Spitzer Tells Howard Dean: Time To Call Wall St.'s Bluff On Executive Compensation (VIDEO)

With public outrage over extravagant Wall Street pay packages still simmering, Eliot Spitzer, who pursued overpaid financiers as a prosecutor, went on "The Rachel Maddow Show" last night to discuss the issue.

In particular, Spitzer and guest host Howard Dean discussed the pushback from failed insurance giant AIG, as well as the Treasury, against the insistence by President Obama's pay czar that AIG cut compensation for executives. AIG and Treasury officials have been repeating the now-familiar argument, made by banks all over Wall Street, that cutting compensation would result in an exodus of executives from the company.

Spitzer's response: let them go:

There's an old saying, I think it was De Gaulle. 'The graveyards are filled with indispensable men.' The AIG folks who are saying they're indispensable - test them. I think it's time to call their bluff. Say to them, 'you want to leave? Go away. We will replace you at one third of the pay.' The entire structure of Wall Street pay is out of control.

A new study from Harvard, "Wages of Failure," will only serve to stoke public anger at Wall Street compensation as it concludes that "since 2000, the top five executives at each firm (Bear Stearns and Lehman Brothers) had received staggering amounts of cash bonuses and had sold mountains of stock." While the CEOs of these companies lost hundreds of millions in stock when the firm went belly up (Lehman Brothers) or was bailed out (Bear Stearns), they still retained massive compensation packages.

As one financial compensation expert put it: "They were rewarded hundreds of millions of dollars, and they got that reward for making catastrophic decisions."

Dean asked why, in light of the massive damage that banks have done to the lives of ordinary Americans, some of these executives are not in jail.

Spitzer replied, "Some of them should be"

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