Former Governor Eliot Spitzer, whose instincts on Wall Street shenanigans have been largely vindicated, warned that the populist outrage over AIG's bonuses was misguided and obscured the need for larger reforms to the financial system.
Appearing on CNN, the New York Democrat -- who resigned from office roughly a year ago amidst a prostitution scandal -- told host Fareed Zakaria that he was worried about the kind of anger being directed at the bonuses, which includes a law passed by the House of Representatives this past week taxing the benefits at 90 percent.
"It is being fomented by sort of a faux populism by many on Capitol Hill who saw this coming, who knew this was going on," he said. "And so I look at them and I say, come on, guys, you're supposed to be more mature ... Express the anger but then say, 'how do we solve it?' Don't just throw more oil onto the fire. And I am worried about that. And I'm worried that it will be destructive to our capitalist system. And I've said since the very beginning that my energy was directed at preserving and protecting capitalism."
As New York's attorney general, Spitzer made his name by going after business practices and executive compensation structures of several major financial institutions, in particular AIG. For his efforts he earned the moniker "Sheriff of Wall Street." Spitzer was himself derided as a politically-opportunistic populist. His rise in public office was only eclipsed by the drama of his fall. But in recent weeks, as these very issues have reemerged in the news, Spitzer's profile has risen once more.
During his appearance on CNN, the former governor offered a legally quirky measure for going after the AIG bonuses.
"I think I might go back to a very old tort theory of unjust enrichment, contract theory, tort theory, and say, you know what, guys, there is a theory in the law that says ... AIG just doesn't have the money to pay you," he said. "And absent the federal infusion, it wouldn't have it, so we can't pay. And second, I would say unjust enrichment. You simply don't deserve it."
Earlier he was asked to assess the job that the president was doing, in trying to put out multiple Wall Street fires.
"Well, I think he is doing stupendously," said Spitzer. "I mean, I'm a huge fan of his, I think we all have to be and should be, if only because he has been thrust into a dynamic that is almost impossible. He is trying to put out not 500 small fires, 500 forest fires simultaneously. And he is addressing them sequentially, trying to keep a political coalition together. But it's very hard. And I think one of the largest, most difficult tasks that he has is to control the outrage that is brewing in the public, sympathize with it and garner it, but use it to get good policy, not policy based upon anger."