Solution to AIG bonuses: a 90% tax on people who receive them
The House of Reps has a solution to those crazy AIG bonuses: a new tax that will claw back 90 percent of the income of anyone paid more than $250,000 by any firm that got more than $5 billion in bailout money.
The House measure would apply a 90% tax on bonuses given to employees who earn more than $250,000 at any firm that received more than $5 billion in bailout money.U.S. House OKs bill for new tax on AIG bonusesA Senate proposal would would impose a 35% excise tax on companies paying bonuses and a 35% tax on employees receiving them. It would apply to all companies that received federal bailout funds.
Sen. Harry Reid, D-Nev., the Senate Majority Leader, said he doesn't think it will be much of a problem to resolve the differences between the House and Senate. They are hoping to move on the Senate bill next week.
Previously:
- Sen. Grassley to AIG execs: quit or commit ritual suicide - Boing ...
- AIG Ripoff Gets More Maddening - Boing Boing
- LOL Street: open thread on Lehman/Merrill/AIG/Dow/Fed/FUD/OMG/WTF ...
- Web game: AIG-Catcher - Boing Boing
- Basket Case Insurer Gets $170 Billion from Taxpayers, Still Pays ...
- Is Obama Finally Pushing Back on the Wall Street Barons' Supreme ...
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Seriously? Only 90%?
Well, that is an answer to "we couldn't legally refuse to pay the promised bonus" -- fine, pay it, but most of it goes right back to the government.
I don't like it aesthetically -- targeting taxes that narrowly is a matter of countering an abuse with another abuse -- and the precedent worries me. But it's hard to feel much sympathy for this particular target.
This is getting awfully close to Bill-of-Attainder-land.
Especially dangerous since no one seems to care at all what the circumstances of the bonuses are, and just want to form lynch mobs and hurt people.
Or if AIG would have been allowed to go into bankruptcy as its accounting would dictate (without government bailouts), those bonus recipients would have been denied their claims through the "protection from creditors" nature of bankruptcy proceedings.
The only reason those bonuses could even be paid is because of tax dollars keeping AIG acting as a zombie.
Never mind that bonuses are a red herring -- a single drop in an entire rainstorm of public money being thrown around.
The entire manner in which this issue has been framed in mass-media smacks of agitprop.
All your bank is belong us US.
The "circumstances of the bonuses?" The circumstances of the bonuses are - the very people who did the most damage to the company, and by extension, the American people, are getting huge bribe payments not to go to the competitors and continue looting AIG (and by extension us,) from the outside. Fuck them.
Yes, the tax is ugly. Yes, the anger is ugly. But it's long past time to get ugly with these fucking thieves. They deserve to be treated the same way you'd treat someone breaking into your home.
That's pretty much what I was going to say, technogeek. I can cheer for this, but only because it doesn't apply to me. Give our elected corpulent clowns enough time though, and I'm sure they'll find some behavior of mine they'll deem worthy of a punishment tax. It really is getting to be about time to press the reset button.
Article I Section 8 of U.S. Constitution:
"...No Bill of Attainder or ex post facto Law shall be passed."
This is fundamentally different than other "targeted" taxes because it is simply reclaiming tax dollars that never should have been spent, not punishing private citizens for their behavior.
If your salary is paid by taxes, then taxing that salary is really just a pay cut.
The precedent of them getting away unscathed after the attempted blackmail worries me more.
Now that we're getting some money back, lets use it to prosecute them.
This bill will not pass, or if it does, it will be neutered so that none of these AIG people lose a penny of their bonuses.
Congress had an opportunity to write these provisions into the bill BEFORE handing over the money. They did not do so. Did they fail to anticipate that this would happen? No. They failed to anticipate that a mass of people would get upset about this particular instance of robbery.
So now they are looking to retroactively cover their asses. Once the bill is passed, I will certainly be clicking the "Suggest A Link" button to suggest that you post it. Because there will undoubtedly be no real provision for getting any of this bonus money back.
