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Death and Taxes
The AIG bonuses have already been paid out, so how can we get them back even if we want to? Some clever congressmen think they have the answer:
Senate Democrats will seek to recoup $165 million in bonuses paid to executives of the troubled insurance giant American International Group through a narrowly focused tax, unless the money is returned voluntarily, party leaders announced this morning.
Senate Majority Leader Harry M. Reid (Nev.) said Finance Committee Chairman Max Baucus (Mont.) would unveil a proposal by tomorrow that would tax up to 98 percent of the bonus money. "That will certainly send a message to the people at AIG and all others who try to benefit from the hardships the American people face," Reid said.
In the House, Reps. Steve Israel (N.Y.) and Tim Ryan (Ohio) introduced the "Bailout Bonus Tax Bracket Act" to create a 100 percent tax on bonuses over $100,000 that are distributed to employees of financial firms receiving federal bailout funds.
On the scale of grand karmic justice, this all sounds fine. Screw 'em. Sadly, though, the world doesn't work on the principle of karmic justice. If it did, Rush Limbaugh would be flipping burgers at a McDonalds in West Sacramento. So, some random thoughts:
• Would this cause havoc with the sanctity of contracts? Would no one ever trust the United States government again? I've now read variations on this theme several times, and I'm unimpressed. More likely, I'd say, is that the lesson everyone would learn is that if you destroy the global financial system then you might have your bonuses taken away. This does not strike me as such a bad lesson.
• Would this be legal? Just curious. The Supreme Court is fine with retroactive tax increases, but if you target this too finely couldn't it be read as a bill of attainder? Maybe some legal eagles can chime in on this.
• I wonder how many of the folks at AIG getting the big bonuses are American? Can we get Gordon Brown to put the screws to the ones who aren't?
• There's actually a genuine unfairness in applying this to every financial firm that's received federal bailout funds. This is one of the reasons I opposed Hank Paulson's dramatic October gathering where he insisted that every big bank accept TARP funds: it means that we don't know which banks really needed the money and which ones didn't. If, as Richard Kovacevich continues to insist, Wells Fargo never needed the money in the first place, does the government really have the moral authority to wipe out Wells Fargo's bonuses?
• Are we afraid that if we don't pay these guys millions of dollars they'll all quit and AIG will implode even worse than they already have? Here's an idea: draft 'em. Rewrite the selective service law to remove age limits, make financial wizards a special category, and then induct them into the Army. Unlike the world of foreign affairs, this is one place where the carrot and stick metaphor is genuinely appropriate: instead of the carrot of millions of dollars for good performance, we'd use the stick of years in the stockade as a way of preventing bad performance. Plus we could make them all wear uniforms and clean out the latrines in their spare time.
That last idea is dedicated to Tyler Cowen. We don't want bloggy fame making us too conventional, do we?
The Price Tag of Trade Offs
Ah yes, $165 million in bonuses paid to executives. Of course it sucks, but anybody care to calculate the costs (in real $$) of doing anything about it? Billable hours, court docket time, congressional staff time, meetings at the White House……
I liked
I liked Jim Lindgren's suggestion over at Volokh -- pay them their bonuses in toxic assets instead of cash.
;)
You could always say "sorry,
You could always say "sorry, you don't get a bonus for ruining the world financial sector, but if you stay on and do a good job fixing it, maybe we'll give you some of that money anyway."
Why can't we just
blow up the financial system and get some 22-year-olds fresh out of college to rebuild it using their Econ 101 textbooks? It worked in Iraq.
Kevin Drum: This is one of
Kevin Drum: This is one of the reasons I opposed Hank Paulson's dramatic October gathering where he insisted that every big bank accept TARP funds
Paulson didn't force anybody to accept those funds - he made the deal so sweet that anybody would have taken them.
Ok, enough political grandstanding and outrage about the bonuses - paying off on the CDS contracts is literally 1000x worse.
Charming Bolshy
tagged as:- result
Forgot your history lessons? You do love to harp on about that. Credit Anstalt
fine them until they have to live in tents
Comb through every transaction these AIG employees made. Everyone makes mistakes, and they may have made unlawful ones. If they made unlawful mistakes, they will be willing to trade bonus money for no jail time. Fine them until they have to live in tent city.
UK Law
Charming whinging on, but the unit is in London, not NY.
I see a bull market for pitchforks.
Um, can't we just withold $165 mil of the stimulus?
If not, then yeah, they get draft notices with their checks.
This entire AIG fiasco has
This entire AIG fiasco has exposed the One and the Democrats' claim that government can be "effective" in solving any problem as being the empty slogan that us conservatives have been saying all along.
