Does the bailout really remove disincentive for failure? Sure it lessens it, a bit. But this article is describing a gross moral hazard. I don't think this is comparable.

AIG shares have lost virtually all of their value. The bailout rescues some of it, but it's probably less the 5%-10% (please correct me if I'm missing something). Imagine AIG's morally hazardous executives a year or more ago (share price = $65 - $75). They know that while their desicions could cause a collapse, there's a $3.50 floor. Does that have much of an effect on their desicions?

What this article shows is how "moral hazards" & close relatives exist within organisations to a much larger extent then they do between them.