A token civil measure where extraordinary punitive recourse is required. People like these execs will only continue to drive america on a course toward economic extinction unless their livelihoods, not just their bonuses, are put on the line.
this is the craziest and also most dangerous law. laws should not be driven by individual current events and they should not be retroactively. this new bill goes against both of these. it is a bill that is founded on public outcry and is a purely populist issue. so what next? what if someone will kick out a couple of words all boni will be taxed by 90%? this is dangerous and populist.
i wish that boingboing which usually is all afraid of big brother and the federal government would have a bit more outrage on this.
Sure, they're a bunch of vampires but this tax would be unconstitutional.
wwggd?
what would gordon gecko do?
They deserve to be treated the same way you'd treat someone breaking into your home.
I think that you're conflating reality with video games.
So, those poor folks who were going to get $250,000 will only get a measly $25,000? How are they going to buy their annual brand-new car? (And no, a well equipped Mini Cooper S doesn't really count as a car!)
Kudos for wit to #5
@ #14 posted by carsten:
this is the craziest and also most dangerous law. laws should not be driven by individual current events...
You mean like congress passing the emergency bill that gave them the money in the first place?
The problem is that AIG is taking Uncle Sucker for a ride, and that never should have been authorized to begin with. (Of course, politicians having luncheons and private meetings with Wall Street representatives don't really care about spending your taxpayor money -- that's the principal-agent problem defining Public Choice Theory.)
So, a financial-buff friend of mine was telling me that the plan, as stipulated by the bailout agreement, was to save AIG from immediate collapse in order to sell off assets and shut down in an orderly fashion. A gentle descent, rather than a toppling over that damaged everything around it. And in order to do this, they need to retain the employees who are familiar with and know the value of the assets. To that end, bonuses were the only thing keeping people around (until they started getting death-threats)
Under the plan, we stood to have all the bailout repaid, and possibly even with a profit, but the current 90% tax threatens to collapse the whole thing, not stop the collateral damage, and waste the bailout money we already spent.
Given that this is just what I heard and not my own viewpoint, is there factual claims that contradict this interpretation of the situation? I'm really curious.
Exactly!
* Emergency Economic Stabilization Act
* USAPATRIOT Act
I think many if not all of the bonus recipients are quietly returning them and getting as much distance as they can. Anyone following them?
This tax applies to ALL bonuses paid by other companies that have taken more than $5bil in TARP money. It's not just punishing these guys in AIG Financial Products that imploded their company - it's also retroactively punishing employees in profitable divisions at banks that probably don't really need the $5bil+ they took.
I hope this bill dies somewhere - I appreciate that Congress thinks something's got to be done before the public collectively has a stroke over this frankly piddling sum (compared to total TARP outlays), but this was a pretty poorly put together effort even by their standards.
I'm as angry as anyone, but we can't just go trampling on the Constitution to get there.
@#4 ZUZU
I am really glad that some people realize this is 165 million out of more than 100 BILLION that we gave AIG. There is a reason we have bankruptcy and a reason government controlled businesses are a bad idea (Fannie Mae Freddie Mac anyone?)
These bonuses, if they were so horrible, never would have made it through bankruptcy. I've heard an explanation for the bonuses, and they make some sense, and it fits with the business unit they are from. They may be a bit excessive, but they were necessary if the explanation is correct.
The business unit in question had failed, and had done so before the major crash that really broke the back of the company. The unit was being scuttled, and the intent was to do this in a way that had the most positive impact on AIG as a whole, but in order for that to be done the executives who knew the business unit needed to be kept around to make sure it happened properly. In order to keep them from leaving for other jobs before everything was done they put "renention" bonuses in their contracts. At the completion of their tasks their job no longer existed and they got their money, kind of a severance package. In the end, the company was to salvage as much capital from the dead business unit and it would be gone. That's why bonuses were paid to people who are already gone, despite the term "retention" being used.
Had the company gone into bankruptcy the judge involved could have determined if the bonuses were too high and altered them, could have abrogated the contracts outright, or whatever else was necessary. Bankruptcy doesn't normally end with a company gone, just reorganized and cleaned up. AIG wasn't allowed to go bankrupt because congress was afraid that if they did so they couldn't cover immediate debts and payouts during restructuring really screwing up the economy. That may be true, but on the other hand when they stopped it from happening they gave up any legal method of undoing any already signed legal contracts.
