The current flap over bonuses paid to the AIG executives who failed so badly that they nearly brought down the world's financial system has some interesting aspects. First there is Congress that is outraged at paying bonuses to guys who failed even though they passed a law that said the bonuses would be paid. On investigation Congress can't figure out how that provision got into the law. Of course, we know that Congress doesn't actually read the laws they pass; not just in this case, but in general. In this case a wording change apparently was made in a meeting between House and Senate Democrats and the Administration. (No Republicans allowed.) But, no one knows who made the change. Maybe it was a staffer. Maybe it was an AIG lobbyist. (I thought Obama wasn't going to allow lobbyists anywhere near his Administration. So much for that promise.) We have known for a long time that the legislative process was flawed because the Congress people often don't know what the laws they pass actually call for. Our Congress is inept.

Another question concerns the management of AIG (and also other financial institutions). Why do they promise huge bonuses to employees with terms such that the bonus is paid even though the employee managed to lose billions of dollars? For example, I know nothing about credit default swaps, but I could have done a better job that the employees of AIG did, for the simple reason that by virtue of knowing nothing I wouldn't have made any bets. According to the conventional wisdom, Wall Street people were rewarded well because they took risks, and could lose everything. But it turns out that they collect large bonuses even if they fail. There is something wrong with the whole picture. It turns out that those Wall Street "masters of the universe" not only have feet of clay, but are charlatans.