Wednesday, March 18, 2009


Monday, March 16, 2009
To get some perspective on what's going on, I looked up the total direct losses from property crimes in the US. This totalled $17.6 billion in 2006. Meanwhile, the cost to US taxpayers, for one firm alone (AIG) are around $170 billion (and quite possibly going to increase further). That's almost 10 times more than all property crimes.

These property crimes were committed by many thousands of people. Those who were caught are now languishing in prison in the US (often under truly horrific conditions). Amazingly, just a few hundred people at a single AIG division in London were responsible for much of the insurer's woes, and thereby played a key role in getting the world economy to where it is. These people, having been rewarded very handsomely all these years, are now getting another half a billion dollars in "retention bonuses". These people and their managers don't seem to care one bit about the economic chaos and mass hardship their actions have helped cause, so it's not entirely surprising that they don't seem to be taking much notice of Obama's disgust or Geithner's harsh words either.

If there are just two things about the financial crisis I think are worth stressing they are this. First, the crisis was not an outside shock (like a hurricane or asteroid collision) but a consequence of things people in the system did, acting "rationally" under perverse incentives (which still largely remain in place). Second, however you tally up the numbers, the scale of the hit to your wealth absolutely dwarfs things like "normal" crime and benefit cheats.

No comments:

Post a Comment