I have a really hard time believing they didn't know this, they're using anger to steer blame where it's safest for them, personally.
This is all nonsense (emphasis added). Those assets are worth diddly squat, and government is doing everything in its power to keep them over-valued.
The market knows they're worthless, because they are. All of this bailout scheming is just another confidence game at the public's expense. (Remember, television tells us it's all about "confidence", not finding the true value -- which is massive deflation necessary to correct for the massive inflation of the boom period of the credit cycle lo these past 8-12 years.)
is there factual claims that contradict this interpretation of the situation?
I bet there isn't. One thing these folks are clearly very good at is making themselves rich. I am sure they have anticipated every angle whereby they could be prevented from making themselves richer, and have made sure to cover those angles.
They will get their money, and there is not a thing we can do about it.
This tax is a lousy solution if you ask me. Like others have said, it sets a dangerous precedent. It's better for those smug assholes to keep their bonuses, which amount to a drop in the AIG bailout boondoggle anyway.
@ #25 posted by Inkstain:
I'm as angry as anyone, but we can't just go trampling on the Constitution to get there.
OK, you tell me which part of the Constitution this violates and I'll withdraw my support from the plan.
@#4 ZUZU:
Exactly. All this media attention and government attention is distracting the public away from the fact that they have been swindled.
That's how I feel... SWINDLED.
Thanks government.
@#29 - The assets are not worthless. Some of them are worthless or near worthless. They have some good assets. They have some fantastic assets. Billions and billions of dollars of each.
gtmoogle - Yes, but then the smoke stopped obscuring the mirrors.
Bear in mind that the lion's share of the bailout AIG received is not going into the bonus packages, but is being paid out to its customers, and Goldman Sachs is at the top of the list. How convenient that the former CEO of Goldman Sachs is named Henry Paulson, who took over as Secretary of the Treasury in 2006 and engineered the details of these bailouts before handing over the problem to Timothy Geithner.
It's ridiculous that Congress thinks taxing the bonuses back into the treasury is going to change anything. It's just shuffling around numbers on the ledger (all of which are printed in red ink).
If the bailouts had been rejected from the outset, we could have let AIG fail, along with Bear Stearns, Lehman Bros., and a bunch of other banks deeemed "too big to fail," and proven last year that there is no entity that meets that "too big" criteria. That would let the market do its regular job of punishing the wicked and rewarding the thrifty. What the government has done is try to prevent capitalism from functioning the way it is supposed to operate!
Why didn't Congress reject Paulson's nomination to the Treasury post? Why can't a President appoint an eoncomist to this most important position? Throughout most of his career, Paulson has been an investment banker, not an economist. At one time, he was even chief assistant to convicted felon John Ehrlichman who went to prison as a Watergate conspirator during the Nixon administration. Yet his nomination sailed through the confirmation hearings as if these bozos understood what they were doing to the country!
I read this in the times this morning and I'm still confused by the numbers how does 35% + 35% end up being 90% instead of 70% are they including some sort of 20% base tax rate I don't know about?
This tax is a lousy solution if you ask me.
Probably a good phrase to reuse. Think about other congressional brainstorms that have been cooked up in response to unusual circumstances, like Special Prosecutors. That one went well. If Congress can pass what is essentially a punitive, retroactive tax, what's to keep them from doing it again? Laws that are passed to assuage public fear and anger set precedents for repression and greater taxation. Web tax, anyone?
We brought much of this on ourselves. The sad fact is that most of these asshats are suspected of criminal wrongdoing but our government is reticent, perhaps down-right powerless to investigate since our government is now their largest shareholder.
@Sally - different bills, senate vs. house.
@inkstain - "I'm as angry as anyone, but we can't just go trampling on the Constitution to get there."
citation please - I see precedent trampling, not constitution trampling here.
If you're angry (I'm not), be angry at the President, who claimed he wouldn't sign any bills without adequate review, and your elected congressional representatives and senators who voted for the bill.
