MacroScope

To say former New York Governor Eliot Spitzer is no fan of the Federal Reserve Bank of New York would be an understatement.

After arguing financial regulatory reform proposals being discussed in Washington fall short, he said:

“One institution needs to be completely overhauled: The New York Fed,” he said.

At a panel in New York,  Spitzer lambasted the  New York Fed as “an absolute sinkhole when it comes to what went on over the past ten years.”

“There wasn’t a single person there who knew what was going on because this was all one club,” Spitzer said.  “Every member of that club wanted to protect what was going on,” he said.

The AIG bonus fiasco has sparked a widely reported furor in Washington and across the country. Those who defend the need for lavish pay packages claim that efforts to cap compensation are a “war on talent” that will prevent those institutions from digging themselves out of the hole they are in.

William Black, a professor of economics and law at the University of Missouri at Kansas City, says the controversy could have the unexpected result of helping atheistic Marxists find religion.

“It’s too bad that so few Marxists believe in God, because this would prove that God existed and was a Marxist,” he said. “For if God wanted to destroy capitalism, he would send the AIG management team.”

Need a job? AIG needs workers and the money is good.

American International Group CEO Edward Liddy was under the klieg lights Wednesday for paying $165 million dollars in retention bonuses to employees who are “winding down” the company’s notorious Financial Products division, known as AIG FP.

Liddy said he knew the company would be attacked for paying the bonuses, but he decided it would be better to pay them because the firm needed workers who understood the complex transactions on AIG FP’s “book” to make sure the contracts could be closed out.

Many lawmakers wanted AIG to fire everybody working for AIG FP and hire new ones to close the AIG FP unit.  But Liddy said it wasn’t that easy.

Stocks are tumbling around the world and Mainstreet is feeling the crunch, but at the Institute of International Finance (IIF) luncheon it was hard to see the dark side past the luxurious chocolate mousse cake and keynote comedy.

Jacob Frenkel, the vice-chairman of American Internal Group (AIG) — yes, that insurer on the receiving end of an $85 billion government bailout a few weeks ago (and now an extra $37.8 billion loan ), gave a light-hearted address on the G7′s plan of action to combat the credit crisis.

Frenkel was quick to take issue with the lack of details in the G7 plan and urged the importance of concrete dates.