When I listed the options yesterday for how to deal with the AIG bonuses I obviously missed one. One member of the house thought up the idea that we could tax AIG bonuses at 100 percent. The beauty of his bill is that it is written to apply to large bonuses at any company receiving TARP funds. I like the concept because it leaves private businesses (meaning those not being propped up by Uncle Sam) free from any new restrictions in compensation and id does not affect the people getting small bonuses (the ones least responsible for the problems). The biggest change I would have made to this idea would be to lower the threshold from $100,000 to $25,000 or less.
I Missed An Option
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3 responses to “I Missed An Option”
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That is awesome!!
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The problem with all of these punitive measures is that the government was in such a huge hurry to throw money at AIG that it was derelict in its duty to specify the strings tied to the money. Whenever anyone accepts money from the government, it is appropriate for the government to specify terms for its use. BUT that must happen up front in order for the requirements to be valid.
This whole issue is nothing more than political grandstanding. Congress, Treasury, and the FED knew about these bonuses all along. They even wrote some rules designed to prevent such bonuses in the future. They figured this would be OK until the public caught wind of the bonuses. Suddenly Congress is up in arms, even to the point of suggesting that these evil executives commit suicide.
What a marvelous cover for the activities of these self righteous, pompous windbags. These guys strain at the gnat (bonuses) and swallow the camel (AIG’s transfer of multiple billions of dollars to foreign banks).
You might find Russ Roberts’ take on this matter interesting. See http://www.cafehayek.com/hayek/2009/03/grassley-is-unhappy.html .
The appropriate thing to have done — and still the appropriate thing to do — is to allow AIG to file for Chapter 11 bankruptcy and reorganize. This would allow a trustee to suspend or rework the contracts that have caused AIG to transfer so much of our borrowed taxpayer money overseas. You can also bet that the trustee would have prevented the bonuses that everyone is so upset about.
In other words, if this whole issue had been properly handled within the boundaries of existing laws instead of trying to do a special roll-your-own bailout, we’d have a much better result. And for the record, I don’t buy the line that the whole world would have gone down the toilet if the government hadn’t bailed out AIG. Now we have a seriously insidious mess that continues to produce worse problems than the ones it is ‘solving.’
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I absolutely agree with you on all counts – and thanks for the link to Russ Roberts’ posting.
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