Mark@31, MDH@11, Technogeek@2:
No, this does not set a precedent. There is plenty of precedent for narrowly defined taxes designed to curb specific types of bad behavior. For an example, see the 50% excise tax designed to prevent "Greenmail":
http://en.wikipedia.org/wiki/Greenmail#Prevention
(via this article)
Less financially-abstruse examples would be the high taxes on cigarettes and alcohol, often justified on health grounds, and environmentally-justified taxes on gasoline.
I think a more pressing issue is that these bonuses are actually a drop in the ocean (as others have noted), allowing some economically corrupt politicians to act all outraged, when in fact the majority of bailout money is still vanishing with almost no oversight.
Notice: Family income above $250k. That means that two middle managers working for different companies would be hit with punitive taxes. In theory, a secretary working for AIG with a thousand dollar bonus would be taxed 90% because she is married to a lawyer.
"Free up some cells at the white collar prison. I smell tax evasion."
@41 - Article 1, section 8. It's been quoted here already, Bills of Attainder have been discussed. I can't imagine the courts not letting a Bill of Attainder stand in any way. They're trying some voodoo with the wording, but the courts are pretty protective of their duties.
Appeals would be accepted by the SCOTUS without a doubt, and if the wording does make it through as constitutional there'll be a pretty fiery dissent, at least as far as you can make judicial documents fiery.
#22 GTMoogle Given that this is just what I heard and not my own viewpoint, is there factual claims that contradict this interpretation of the situation? I'm really curious.
NPR reported yesterday that one of the recipients of a $6 million "retention bonus" is no longer working at AIG anyway. He resigned after cashing his "retention bonus" check. Obvioulsy, this was someone smart enough to read the writing on the wall.
More internal dirt on AIG is being discussd on reddit at http://www.reddit.com/r/reddit.com/comments/85de1/i_know_the_chances_are_slim_but_is_there_anyone/c08au3b
As other posters have pointed out, if AIG filed for bankruptcy protection, all of these "contracts that can't be broken" would be nullified and re-negotiated as part of the bankruptcy settlement.
Thanks for the clarification KCOBBQ.
If Congress can pass what is essentially a punitive, retroactive tax, what's to keep them from doing it again?
If Congress can't pass a punitive retroactive tax, what's to stop insider executives from doing it again?
@47: Retroactive taxes are totally different from Bills of Attainder. Whether or not you agree with them, there are many precedents for retroactive tax and they are not forbidden by the US Constitution.
For example see this (top Google hit for "retroactive tax", certainly unsympathetic, but quite clear on the constitutionality):
http://www.heritage.org/research/taxes/hl613.cfm
Bill of Attainder: declaring a person or group of persons guilty of some crime and punishing them without benefit of a trial.
Congress left room for the abuse of TARP funds, and went back to fix their mistake. Nobody is being found 'guilty ' of anything.
Saying they only get to keep 90% of OUR bailout funded bonus monies (especially when they were accepted under bad faith that these people could salvage a company they knew was done for) isn't punishment.
@51 - This isn't just a retroactive tax, this law is written to punish specific people, and that's the problem with its Constitutionality.
As much as I dislike retroactive taxes, as long as they meet the precedents set to not be ex post facto, I can't really claim that.
This differs from greenmail in *how* it targets. The tax can't escape the context it's written in, unlike finding creative new uses for old laws.
Mark F, currently at #31: Nail. Head.
With the added obvious that members of Congress knew the bonus dealie was in there. Enter grandstanding.
Twain: "Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself."
it was probably against some law, somewhere, to invade Iraq and kill a million people. That happened anyway. If Nixon can use: "if the president does it, it's not illegal" , then I don't see much problem with forcing these jokers to hand back some money. If they were going to execute them, then there might be an issue. Politics is about real life and real life isn't precise. Or pretty, most of the time.
While we're at it, let's slap a 90% tax on EVERYONE responsible for the current economic mess.
-realtors
-people who bought homes they should have known they couldn't afford
-pretty much everybody in Congress
-Bush, Clinton, et al.
