American International Group, or AIG, has been in the news a lot recently. Not only for the $180bn “bailout” the company received from the government, but also for the fact that half that money was paid out to AIG creditors at par, or 100 cents on the dollar. Particularly strange was that creditors of other companies “bailed out” by the government did not receive par value for their claims, but walked away with usually between 10 and 30 cents per dollar. Many creditors got nothing.

This impasse is currently being investigated by the House Oversight Committee in hugely entertaining public hearings. Today I watched as the Committee deliberated whether or not to allow Tim Geithner, current Treasury Secretary, to cut into time allocated to former Treasury Secretary, Hank Paulson. The Committee spent a full twenty minutes debating the merits of shafting Paulson to ask Geithner more pressing and direct questions.

“We have a set agenda and strategy”, said the Chairman of the Committee. “We do things a certain way here and we can’t go around messing with the schedule”. Members of the Panel argued in vain that Geithner was in fact the one they wanted to talk to, in particular about the AIG creditor situation. But the Chairman refused, compromising by giving two minutes to each side to raise further questions before Paulson was brought in.

To make matters worse when Paulson came in, he read a prepared statement which clearly explained he had nothing to do with the AIG creditor payments (they were authorized after he had left his post), and that was the crux of his answers going forward. Treasury 1 House Oversight Committee 0. Or am I being generous to the Committee?

But back to AIG. You may be interested to know that the company and the SEC have been hard at work figuring out how AIG is going to recover the billions of taxpayer money it has lost. In a recent SEC filing, it was revealed that AIG Chief Executive Robert Benmosche has signed an aircraft time-sharing agreement covering the rules for when he may take a company jet on “personal detours” from primary business use.

The agreement is explained as the “Luxury Expenditure Policy” and basically allows the CEO personal use of private aircraft only if that use "is incidental to a business trip and the incremental cost is paid by the AIG CEO". It goes to say, then, that personal use that is not “incidental to a business trip” is prohibited.

Some of the expenses Mr. Benmosche must cover if he uses the jet for personal use include ground transportation and accommodation for crew to in-flight food and beverages.

Apparently the filing is in relation to a dispute between regulators and board members who appointed Benmosche as CEO of the company. He was, according to reports, initially promised personal use of the aircraft as long as he reimbursed the company.

However regulators disagreed with the board and forced Benmosche the ignominy of using regular commercial aircraft. This new deal was put in place after Benmosche missed a family occasion after being forced to fly commercial. Have you ever heard of such a humiliation?

In summary: Mr. Benmosche will not be allowed to use the jet for any personal activity, but will be allowed to use it if he needs to be at a family function where a potential client might show up. For this he will be billed the costs of the flight, the crew and the Coke/Jack Daniels he consumed.

So this new arrangement will probably save the company at most $200,000 per personal flight. Mr. Benmosche, by implication, would then have to make about 400,000 personal flights in order to cover the hole left by the “bail out”.

The somewhat farcical issues I highlighted above go a long way to explaining why effective increased regulation and political oversight of financial institutions and markets is a wild goose chase. It’s a good primer for anyone who believes that politicians can regulate markets efficiently and put aside partisan politics, self-interests and trivial pursuits.

I mean, you can’t make the boss of a government-owned entity fly commercial, if you’re also the boss of a government-owned entity, now can you?