The AIG Bonus Tax Stench: The House Made It Harder to Fix the Financial System
By Michael Barone, Thomas Jefferson Street blog
This Washington Post editorial gets it right. "The House had the feel of a mob scene," when it passed a 90 percent tax on bonuses paid by AIG and other firms which have received more than $5 billion in TARP money. This was a moment of panic for House Democrats. Almost all of them, and not a single House Republican, had voted for the stimulus package which specifically authorized such bonus payments. A bill that no one was given the opportunity to actually read. You don't have to be a political genius to see what peril that poses for just about every Democratic incumbent and the opportunity it presents for every Republican candidate. But they evidently felt they couldn't just pass a confiscatory tax on the bonuses only at AIG, since that would violate the Constitution's prohibition of bills of attainder—not to mention notions of basic fairness, as Majority Leader Steny Hoyer and Ways and Means Chairman Charles Rangel noted when they were first asked about proposals for a 100 percent tax on AIG bonuses. So now this will apply to other firms, including those like JPMorganChase which took TARP money though it didn't want it, because Treasury Secretary Henry Paulson said that otherwise there would be a stigma on those firms which did take TARP money.
This confiscatory tax has the smell of something that will not finally make it into law. But in the meantime the stench is pretty strong. The House has just made it a lot harder to repair the financial system, as Charles Krauthammer demonstrates. Appalling.
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Tags: Congress | federal taxes | House of Representatives | taxes | Wall Street | corporate taxes | Washington Post | executive pay | AIG, Inc.
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Reader Comments
Focus on Those Offering The Package
The news of these individuals receiving such enormous bonuses during
these times is really setting people off. But tell me how many of us
would not take the bonus if we were in their place. 50%, 70%, 99%. Be
real people, anyone would be a fool to turn down that offer. Don't get
me wrong. It ****** me off just the same as everyone else but given
the opportunity - SHOW ME THE MONEY!
Where we need to point the finger and all our anger is at the HR
officials, Boards of Directors, CEO's, anyone that creates these
extreme packages to lure these people into the organization. Offering
someone a 5 million dollar salary and a 15 million severance package
paid whether they screw up or not is obscene. If I screw up I'm toast.
Why are these individuals offered such outlandish packages - because
the people that offer the deal are in exactly the same situations as
the person they're trying to gain. They're trying to keep the species
alive. If something were done to control this then the HR officials,
Boards of Directors, CEO's, anyone that creates these extreme packages
would also suffer and they will not allow that. Therefore the system
exists and will always exist. It's the 'Good Ol Boy' network on crack!
It stumps me why stockholders are not up in arms over this stuff too.
It seems to me that all of that money would be better utilized if it
were used as dividends.
I think that the core problem to all of this is 100% pure American
greed. All these years we've been shown more and more to rush in, make
the big score, and then get the hell out. Forget the long haul, go for
it right now! Never mind tomorrow!
AN UNDESERVED COUP
If the Republicans win in 2010, it will be a coup they don't deserve to win. It was on their watch, and with their participation, that GW Bush started two wars and unbelieveably, cut taxes for the wealthiest Americans. Pay-as-you-go spending, instituted by GHW Bush and continued by Clinton, was abandoned. Bush and his Congress spent money like the spoiled, rich brats they were. They drunkenly hit us head on, cutting us off at the knees in deficit spending, and a hands off policy with regulating the financial institutions.
Obama is left with the job of rehabilitation.... trying to get us walking again on prosthesis, propped up with crutches. It will be costly, we will probably never fully recover. But the alternative is we never walk again.
If Republicans prevail in 2010, they will preside over our demise.
AIG
The scariest thought is not the bonus taxing but the fact that every trader at AIG now has no incentive to show up for work and unravel the mess they were working on. Instead they will most likely return their bonus to avoid the lynch mob mentality of the general public and simply walk across the street to a European bank and trade against that very portfolio they were working on which will now be rudderless and unhedged on an active trading basis. AIG will blow up and the taxpayers will lose $170bn but have saved $160mm.
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