-credit card companies (for encouraging people to live beyond their means.)
-rappers (why not? blame bling.)
-anyone involved in reality television (I know they had something to do with it.)
-developers (for building crap McMansions)
-lazy rich people
-lazy poor people
-TMZ
Did I miss anyone?
1) The bonuses constitute less than one tenth of one percent of the whole package. That's less than the fudge factor in the office supply budget. It's political prestidigitation so that members of Congress can look less guilty to their constituents come election time. The outrage that's driving this torch-and-pitchforkfest is just as irresponsible as the greedfest that got us into this mess in the first place.
2) The cost of passing this law, then fending off litigation will exceed the amount of money saved, probably by a substantial factor.
3) Getting Congress to pass a dodgy, possibly unconstitutional, precedent-setting new law to assuage public sentiment is like the BioWeapons Division of Weyland-Yutani trying to tame the alien queen. She'll breed. You'll die.
ah here we go, it'll be public by tomorrow
http://www.huffingtonpost.com/2009/03/19/aig-turns-over-list-of-bo_n_177067.html
I agree that this doesn't cross into "Bill of Attainder" territory. Dislike the precedent if you want, but until the ACLU tells me otherwise I'm going to say this plan sounds constitutional.
#25 is right on the money. If this passes, expect a rush to the exits of TARP by ANY bank that can afford to repay the money. (Particularly by the banks like Wells Fargo that were healthy but took the money anyway because Paulson told them to.) You can be sure that next time the healthy banks will tell the government to fuck off when they are asked to help out.
This may or may not be what Congress wants, but it will be a serious unintended consequence. It may well hasten the day of reckoning (Citi and BofA nationalized) as it becomes ever more obvious which banks can't stand on their own.
Oops, that last one was @50, not 51.
This is @51 - the precedent in the US is that any private bill which is punitive is considered a Bill of Attainder. Dictionary definitions mean little vs. precedent in a court deciding matters of Constitutionality.
And the company wasn't done for. Congress acted on the idea that losing the immediate payouts on claims vs. that part of AIG that would be put on hold during a bankruptcy would have far worse, far reaching effects. Which is debatable. It wasn't just internal factors that were taking AIG down. The company might never be as big again, but it wasn't going anywhere in all likelihood.
@ #60: It's not a "private bill" if the law applies equally to all corporations and not just AIG.
@Takuan - Yay! Bomb threats, violence, and posting pictures of these people's kids on the internet will be great! Awesome. Now they'll have to waste even more of the TARP money on security.
@61 - the bill can't escape it's context. Poll taxes apply equally to all voters.
I do taxes for a living. What frightens me most about this is that Congress isn't even pretending to understand the tax code before mucking with it.
@ #63: Poll taxes aren't illegal because they constitute a Bill of Attainder.
This bill doesn't target a specific person or corporation, it targets a specific behavior.
Wouldnt a simpler solution be to not give them BILLIONS of dollars to begin with? (i ended that in a preposition just to be a grammar troll). Then we wouldnt have to wine about the MILLIONS that get spent in bonuses.
please note the significance between the B and the M. im a bit appalled that its taken this long my country to get angry about all of this.
Precedent:
United States v. Carlton (92-1941), 512 U.S. 26 (1994)
The reasoning the Court applies to uphold the statute in this case guarantees that all retroactive tax laws will henceforth be valid. To pass constitutional muster the retroactive aspects of the statute need only be "rationally related to a legitimate legislative purpose." Ante, at 9. Revenue raising is certainly a legitimate legislative purpose, see U. S. Const., Art. I, §8, cl. 1, and any lawthat retroactively adds a tax, removes a deduction, or increases a rate rationally furthers that goal. I welcome this recognition that the Due Process Clause does not prevent retroactive taxes, since I believe that the Due Process Clause guarantees no substantive rights, but only (as it says) process, see TXO Production Corp. v. Alliance Resources Corp., 509 U. S. ___, ___ (1993) (slip op., at 2) (Scalia, J., concurring in judgment).
