Andrew Cuomo's mojo

Andrew Cuomo is having full as much fun in the NY AG seat as Eliot Spitzer before him:

... New York Attorney General Andrew Cuomo asked AIG to provide details on who's receiving bonuses in its AIG Financial Products subsidiary by 4 EDT p.m. on Monday or face subpoenas:

In Mr. Cuomo's letter to AIG Chief Executive Edward Liddy on Monday, the New York attorney general requested a list of individuals who are to receive payments under the unit's retention plan, as well as details of each individuals job description, information on their performance and copies of any contracts requiring the payments. The attorney general asked that AIG provide the information by 4 p.m. EDT Monday.

"We were disturbed to learn over the weekend of AIG's plans to pay millions of dollars to members of the Financial Products subsidiary through its Financial Products Retention Plan," Mr. Cuomo said. "Financial Products was, of course, the division of AIG that led to its meltdown and the huge infusion of taxpayer funds to save the firm."

Mr. Cuomo said he's looking into whether any of the individuals receiving payments were involved in conduct that led to the insurer's near collapse; whether the contracts may be unenforceable for fraud or other reasons; and whether the payments may be consider fraudulent conveyances under state law.

"Covering up the details of these payments breeds further cynicism and distrust in our already shaken financial system," he said.

Does Cuomo still want to be governor? Why step down?

B.F. Skinner haunts the banks

A year after first Raghuram Rajan and then Martin Wolf, both writing in the FT, fingered bankers' bonuses as a prime cause of the financial meltdown, Nassim Nicholas Taleb redoubles the attack. The point is not hard to grasp. The banking industry runs on a heads-I-win-tails-you lose incentive structure: take huge hidden risks, reap the rewards of resulting outsized gains, and give up nothing (except perhaps your job, multimillions later) when those gains give way to huge losses.

But Taleb does end with an arresting dictum that's worth a thousand words:

never trust with your money anyone making a potential bonus.

Take that as as a rule of life. Are you listening, education reformers? It translates: never trust with your child anyone making a bonus. There are buried risks in juicing children's apparent performance, too. Skewed incentives also pervert education from the other end. As an opponent of behavior mod programs once said, give children pizzas for reading books, and you'll end up with a lot of fat children who can't read. Incentives focus people's attention on the reward rather than on the act required to get the reward.

I'm also reminded of a wise woman's watchword: never trust what you hear from any man with an erection. Broadly, then: beware of anyone dazzled by overwhelming incentives, by the prospect of immense gratification.