I briefly noted it before, but I still can’t understand why the American public isn’t incensed that a huge amount public tax money is going to be allocated to bail out the financial instability produced by greedy, individualist assholes on Wall Street, when that same American public gets pretty damn incensed when it imagines tax money going to poor inner-city mothers. Richard Adams, in the Guardian, adds another twist to the problem:

The phrase that we will be hearing soon enough, once the markets have digested the weekend’s events, is this: moral hazard – the idea that economic agents will take greater risks if they think there is a safety net to catch them. (That’s why kids learn to ride bikes with training wheels on.)

Between welfare reform, the tightening of bankruptcy laws, and the consolidation of financial records, we’ve seen an enormous trend in the last decade towards holding people accountable for the consequences of their economic decisions—even if those consequences are only dubiously attributable to the actor’s own control. These reforms were all passed on a “you broke it, you fix it” ethos: if you didn’t get an education, if you failed at running your small business, if you maxed out your credit card, you suffer at the economic gallows as a penance.

But we’re telling the exact opposite story to the most privileged members of our society. In effect, high-level investment managers suffer no responsibility for the risk of their actions. All told, Bear Stearns’s managers will still have multi-million portfolios, summer homes in posh locales, and dinner dates at New York City’s swankest restaurants. Their lives will be relatively unimpeded by the decisions they made in their profession. Where this happens elsewhere, we hold the person responsible. In financial markets, we say that the business is too volatile and too unknowable, and that these poor manager suffered from events outside of their control.

And so a giant income redistribution occurs at the expense of the American taxpayer. Investment managers who ran risky portfolios in order to engorge their already-opulent lifestyles are offered a blanket pardon and a federal pension plan.