@65 - I didn't say they did. They are an example of a law that can't escape it's context, even if it's objectively neutral. I was making a pretty straightforward comparison.
Word up @ 34 KC0BBQ (I as oversimplifying) and @38 & 56 Antinous (very well said!)
@54 Takuan,
So much for the Rule of Law, then?Let me know if the parallels between the American Empire and the Roman Empire ever stop being made.
well, the important thing is Something Is Being Done. If the bonus recipients all die at the hands of angry mobs they can at least console themselves by knowing that there is a certain symmetry preserved in the balance of their few lives against the thousands of peasant lives blighted by poverty driven lost opportunity, or lost to uninsured, untreated sickness. I am quite sure Persons of Quality consoled themselves thus as they rode the tumbrel.
KCOBBQ - inertia and solvency are very different things.
The status quo might have been maintained, but that doesn't mean the AIG executives were magically unaware of the house of cards they all built together.
I'm reminded of an experiment where two rats were connected to electrodes. They were given random shocks, but one of the rats could press a bar to make the shocks stop, until the next random interval, anyway. So both rats received exactly the same shocks at the same times for the same durations, but the one who was in control learned to cope and remained relatively healthy, while the one not in control was physically devastated by anxiety.
Yet, our cognitive evolution may not be the best suited for these counterintuitive problems. Consider the sensory illusions in aviation. Our evolutionary biology is ill-equipped to make the correct choices when piloting an aircraft (since this is an extremely recent phenomenon in human evolutionary history). Doing what "feels right" will get you killed.
I highly suspect that this same crowd psychology of "Do something!" is what's getting us killed now.
Antinous,
Your three-point support for the status quo has been noted. I see what I did there, but I see what you did there too.
leadership 101: ANY decision is better than no decision.
(SHHH! let the fools exterminate each other! Even now our young grow strong in the vats and our day grows closer!)
Populist misdirection.
I was so glad to hear of the 90% tax. I would have been happier with public executions, but this works too.
@12 87 Republicans and 6 Democrats in the House, voted against this bill. The Republicans that voted "no" did so because they had a bill to get MORE of the money FASTER. I think there is a tremendous amount of "Will of the People" behind this. I'm not sure it'll get stopped in Congress.
Agree with #22. Only grandstanding can unite congress this thoroughly. Before loading up your pitchfork & torch and storming AIG-FP, check out this article:
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/18/AR2009031804104.html
If these folks are so critical to American security, draft them. Draft them into the Army and give them a choice: Afghanistan or a cubicle doing exactly what they are doing now. We've drafted young people, poor people, and so on for decades. Why not draft bankers?
This is a moronic solution. And to be honest I don't even get the outrage over this problem. With all the crap that is going down, people are this upset over $170 million? THIS is what pisses people off? After eight years of illegal war and torture and wiretapping and who knows what else... and now the collapse of our financial system. And people get angry about these bonuses? We are so fucked.
I do not wish any harm on those who are innocent bystanders in this fiasco -namely the families of those responsible for this economic crisis. However, those of you who share in the nation's collective disdain for these greedy bastards should first direct your ire to this douchebag:
Connecticut Senator Christopher Dodd(R)
because it is he -and he alone- that placed the clause in the legislation to bailout the 'steaming pile' that is AIG, that allowed these bonuses to be paid out. His immediate resignation should be sought by all citizens, including the President.
what is the REAL social contract in the American example? Democracy? Liberty? Rule of Law? State religion?
Money.
The absolutely underlying cornerstone that informs all American social experience is the firm belief and understanding that enough money can fix ANYTHING. It is all that counts, more than sex, race, age, religion, education, talent, anything. It is the ultimate equalizer and the whole Dream is sold on the idea that theoretically anyone could accumulate enough of it to be truly free. Whether by birth, work, inheritance or fortune. That contract, rigged though it always was, is now in danger of being revealed as unworthy of faith. These executives are the perfect sacrifices. Shunned now by the other,luckier nobility, made unclean by association with failure, despised by the masses and having no leverage at all with the rulers, they cry out to be thrown on the fire first. Do I have any pity for them? I wonder how they would look upon me if our positions were reversed?
