Provocation of the Day: Blinded by Hysteria

Politicians can't deal with the fact that ordinary Americans were to blame for the financial crisis, "Moneyball" author Michael Lewis tells us in a Bloomberg op-ed. His point: hysteria over the AIG bonuses makes no sense, has caused the entire political system to go nuts, and proves to that all big numbers look the same to the American people, whether or not it makes sense to be outraged about them.

No one should be outraged about the bonuses, Lewis says: they pale in comparison to the $173 billion in bailout money injected into AIG, these people probably didn't have much to do with AIG's failure, we shouldn't encourage them to leave, and the government would harm the company by proving its contracts are no good. But, more importantly AIG hysteria has obscured the moral of the financial crisis, Lewis says, namely that greedy individual borrowers were to blame:

As the financial crisis has evolved its moral has been simplified, grotesquely. In the beginning this crisis was messy. Wall Street financiers behaved horribly but so did ordinary Americans. Millions of people borrowed money they shouldn't have borrowed and, not, typically, because they were duped or defrauded but because they were covetous and greedy: they wanted to own stuff they hadn't earned the right to buy...

But now that taxpayer money is on the line the story has changed: innocent taxpayers are now being exploited by horrible Wall Street financiers. The guy who defaulted on mortgages on his six spec houses in the Nevada desert has turned himself into the citizen enraged by the bonuses paid to the AIG employees trying to sort out the mess caused by his defaults.

People would be outraged if the government sent money to their neighbors who took out mortgages they couldn't afford, Lewis says, so it was more politically viable "to throw trillions at opaque corporations, the inner workings of which no one still really understands."

Now, Lewis says, the public--some members of which helped cause the crisis by buying things they couldn't afford--is crowing about bonuses that actually make sense, despite the fact that spending a far greater sum to "pay off AIG's gambling debts" didn't raise nearly as many eyebrows.