ON SELF-DESTRUCTIVE RAGE

BOILING OVER

Today was a day of extreme bad behavior by our Congressional leaders, at least in the view of this humble citizen.  As the New York Times reports:

"The House overwhelmingly approved on Thursday a near total tax on bonuses paid this year to employees of the American International Group and other firms that have accepted large amounts of federal bailout funds, rattling Wall Street as lawmakers rushed to respond to populist anger."

Despite questions about the legality of the retroactive 90 percent levy, Democrats and some Republicans said the tax on bonuses for traders, executives and bankers earning more than $250,000 was the quickest way to show angry Americans that Congress intended to recoup the extra dollars. Even backers of the measure noted it was an extraordinary step.

The House vote sent some employees into a panic about the prospect of, in effect, having to give up money they might already have spent. And it had regulators fearing it could undermine the Treasury’s efforts to stabilize the financial system if banks tried to flee the bailout program or if other firms refused to participate in coming rescue operations to protect their bonuses, some executives said. "

In their anger to punish AIG, the House action, if echoed by the Senate and passed into law by our President, would affect hundreds of thousands of Americans across the country in an extraordinarily negative manner.  As the article continues to explain:

"The legislation would apply to bonuses paid to executives at companies holding at least $5 billion in bailout money and would essentially wipe out the phenomenal paydays that have been a tradition on Wall Street, at least until the firms reduce the amount they owe taxpayers to less than $5 billion.

According to a tally by The New York Times of bailout recipients, employees at 11 institutions — including Goldman Sachs, Bank of America, Citigroup, Wells Fargo and JPMorgan Chase — would face restrictions immediately.

The current version of the Senate bill would apply to an even wider array of companies. It would tax bonuses at companies that received as little as $100 million in federal bailout assistance, though at a lower rate. "

Worse still, is that in it's quest for vindictive revenge, Congress could utterly undermine the very rescue effort of the national economy it's committed trillions of taxpayer dollars to already:

"Several banks are considering refusing to participate in government financial rescue programs if the bill passes, according to a person briefed on the banks’ plans. Hedge fund and private equity firms may also be hesitant to work in partnership with the government to purchase bad assets from banks — a central component of the Treasury Department’s coming financial recovery plan — if they think the government might later add restrictions on their pay."

Yet another awful reality that's emerging about all this is that ours leaders, including the President, may not have all the facts in their quest for retribution. 
As the Washington Post points out in an article that's a must-read, the real culprits of the AIG mess are long gone.  The people that are being nationally targeted and torn apart, not to mention physically threatened in some cases, are the folks that our government asked to stay on to undo the mess for the ultimate benefit of the tax-payer.

We all need to take a deep breath on this AIG and "Bonusgate" issue.  In our anger and need to lash out at somebody, we may be giving our leaders and the media the opportunity to take us to places that we may very well regret going to in the very near future.

* Image source.

Comments

[SS]

Both NYT and WP article make no sense. People who worked in these situations know very well how hallow these claims made in the media are. We should all be happy even though it is late, at least now the law makers woke up to the reality. These so called CDS traders are nothing but glorified back office clerks.

[Eric Strobes]

Michael, don't you agree that this whole sorry mess could have been avoided if AIG had been declared bust BEFORE the money was put in? Roll over all the customer obligations yes, but shareholders/ staff lose everything. Then start again. Why wasn't this done? Please , please explain...