Everyone is familiar with misdirection. It’s part of what makes magicians’ acts so enjoyable. We see the same tricks performed over and over again, but the patter and the methods to trick the audience change. My personal favorite is when a magician appears to use one technique while actually employing another (like the invisible palming trick, which doesn’t actually employ palming).

Today there’s quite a bit of outrage at the $165 million in bonuses being paid out at AIG. Some of the outrage is directed at the government because not enough strings were attached. However, there seems to be little outrage over the $105 billion of bailout money that went to pay off credit default swaps, where no strings can be attached. These credit default swaps were trading as low as 15 cents on the dollar when AIG was teetering on the brink. Had the government bought the contracts, they could have simply ended them at a substantial discount (the contract holder has the option to cancel). Instead, bailout money was filtered through AIG, and this particular type of toxic asset was purchased at 100% face value. Calculated Risk has a short post that includes a link to the list provided by AIG (pdf).

This is an impressive show. I realize that it’s possible to be outraged by both of these things. But, is there enough outrage for everything? How about this? The taxpayer also paid out $2.5 billion (and counting) to a loss producing division at AIG. These losses weren’t through excessive bonuses or credit default swaps. No, these were through the traditional method of just doing business poorly.