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Former New York governor Eliot Spitzer has begun an attempt at reputational rehabilitation. His main device has been a series of columns spewing conventional wisdom across the virtual pages of the internet magazine Slate. One such discharge focused on the fat AIG executive bonuses. Spitzer argued that public outrage was misdirected. Fair point. He botched things, though, when he argued that the real outrage was that the Treasury Department cash infusion was being used to fund payments to the counterparties (mostly big banks) to AlG’s dubious insurance contracts.

Strapping on some unconvincing populism, Spitzer wrote: “Workers around the country are being asked to take pay cuts and accept short work weeks so that colleagues won’t be laid off. Why can’t Wall Street royalty shoulder some of the burden?”

Close, but no cigar. There isn’t much royalty on Wall Street. The financial services market is dominated by fast-buck artists who have a lot in common with the professional hookers that Client Number 9 patronized. Always has been.

The real real outrage is that the Treasury Department structured its subsidy of AIG to involve equity ownership. The federal government effectively bought the troubled insurance giant. So, the government has become proprietor of a house with the illest repute on the Street. The term “moral hazard” doesn’t do justice to the bad precedent this sets.

Spitzer isn’t ready for a return to prime time yet. Maybe he was never really ready. Once you grow accustomed to paying people for their enthusiasms, it can be difficult to see things clearly for what they are.

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