Oxy Mora: David Brooks at the Budget Motel
Richard Day: Shelter From the Storm
Mr. Smith: Duchamp, the Big Glass and Chronic Illness
Great. Now there's a backlash to the backlash to the AIG bonuses, and everyone is scolding Congress for acting so rashly in crafting a bill designed to recover 90% of the bonuses in taxes.
Conservatives are complaining the bill is unconstitutional and unproductive. In his Obama interview, Jay Leno said he's frightened about its implications, and our own Genghis is mocking the effort.
Gimme a break.
Don't get me wrong. I have plenty of problems with this bill.
I question the constitutionality of the law.
I think targeting bonuses alone is unwise and insufficient. Companies will just get around the law by increasing base salaries, and bonuses in any case are a reasonable compensation incentive, as long as they're tightly tied to performance at the individual AND corporate level.
I agree that some talented people may be poached by companies not encumbered by the law and that this would put the very institutions we're trying to rescue even further behind the eight ball.
I worry that banks that aren't healthy may try to return the TARP money as soon as possible, undermining the main purpose of the program in the first place - keeping the banks well capitalized and the credit flowing.
However, I think all of these potential issues aren't nearly as concerning as the critics would have you believe.
I'm no lawyer or Constitutional expert, but I do believe the bill of attainder issue has been at least somewhat addressed by broadening the law to include bonuses paid by any bank receiving a certain amount of TARP money. At a minimum, the answer doesn't appear clear-cut and deciding questions of legislative constitutionality is one of the reasons why we have the court system anyway.
While I'd rather have Congress devise a broader, much more considerate compensation bill, I'm not going to cry that banks which are receiving significant sums of taxpayer money in order to stay solvent are severely limited in their ability to pay out bonuses to people already making a very good living (the bill only targets households with income greater than $250,000). When these banks are healthy and making a profit again, they can return the money and institute whatever compensation policies they want.
In terms of top talent leaving banks targeted by the bill, I think this concern has been wildly exaggerated. The financial industry has been decimated; unemployment in the sector is very high and even some very talented capable individuals are out of work and available should any talent be poached. Besides, you gotta find it laughable that we are worried about these 'best and the brightest', since it was in large part these very same folks with their fancy financial alchemy that created the monster which finally broke our system. Perhaps a thorough management cleansing at some of these companies would ultimately be helpful.
I also largely dismiss concerns regarding the unintended consequences of incentivizing banks to return the TARP money too quickly. If banks are healthy, we want them to return the TARP money as soon as possible. If banks are not healthy, and still attempt to return the TARP money, the government can stop them. Government regulation requires a certain amount of capitalization, and the stress tests will hopefully further separate the healthy institutions from the sick ones.
In short, I am glad Congress is moving in haste on this issue, even if in practical terms the AIG bonuses are chicken feed and any legislation addressing them will do very little in terms of getting us out of our current mess.
Would it have been so much better had we used force of law to stop AIG from giving out the bonuses n the first place? Absolutely, and if Geithner or others did not act forcefully enough to make that happen, I hope they are taken to task for that failure.
Do I hope our legislators take the time to craft a meaningful, defensible bill that minimizes any negative unintended consequences? Of course. Now that the first tranche of bonuses have already been paid out, and it will be up to the government to get the money back, it only makes sense to do this right.
But symbolism matters, and if we plan on continuing this practice of doling out hundreds of billions of dollars to companies in need, we have to show that this kind of behavior won't be tolerated. It's our money, and we have a right to say how it is used.
If in the process, we begin talking about how our culture of excess and misaligned compensation policies led to an unhealthy focus on short-term profit and an imbalance in dangerous risk-taking, then all the better.