Hurray! They Government can now go after, bully, and scare private citizens out of their earnings at will, simply because the majority of people agree it should be done?
This, my friends, is just the start of the dividends we will collect for a fatally flawed public education system that puts emotions ahead of law.
by Milton Meyer, They Thought They Were Free
Their contracts pre-date the bailout, they were discussed months ago by at least one member of congress, they were explicitly protected by Sen. Dodd (at the behest of Geithner's Treasury), and then, when the public found out about it, all the lawyers in the room forgot everything their teachers taught them at Harvard, Yale, et al, and decided that targeting tax code on a handful of people retroactively was the the right thing to do...
Three months ago, Rep. Elijah E. Cummings, D. Maryland said congress should investigate AIG giving retention bonuses to some employees... Why did no one follow-up?!
How about, next time, take a moment or two, and read the freaking laws you are about to pass, and then, for a second or two, consider the implications?
Just a thought...
(I'm under the impression that most of the "bonuses" were actually guaranteed payments in addition to $1/year salary, these were not "bonuses" in the sense of being tied to anything other than remaining with the company, and the company remaining another 12 months.)
Sure is a lot of fuss for 1/10th of one percent of the total monies given to AIG to date, but there is a guarantee of more to come, since they are too big to fail
Damn, Takuan @#84, you just summed up the entirety of American history.
If these guys are denied their bonuses, or even better, if justice prevails and they have everything taken away from them and wind up living on the street ... Can there be any doubt that the take-away lesson for most Americans will be, "Please do anything you can to make the most obscene amounts of money possible, except avoid this one really narrow, specific activity that these guys did and were unlucky enough to get caught doing."
whisper dog said:
Chuck Schumer, D. NY agrees with you, it seems.
Or maybe not...
If we called thei "pork" instead of "bonuses", the American People wouldn't care - right Chucky?
but Timothy, if Rule of Law applied, surely Bush and Cheney would long since be in prison and millions would still be alive.
@falcon seven
because it is he -and he alone- that placed the clause in the legislation to bailout the 'steaming pile' that is AIG
You shouldn't lie. Lying makes baby Jeebus cry. And it gives people the right to call you a liar.
@timothy hutton
They Government can now go after, bully, and scare private citizens out of their earnings at will, simply because the majority of people agree it should be done?
And out of whose pockets are those "earnings" (which is ridiculous, because "earnings" suggests there's some merit attached) coming from? Oh yeah, the "Government" and "the majority of people".
If one were to go back through BB posts about the UAW, I wonder if the same people who had no problem with slashing contract-guaranteed benefits for union workers are now defending these contract-guaranteed "retention" bonuses as if they were the virginity of democracy itself.
Hurray! They Government can now go after, bully, and scare private citizens out of their earnings at will, simply because the majority of people agree it should be done?
1. If the taxpayers own more than half the shares in your company then you're a Federal employee, not a private citizen.
2. They are only "earnings" if you earned them.
Dysfunctional firms need to fail so that their resources can be put to productive use by others -- which is what real economic recovery entails. Keeping those resources tied up in unproductive use merely lengthens and deepens the economic destruction.
Because the bail-outs have been a big hit on the taxpayers, the people who worked for the bailed-out companies who make more then $100k a year, should get ZERO TAX DEDUCTIONS, until the bail-out money is paid back (with interest).
Maybe next we can levy a bill of attainder against the people who donated to Prop8 in California, a tax of 100% of their hate donations.
Can someone explain the point of contractually obligated 'bonuses'? If you have to pay it, why is it not simply 'salary'? In the current economy, could anyone have actually reached a sales target? It seems unlikely.
@89 - "I'm the one who has led the fight against excessive executive compensation, often over the objections of many," said Dodd, the chairman of the Senate Banking Committee. "I did not want to make any changes to my original Senate-passed amendment, but I did so at the request of administration officials, who gave us no indication that this was in any way related to AIG." - Connecticut Senator, Christopher Dodd(R).