Good luck in getting any form of health care reform through now that will increase the government's role. And kiss goodbye any form of cap and trade that will be created by the same brain dead morons who authored and impledmented the AIG bailout. Especially, when it was Senator Dodd who slipped in a provision that made the paying out of these bonuses legal. As was pointed out by David Freddoso in this posting in the Corner:
But why is Obama so outraged and surprised? Today we learn that he signed the very bill that quite clearly made those bonuses legal — the $787 billion stimulus package he had traveled around the nation promoting. The bill includes restrictions on executive compensation, but creates an exception for bonuses contractually obligated before February 11 of this year. The provision, and the exception, were inserted into the bill by the chairman of the Senate Banking Committee, Chris Dodd (D, Conn.), who has received more than $100,000 from AIG employees in the last 20 years, had written and inserted the relevant provision, with the relevant loophole. How can he, the president, or anyone else who voted for the stimulus, suddenly act surprised? Don't tell us they didn't read the bill.
Yes, Ronald Reagan was absolutely corrected when he said the scariest words in the English language were "I'm from the federal governement and I'm here to help." lol
Shorter Chicounsel
Shorter Chicounsel:
Because Barack Obama failed to resolve an inherited mega-clusterfuck (caused by runaway deregulation) in less than two months, this proves that all government regulation is bad and that also government is incapable of doing anything about health care reform (despite the fact that government-run health care systems throughout the developed world deliver better outcomes at less cost than our quasi-private system does).
Can't we do the equivalent
tagged as:- solution
Can't we do the equivalent of disbar them?
Its difficult to disbar when there's no licensing rules
Unlike lawyers, doctors, or even hairstylists, financial professionals such as those making these "toxic assets" don't need any sort of license to practice their trade. So, there's no real way of "disbarring" them, given that they never passed the equivalent of a bar exam in the first place.
Creating licensing rules for this sort of thing, on the other hand, might be a good idea. At least then the suits wouldn't have the excuse of, "We didn't know! Its all the fault of those wily quants!"
Yammering on....
In fact, regulatory authorities can indeed bar people from employment in the financial services sector in 'fiduciary roles' - FSA can do so and has done so.
You bloody idiots yammer on without a bloody clue.
A reminder from your GP
Dear Lounsbury,
we must really ask you to bethink yourself of your blood pressure. As we have admonished you time and again, this swollen jugular is so unbecoming of your health.
Of course, we understand that it helps to releases the psychological pressure. Just keep it to a minimum, will you.
Another route to getting the money back
tagged as:- solution
Seems like Cuomo is talking about another way of getting money back. There is a legal cause of action called fraudulent conveyance, which is used to recoup money that is paid out to creditors/payees when a business is insolvent (according to one of several definitions of insolvency--at least some of which are applicable to AIG.) The idea is to keep people from getting preferential payments from businesses that are going under, at the expense of other creditors. The general rule is that they should not get more than they would be entitled to get from a Chapter 7 (liquidation) bankruptcy.
The feds could use it, too.
May not be able to use the fraudulent conveyance laws
The issue with fraudulent conveyance is that the people receiving the bonuses were AIG employees, not AIG creditors. So, as such, they fall into a different class, and may be able to escape the fraudulent conveyance rules, given that such rules were never really intended to ensnare them.
Better than drafting them
... why don't we just load them into fighter jets and drop them on whatever country we decide to destroy next?
Deleted.
This duplicate has been deleted.
Retention failure.
The BBC reports that eleven of the executives paid over a $million in the recent bonus round, to keep the best and brightest mind, have left AIG for greener pastures.
As far as I can determine, these bonus contracts (which obviously were written to be paid regardless of what happened) were conceived as a direct consequence of the havoc caused by Bear going under and the concomitant gyrations in the housing markets. In other words, these people saw that is was all over but the shouting, and wanted their part of the loot in black and white.
So, flash forward to the present, they get their "retention" bonuses... then move on over to GS and start making money shorting AIGs paper... probably some good money in that, no?
No more carrots for you
Kevin, a day after pleading for the demise of "carrot and stick", here you go (mis)using it! It doesn't mean offering a choice between reward or punishment -- getting to eat a carrot vs. getting beaten with a stick.
"Carrot and stick" is a singular device, a simple way to dangle the carrot, tantalizing but unattainable, in front of the nose of the animal pulling the cart. The animal keeps stepping forward to nibble on the carrot, never understanding why he's not getting closer. In the process he pulls the cart where the driver wants to go.
It's a ruse where the clever driver suckers the stupid, harnessed beast. That's why it has no use in foreign policy discussions or AIG bonus-takers. Unless you want to compare your adversary to a barnyard animal.
Speaking as a democrat, this
Speaking as a democrat, this is bad optics for the democrats. Problem? Hit it with a tax increase.