The current investigation of the American International Group (AIG) bailout by Congress has brought to light the inner workings and secret deals that were made.

Center stage in the investigation is the New York Federal Reserve. There are 12 Federal Reserve Banks that operate under the supervision of Federal Reserve's Board of Governors, chaired by Ben Bernanke. Member bank presidents are appointed by the nine member board, who themselves are appointed by other bankers.

Did the Federal Reserve gag American International Group (AIG)? Emails first reported by Bloomberg News show that the insurer wanted to disclose information about the payments it made to such banks as Goldman Sachs (GS) and Deutsche Bank (DB) to cancel some financial deals. But, lawyers for the New York Fed, which was led by Timothy Geithner at the time, told AIG to pull that information out of a report it was going to issue.

The AIG bailout is being questioned by watchdogs, which accuse the Fed of doling out billions of dollars to banks that weren't necessary -- especially now that big bonuses are piling on.

The bailouts of late 2008 and 2009 have cost the American taxpayers $61 billion, according to the Treasury Department, but the banks aren't to blame this time. The auto manufacturer bailout, which includes Chrysler and General Motors (GRM), has cost the country more than $30 billion, with American International Group (AIG) consuming another $30 billion.

Meanwhile, Bank of America (BAC) has already made good with the government, and several banks -- such as Capital One (COF), JP Morgan Chase (JPM) and TCF Financial (TCB) -- only have to clean up situations regarding the warrants they've issued. And interestingly, the losses from the bailouts on AIG and auto manufacturers are being offset by profits from the bank bailouts, which could generate additional funds of up to $19.5 billion.

US Treasury Geithner wants to protect his turf. He sent a letter to Nancy Pelosi and Senate Majority Harry Reid extending the Troubled Asset Relief Program (TARP) until October 3, 2010, keeping $550 billion in bailout funds.

His letter states that: "The extension is necessary to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses and to maintain the capacity to respond to unseen needs."

A report in The New York Post suggests that Jamie Dimon, CEO of JPMorgan Chase (JPM), could be the logical replacement for current U.S. Treasury Secretary Timothy Geithner. The paper's sources indicate that "a number of policy makers have begun mentioning Dimon as a successor to Geithner, whose standing in Washington has suffered because of the country's high unemployment rate, the weakness of the dollar, the slow pace of the recovery and the government's mounting deficit."

Meanwhile, reports the Post, Dimon has emerged as one of the heroes of the financial crisis, "having navigated JPMorgan through the recession and being a go-to guy when Uncle Sam last year needed Wall Street's help during the collapses of Bear Stearns and Washington Mutual."

The second half of the calendar year has begun, and earnings return to the spotlight this week. As usual, Alcoa Inc. (NYSE: AA) is among the first of the S&P 500 to report quarterly results. For the second quarter in which Alcoa agreed to sell its wire harness and electrical distribution business and its fastening systems business expanded into Morocco, analysts surveyed by Thomson Reuters expect the New York-based aluminum producer to report swinging to a net loss of $0.34 per share from a profit of $0.66 per share in the year-ago period. Second quarter revenue is expected to have fallen 48.3% to $3.9 billion. The full-year forecast is currently for a loss of $1.04 per share and revenue of $16.7 billion (-38.0%). Alcoa has missed expectations in the past three quarters, by as much as 17 cents per share. The long-term EPS growth forecast is 10.0%, which is better than the sector average. Alcoa slashed its dividend earlier this year, and the First Call consensus recommendation remains to hold AA. However, TheStreet.com recommends it as an against-the-grain pick. At $9.86, shares are down 12.4% since the beginning of the year, and recently have been bumping up against the 200-day moving average.

Well, last week's Beige Book report and other indicators didn't in fact make it clear whether economic recovery is underway. So what do we have to look forward to this week?

There's Treasury Secretary Timothy Geithner's testimony at the House Committee Hearing on the Financial Regulation Plan on Wednesday evening. Or how about the bankruptcy filings for the second quarter or Leading Indicators Index for May, scheduled to be released Monday afternoon and Thursday morning, respectively. Will they provide a clear signal about the direction of the economy? Probably not.

A report today in the New York Post indicates that Western Asset Management Co., a unit of Legg Mason (NYSE: LM), is one of several institutional investors hatching a plan to absorb bad assets from banks. The Post says that LM's unit is "among a growing group of big-name investors looking at establishing vehicles similar to real-estate investment trusts that would sell shares to the public and use the proceeds to buy troubled residential mortgages and commercial real estate."

Other interested parties include Pacific Investment Management Co., as well as billionaire Gerald J. Ford, says the Post. The creation of an REIT-like entity to purchase undervalued mortgage assets would fall under the Public-Private Investment Program described by Treasury Secretary Timothy Geithner earlier this year as part of the government's broader bailout initiative.

In celebration of Barry Ritholtz's critically-acclaimed new book Bailout Nation, he held The Big Picture Conference, which I was fortunate to attend.

Here are the main points from the most reputable speakers, Congressman Alan Grayson, Nassim Taleb, Doug Kass, and Josh Rosner.

Florida Congressman Alan Grayson discussed how systemic risk is an excuse for socialism and that interconnectedness is the main reason that these institutions are "too big to fail." In fact, these institutions no longer hold social or economic purpose, they are simply too big to exist.

U.S. stock futures edged higher Wednesday morning following Tuesday's general declines as economic indicators at home and around the world disappointed.

This morning, though, financials were back in the spot light with Bank of America (NYSE: BAC) raising $13.5 billion through a stock offering to help it meet the government's capital requirements following the recent stress testing. Treasury Secretary Timothy Geithner is also set to testify today.

Meanwhile, there is news the Obama administration may create a regulatory commission to protect consumers of financial products such as credit cards and mortgages, as they try to crack down on abuses.

Tim Geithner hasn't been Treasury Secretary for much more than a month, and already Henry Blodget is calling for his head.

Blodget writes that Geithner's ideas and personality have failed to inspire and, most importantly, he has "Refused to revisit or defend his almost certainly inaccurate view that this crisis is merely a temporary price decline caused by a lack of liquidity, rather than a collapse of a debt-driven economy. You can't cure the patient if you're treating the wrong problem."

A few weeks ago I appeared on CNBC's Closing Bell with Maria Bartiromo to discuss executive pay. One interesting point in the interview was when Ms. Bartiromo argued that it would be difficult to get good people to run big banks if their pay was limited because Wall Streeters are motivated primarily by money. I suggested that if that were true, then you would never see a former CEO of Goldman Sachs Group, Inc. (NYSE: GS) take the enormous pay cut required to become Treasury Secretary.

I am not sure what motivates Wall Streeters to take those pay cuts. But today, another prominent one -- Steve Rattner with whom I worked in the 2004 presidential campaign -- announced he is leaving his private equity firm, Quadrangle Group, and shipping off to Washington to work as Counselor to the Secretary (of the Treasury).