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Santelli, Sen. Kyl Push Back Against "Outrage" Over AIG Bonuses [UPDATE]

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UPDATE: Rick Santelli appeared on MSNBC this afternoon to respond to criticism over his AIG remarks. "The people who love to misinterpret you are already out there doing their work," an MSNBC anchor said while introducing him.

Santelli insisted that he wasn't defending taxpayer-funded bonuses at AIG, which he said were outrageous and "rewarding bad behavior."

But he suggested that the Obama administration should not get bogged down in undoing the bonuses, since that would likely violate contract law. "If there were contracts in place that when the government came in to put the money in AIG, they didn't take care of these issues -- a card played is a card played, as reprehensible as it is."

Santelli added that if the Obama administration could somehow deny the bonuses while not violating contracts, he would react with a "hip hip hooray!"

More generally, the energetic CNBC personality claimed that the public needs to focus on the big picture: the billions in taxpayer dollars that have been used to bail out AIG.

"If we are outraged over $165 million, and arguably so," he said, "we should be ballistically outraged at $165 billion [in bailout funds] in AIG."

Santelli recommended taking all the bad assets and putting them in the hands of the private sector, since government and private business go together like "vinegar and oil."

Meanwhile, Media Matters is calling on readers to sign on a petition "demanding CNBC stop acting like a PR firm for Wall Street and instead fulfill its journalistic obligation to the truth." Watch their video:

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Defending AIG's right to award its senior executives $165 million in bonuses even after the company benefited from $170 billion in government bailout funds requires a certain amount of rhetorical or political dexterity. And, to this point, few if any officials have tried to stem the tide of populist anger aimed at the insurance giant.

In the past two days, however, a few public figures have nibbled at the edges, not defending AIG per se, but pushing back against what they deem to be overstated outrage.

On Monday, Sen. Jon Kyl ridiculed politicians for being quick to "demagogue" the AIG issue. And while rapping AIG for soaking up taxpayer funds before issuing bonuses, he warned -- during an appearance on Fred Thompson's radio show -- that pols like him would "just ride the horse and beat it into the ground."

"The first thing to think about is, whenever politicians start railing about other peoples' behavior -- particularly in the private market -- put your hand on your wallet and start asking questions, you know," he said. "Because, politicians love to criticize others for what they do, and this is an easy issue to demagogue. Particularly because nobody can be happy about the way some of these companies conducted their affairs, AIG among them."

"If the contracts are stupid contracts, if they committed them to do things that weren't right, or went way overboard, because taxpayers have put a bunch of money behind AIG, certainly we have the right to be asking those kinds of questions. But I would hope that we would do it not in a demagogic or hypocritical way, but simply say, 'look, now that the government is helping you out, you can't do that kind of stuff again. So either undo what you did, if you can if it's the right thing to do, or don't do it again in the future.' But you know that isn't how the politicians will deal with it. They'll just ride the horse and beat it into the ground."

On Tuesday morning, it was Rick Santelli's turn to downplay the outrage. The CNBC host of 'rewarding-the-housing-market-losers' fame, urged the masses to show some perspective. After all, this was mere "millions" of dollars engendering the bonus-driven anger, as opposed to the "billions" that AIG has received in bailout bucks. From CNBC's Squawk Box:

SANTELLI: Now, think about it this way. Maybe I'm missing something. But the outrage seems to be about M's, millions of dollars, right? $165 million, OK?

But I would think that it should be looked at as a pretty big positive, because when you go from the M, maybe you should try to go to the B's, which is the billions of dollars, and maybe that's going to even enlighten it for the T, trillions of dollars. You know, $165 million is like worrying about 16.5 cents, while $165 maybe necessitates a little more outrage. What do you guys think?

BECKY QUICK: Hey, Rick, I think the real idea here is just the idea of rewarding bad behavior, which is something you've spoken out against in the past.

SANTELLI: No, I guess what I'm saying is it's an order of magnitude. Don't you think this dynamic that the average guy reading his newspaper is really starting to be in tune with this?

And I think bonuses really strike a cord as to the dynamic you're talking about. But there's many degrees of intensity if one really wants to shine the light on the money that's being scrutinized. You know, there's Ms, Bs and Ts. I just want to know what people think.

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