By Robert Schlesinger, Thomas Jefferson Street blog
The AIG backlash-backlash has begun. After our national paroxysm of anger, cooler heads are starting to remind the rest of us that we've got bigger issues than AIG's nutty bonuses. And while they're right, let's keep in mind that the collective ire served a good purpose.
So as much as these bonuses make us all angry, I think it's time to get back to what's important here. Am I the only one struck by the fact that these bonuses total $165 million—a drop in the bucket when we're talking on a daily basis about billions and trillions of taxpayer dollars? They're infuriating, but in the scheme of things they pale in comparison to what's at stake here. We've got to let them go. In the words of the country song, they're whiskey under the bridge.
The Washington Post's Steven Pearlstein weighed in this morning:
At the end of the day, the thing to get outraged about is not the $440 million in bonuses at AIG or the $10 million that Citigroup is spending to redesign its shrunken executive suite. These may seem like princely sums, but they are almost insignificant compared with the real outrage: the hundreds of billion dollars of taxpayer funds that have been put at risk to keep AIG and Citi from failing and taking the whole financial system down with them. Let's keep our attention on the elephant rather than the pimples on its behind.
I realize that collective expressions of public anger can serve a useful purpose. At times like these, it feels good and is a way for a political system to let off some steam before a more dangerous explosion occurs. More importantly, it builds political momentum for sweeping reform of the regulatory apparatus while scaring the bejeezus out of people on Wall Street, who will now think long and hard the next time they get the urge to take excessive risks with other people's money.
There's another useful aspect to the scare factor Pearlstein mentions. It's not simply about greasing the wheels for new and required regulation while trying to make the wizards of Wall Street more cautious. The AIG bonuses (and too much of everything else that has gone on around the companies getting bailed out) have smacked of business-as-usual, as if Wall Street has viewed the bail-out billions as a means to keeping the party going rather than necessary life support while they cleaned up their acts. Of course we need multimillion - dollar retention bonuses, that's the way we keep this top talent. Of course we can't do anything about these bonuses—it's all in writing and that's just how business is done. Time for a come-to-Jesus moment, folks.
But AIG anger has jumped the shark, and Congress (both Democrats and, hypocritically, as Jack notes, Republicans) has now overreached, lashing out blindly at Wall Street writ large, punishing the blameless and culpable alike in order to get at the AIG greedheads.
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.
We've (I think) spent the national rage. Now we need to get back to the big picture and hope that it didn't do harm to our larger goal of stabilizing the economy.
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