If predictions from a private equity conference in Geneva are accurate, the private equity world is going to get a lot smaller.

The FT reports that as many as half of private equity groups will disappear, citing leading industry figures. The survivors will be forced to abandon the excessive fees and “quick flip” strategies that characterized the credit bubble, the paper said.

Shrinkage of the world’s buyout firms isn’t likely to be too surprising for those tracking similar industries. George Soros predicted last year that up to two thirds of the world’s hedge funds would evaporate, and Blackstone’s Stephen Schwarzman said last week that young people would be less keen to enter finance because of the crisis.

(PHOTO: A visitor looks at an installation called “Heaven is a place on earth” by Swedish artist Jacob Dahlgren exhibited at “The Museum of May 25th” during the 47th October Salon for Contemporary Art in Belgrade October 24, 2006. REUTERS/Marko Djurica)

So AIG is honoring its contracts using bailout money. Pundits, sputtering with rage that the corporate world engaged in contractual bonuses, are basically rehashing the argument about whether AIG should have been allowed to go bankrupt. After all, the government decided that allowing AIG to pay its bills was better for the world than letting it break or renegotiate its contracts.

French bank Societe Generale has gone public defending the fact that it got $11.9 billion in bailout funds from AIG. France’s third-biggest bank by market value said it had acted within its rights to call on AIG for cash. This speaks directly to the rationale for the bailout — if AIG had been allowed to fail, a global systemic collapse in payments would have followed.

Keep in mind, too, that if it had resisted paying the contractual bonuses, AIG likely would have been dragged into court, spent millions on legal fees, and then been forced to pay up anyway. However ludicrous the concept of a contractually guaranteed bonus may be, they were legally binding contracts.

So what to do with all this political outrage? The Obama administration has made no bones about building up government task forces and bureaucracy to deal with corporate malfeasance. Would it be too much to expect a new office of contract approvals, where companies can have some of their more bizarre practices exposed to common sense stress tests? Maybe we could require boards to be licensed to enter into commercial and employment agreements, and put the new office next door to the DMV.

Deals of the Day:

* Australia extended its review of Chinese aluminium maker Chinalco’s $19.5 billion investment in global miner Rio Tinto.

* BG Plc moved closer to buying Australian coal seam gas producer Pure Energy Resources for A$1.03 billion ($673 million) after rival bidder Arrow Energy decided to let its offer lapse.

* Astellas Pharma, Japan’s second-largest drugmaker, said on Monday it has decided to withdraw a hostile bid for U.S. biotechnology firm CV Therapeutics.

* Italy’s Banco Popolare will launch a buyout offer for affiliated Banca Italease at 1.50 euros a share and delist it as part of a reorganisation, Popolare and other shareholders said.

* Swiss drugmaker Roche Holding said it is buying Innovatis AG, a privately held cell analysis company based in Bielefeld, Germany, for 15 million euros ($19.31 million).

* HSBC, Europe’s biggest bank, wants to increase its stake in Vietnam’s Bao Viet Insurance to 18 percent despite tough global economic times, a senior company official said.

* German graphite specialist maker SGL Group said on Monday that BMW shareholder Susanne Klatten, Germany’s wealthiest woman, owns options to lift her stake in SGL to almost a quarter of shares.

* Norilsk Nickel is in talks to sell its Cawse nickel operation in Western Australia to exploration firm Poseidon Nickel <POS.AX> after suspending all of its Australian operations due to the global financial crisis.

(PHOTO: A man walks past a signboard of AIG in Tokyo March 3, 2009. REUTERS/Issei Kato)