19 March 2009

My 0.04 seconds of populist outrage

Via the Washington Monthly:
AIG MEASURE CLEARS HOUSE: The House passed its measure today to recoup the controversial AIG bonuses. While there was some question going into the vote as to whether the two-thirds needed for passage would be there, the bill was approved rather easily
[...] The bill would place a 90 percent tax on bonuses paid out by firms receiving at least $5 billion in bailout money. The tax would apply to individuals and families with overall income exceeding $250,000..
Good. 

We now return you to your regularly scheduled programming.

7 comments:

Jake said...

I understand the reaction, but I'm with Nate Silver on this one. The problem is epidemic in the financial sector, not sporadic with a handful of bad guys at AIG.

http://www.fivethirtyeight.com/2009/03/why-aig-paid-bonuses.html

From later today:
"EDIT: As a commenter points out, the bill was also rewritten to apply only to persons making $250,000 a year or more (it also applies only to bonuses received after December 31, 2008). From my point of view, this weakens, rather than strengthens, the moral force of the bill: if the idea is that this is intrinsically dirty money, obtained under illegitimate premises, then why is anyone entitled to it? When we confiscate drug profits, do we make an exception for dealers below the poverty line? But, alas, you're all probably tired of hearing from me on this one."

Anonymous said...

Along with Jake's thoughts - some of those AIG folks that got these huge bonuses received $1 compensation in 2008 with the expectation of the large bonus in 2009. So, unless the SO made an income greater than $250K - they get to walk away with the millions.

So, rather than just take away the bonuses like we should have done being the govt owns 80% of the corporation - we let these people manipulate yet another bad bill.

The threat of broken contracts, losing legal brains, going to court - hah! I'd like to see one of those people bring a case to federal court against the govt explaining why they ripped off the people of the US & think they should get away with it. As for the brains - as in medicine, each year brings a new set which might prove better than the previous ones.

*rant over*

Anonymous said...

I've heard the tax is unconstitutional because it targets a particular group of people, and is being enacted retroactively.

doc said...

There are certain basic rights that are the underpinning of our entire way of life. One of these is the "sanctity" of contracts. Without the guarantee that contracts, once signed, are binding, then virtually all business agreements become meaningless. If the gov't who, by the way, set this whole payment up, can retroactively and unilaterally invalidate a contract with these people, they can do the same to anyone at any time for any reason. Think about that.....the gov't agrees to pay you a certain amount for a service. Later, just because they decide they don't want to pay it, they simply disallow your payment. That is a program that I don't want to see happen.

Nathan said...

The outrage should be directed at the politicians who passed the bailout, not the people they gave it to. It is interesting that the politicians who are yelling the loudest are the ones who received the most money in political contributions from AIG employees and were most in favor of passing all the bailouts.

shadowfax said...

Couple of comments:

1. the $250K limit includes the bonuses. So that $1 base salary + $1 million bonus = $750K taxed at 90%

2. Retroactive taxes are nothing new, and this is only marginally retroactive in that it applies to TY 2009, which we are currently in. They did not retro it to bonuses received in TY 2008/

3. Bills of attainder -- is this one? I read an opinion by Lawrence Tribe that it is not, since it does not target companies or people by name, but a broad class of persons. Punitive taxes are nothing new and are legal. But IANAL.

4. Re: contracts. I thought it was hysterical that the politicians insisting on the sanctity on contracts are the same ones who, a few weeks ago, were insisting that the UAW give up its contract in order for the auto industry to be bailed out. Also, bear in mind that this is a tax, and does not invalidate the AIG bonus contracts.

5. AIG was bailed out by the Treasury without congressional approval or oversight. It was not part of TARP. So the failure to put any strings on the money was entirely Paulson's fault.

doc said...

Shadowfax:
Re Point # 4. I am NOT a politician, just an average guy who sees that valid contracts are a needed part of our economy. If the gov't or any party can simply cast them aside when they are disagreeable, then all business agreements become meaningless.

Re Point #5 Simply untrue. It has been shown that the white house and congress were in it up to their eyeballs, even to the point that one of the amendments that protected the bonuses was the DODD amendment.

And since then, the POTUS now is talking about limiting salaries in ALL banking and security firms. Sorry to have bring up that dirty word of Socialism again, but where the heck does he get the right to do that, or even think he has that right? The Constitution, our only protection against the uncontrolled power of the gov't, is being trashed before our eyes. Maybe you feel that is ok since it is the big bankers, but recognize that if gov't can do it to one group, it can do it to any group.