Lawmakers are hopping mad at AIG ( AIG) for awarding $220 million in executive bonuses funded by taxpayer money, but there's a simple solution: Stop throwing money at the troubled insurer.

Even better -- skip the hearings and call the loans already extended.

The retention pay that has caused such a firestorm this week were no secret. They were mentioned in a regulatory filing as far back as May 2008, long before the federal government fashioned its first bailout of the company to stave off its collapse in September.

AIG CEO Edward Liddy has called the bonuses "distasteful," but argued the company is legally required to pay them. In congressional testimony on Wednesday, he offered a compromise to lawmakers on Wednesday, saying the company had asked employees who had received more than $100,000 in bonuses to return at least half.

Yet as lawmakers engage in another all-day grilling of a financial company CEO, the issues people should really be angry about have been obscured.

First off, AIG made payments it owned to 15 foreign banks with bailout money it received. That's right, U.S. taxpayer money went overseas.

Or how about that the top recipient of bailout money was Goldman Sachs ( GS)? Remember, Liddy was a former Goldman Sachs board member. Former Treasury secretary Henry Paulsen was a former Goldman CEO. Current Goldman CEO Lloyd Blankfein also was among the Wall Street executives consulted before the government's AIG rescue.

AIG's federal bailout was supposed to stave off a collapse of our financial system. Instead, it bailed out Wall Street firms gambling on the health of the housing and debt markets and the AIG executives on the other side of those bets, who didn't have the adequate capital to back them up.