AIG is the new Enron

Remember Kenneth Lay, Jeffrey Skilling, and Andrew Fastow? Those Enron executives became the poster faces for the hubris and dodgy accounting of the New Economy bubble, which popped nearly a decade ago.

Fast forward to 2009, replace Enron with AIG, and multiply by 10. The AIG debacle involves hubris and risk-taking so breathtaking that it helped burst the real estate bubble and nearly brought the world financial system to its knees.

Congress is already sharpening its knives.

"AIG will be remembered as one of the worst corporate disasters in American history," Rep. Carolyn Maloney (D) of New York said in hearings Wednesday.

"AIG now stands for Arrogance, Incompetence, and Greed," said Rep. Paul Hodes (D) of New Hampshire.

More questions

The story is just getting started. Congressional fury over AIG bonuses is leading to larger questions about who authorized those bonuses and who was hiding losses. What did government officials know when they were doling out bailout money?

New York Attorney General Andrew Cuomo is also in the hunt. Eventually, investigators will piece the story together and fill in the blanks with heroes and villains in a corporate tale as gripping as Enron's.

Here's the twist: Enron's bankruptcy cost shareholders more than $60 billion and collapsed the retirement savings of 20,000 employees and retirees. AIG's quasi-nationalization has already cost taxpayers three times Enron's losses and could through a misstep create a cascade of defaults that would ripple throughout the world.

A wider net?

The investigative spotlight could widen well beyond AIG. There's plenty of blame to spread around to other bailout recipients, bankers, ratings agencies, federal regulators, and perhaps even elected officials.

The lessons of this drama will be the same as any corporate morality tale. Obey the rules of the road. If the investment sounds too good to be true, it is.

And watch out for the unintended consequences of reforms.

Critics say today's accounting standards are so strict that they've weakened banks' balance sheets by forcing them to slash the value of sound assets in markets gripped by fear.Why did the US tighten accounting standards? You guessed it. (Click here.)