The political fallout from the AIG bailout will be massive. With $165 million in US taxpayers' money going to pay executive bonuses, the Obama administration is bailing itself for a backlash. It looks impotent and ineffective as Bernanke tells 60 Minutes he slammed the phone down a few times in that conversation about AIG. But in the end, he says, there was no choice. AIG's tentacles were spread too far.

It coincides with a New York Times/CBS news poll, reported here, showing that 83% of Americans want the US Government to cap executive salaries and politicians pushing the Obama administration to stop the payouts. Some might say that's only fair, but as columnist Thomas Friedman says, fairness has left the building. Congress is shelling out hundreds of billions of dollars on toxic assets and the money is going to keep coming. While people say it's unfair, the bailout is designed to stop the building from burning down, not to build a new one.

"Some people estimate a trillion dollars or more private capital sitting on the sidelines just waiting to come in. You can see it last week in the stock market… No one wants to be late, no one wants to miss this," Friedman says. "It's sitting out there but it's not going to come in until there is some certainty on what the rules of the game are. And the problem with getting that certainty is two-fold. One is the fairness issue. It's gonna be unfair. People who don't deserve to be bailed out are going to be bailed out. That's one problem. And the other problem is the incredible complexity of the issue. We've never seen this much leverage… It's all over the world wrapped in this much complexity and started in America. Untangling this incredible Gordian knot we've created is really going to be difficult."

There are no easy solutions here and we are in for a protracted period of ugliness. The fascinating part will be watching how the politicians handle it to minimize the inevitable collateral damage.