Lisa DePaulo on Wednesday.

To recap: Steele told Thomas that GOP congessional leaders are like "mice" who are "scurrying" because they no longer have access to "cheese" -- read: any clue what Steele is doing. Maybe more inflammatory, he told DePaulo that he thought abortion was an "individual choice" and that he opposed a constitutional amendment on gay marriage. And for a guy who promised to bring hip-hop to the GOP message, he couldn't really name a modern-day hip-hop artist. He called Diddy "P. Diddy" -- oh, who can blame him -- and hailed Grandmaster Flash, who still deserves all of our love and respect, but who is also known as "the grandfather of hip-hop."

That inflamed Alex Koppelman. Understandably. But A-Kop utterly ignored the equally heinous ignorance Steele displayed in GQ about the music of my parents' era -- Frank Sinatra, Dean Martin, Sammy Davis Jr. Or as Steele described them, "the Pack Rats." Huh? DePaulo corrected him: "You mean the Rat Pack." Steele was cool. "The Rat Pack, yeah."

First he alienates that crucial "urban-suburban" hip-hop fan base by not knowing P.Diddy is now, usually, Diddy; then he turns off their grandparents by screwing up the term "Rat Pack"? To be fair, maybe "Pack Rats" is the hip-hop version of the Rat Pack. I'm so confused. But I am glad the RNC went out and found a black chairman, now that we have a black president. That is really working.

In Steele's defense: I do love the idea of his loving Dean Martin, as he told DePaulo; thank God he didn't feel he had to say his favorite was Sammy Davis Jr. In America today, Michael Steele can prefer Dean-o over Sammy. He can like Culp over Cosby, Gibson over Glover. Or McCain over Obama! Is this a great country, or what?

Michael Steele, we're gonna miss you when you're gone.