In AIGony

Story Highlights:

• Beyond the NCAA Tournament, AIG's Bonus-gate dominated headlines Thursday—the House voted to tax 90% of any bonus paid by larger bailout recipients.
• But for markets, AIG's bonus controversy matters far less than the week's river of black ink would suggest, and investors should be wary of letting scandals drive decisions.
• In perspective, AIG's bailout is just one portion of an already massive US and global effort to support the financial system and stimulate the economy.
• Markets will discount all of this information, not just the fraction magnified by Beltway ire—that's a good thing for global investors.

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In Thursday's top news, President Obama posted his NCAA tournament bracket, leading some to decry it as bias—picking teams from obvious swing states to dominate. Still others felt his picking UNC to win was disappointing from a president promising "change," as UNC is considered an "obvious" highly favored selection. (Or maybe the "change" was his late stage cross-out of Louisville to win the big dance as he opted for the more politically safe consensus pick.) Then, there was some other news about AIG.

For those not lost in a March fog, AIG's Bonus-gate dominated headlines again Thursday. It culminated in a House vote to tax 90% of any bonus paid by larger bailout recipients (for employees whose household income exceeds $250,000). The Senate is considering a similar measure. Suffice it to say, historically, Washington's good at finding scapegoats, deserving or not.

Whether AIG bonus recipients get to keep the boodle or return it (willingly or by force), here are a few facts: The disputed bonuses amount to $165 million, or less than 1%, of the $170 billion granted to AIG. Further, AIG is just one portion of an already massive US effort to support the financial system and stimulate the economy. And the US is one country of many—globally we've seen an extremely large, speedy fiscal stimulus response.

The broader AIG bailout will go on—though the firm may struggle to retain talent should compensation continue to be an ever-changing thing. And though it doesn't tell us much about what happens from here, markets, though down Thursday, are up nicely overall since Bonus-gate first broke—the market seems to view Bonus-gate as a non-factor for investors. (Interesting the market falls the day the government votes to abrogate employment contracts.)

The longer the feds monkey around with private enterprise, the more controversy—real or imagined—may surface. If it does, politicians will make hay—that's what they do. But be sure to consider whether the controversy, in perspective, can effectively hold stocks down long term. As far as AIG's bonuses are concerned—probably not. Are bonuses a bad use of bailout money? Maybe. Does the government have a long, unblemished track record for spending effectively and efficiently? Hardly. Enjoy March Madness, but be sure to separate outrageous Beltway bracketology from consequential stock market news.