He was lobbied into submission by the Bush administration and refused to stand up for his constituency. He is solely responsible for the changes to the legislation and for casting his vote in favor of it -despite his 'convictions' to the opposite. He is the liar, sir. He alone deserves the pillory, censure by the Senate -and we, as a nation, deserve his resignation -and you, sir, owe me an apology.
don't you worry Zuzu, the Principle shall be preserved. You must take the macro view; this species is almost certainly slated for replacement by something better. It's economic antics and social gyrations are minor things when taken against the backdrop of that incoming asteroid and the need for intelligent species to take steps to preserve themselves in an uncaring universe.
#94 - I believe the general practice of contractual bonuses in Wall Street came about as a workaround to past legislative attempts to limit executive pay.
I think this is a relatively measured response by Congress, and it's a shoo-in to be signed into law. The problem is public perception that extraordinary measures are being taken to prevent AIG, Citigroup et al from bankruptcy and relatively little being done for the average person who's lost their job or fears losing it.
I heard today the equivalent of TARP/bailout moneys promised thus far is the equivalent to over $10,000 for each American taxpayer. $180 billion is for AIG alone, most of which is now announced in Sunday afternoon press releases.
The cap of $5 billion in bailout money limits this tax to the top 11 recipients of public assistance. The majority of these would have been bankrupt last October in the absence of the TARP funds:
http://en.wikipedia.org/wiki/Troubled_Assets_Relief_Program#Beneficiaries
I don't find the idea that bonuses are necessary to retain employees needed to fix the problems credible -- where are they going to go in this economy?
China would be trying, convicting, and executing the boards of these companies.
I believe they'd call it "a deterrent."
I'm opposed to capital punishment, but... come on... 35%?
And this is only symbolic... one company, one set of bonuses...
Honestly, I'm less opposed to capital punishment than this #*#&
Allow me to be the first to call Godwin's Law on *85.
I believe the general practice of contractual bonuses in Wall Street came about as a workaround to past legislative attempts to limit executive pay.
It's bizarrely outdated, sort of like tipping in restaurants. I've never worked in a industry where people got bonuses. When I worked in the hospital, there were special performance awards for employees who really did something extra, but those were awarded to less than 1% of the work force. When you hand out bonuses to everyone in one tier of employment, you can't very well pretend that it's an incentive.
just imagine what the under the table payments must have been like.
#95 You got the wrong administration.
Dodd said it was the Obama Administration that "lobbied him into submission"
http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aT_tMXRy2vDs
@ 102 - #95 You got the wrong administration.
Makes no impact on his point though, does it.
I'm with #96,
let's just get it the hell over with already...
Takuan asked:
Different discussion - I'm trying to stay on topic...
ZUZU said:
There are at least 535 congress critters and over $1 Trillion that would disagree with that statement...
The ONLY problem with this is the reach of the tax. Anyone associated with the company, even subsidiaries (sp) that made $$$ are eligible for punishment. We need to do something to the actual offenders, like the unit of AIG that caused all this crap. I think banning them from ever working in the financial system again would be a good start.
Punishing groups of people using big, wide brushes can have bad consequences since they set a precedent fro future actions when the public is upset...
There are still companies where bonuses are actually paid to reward performance so the base salary is kept low. For people on the edge of the bottom limits, this can cause the bankruptcy of not only employees who get bonuses but also all the unbonused people who get fired when the company fails.
This king of tax is nothing new. In 1952 (when ironically most republicans would say was a better time), the tax rate on the highest bracket was 85%. YEAH. Back then, corps. didn't give huge bonuses to executives because it was essentially all taxed. Kudos to the company books and the shareholders, huh?
Pay to retain talent? I wouldn't pay for what they're talented at. I'm a retired carpenter, and instead of a 401k, I managed my own $. my portfolio is up 50% this year. I can do a better job than those schmucks.
Terrible solution that amounts to little more than political grandstanding and further waste of taxpayer money. Once again, the media jumped on a minor point and the government acted on the "easy" target to avoid drawing attention to the bigger issues.
A few clarifying points though:
1.- the 35% + 35% aspect is for FOREIGN employees of the companies in question. US employees will be taxed 90%, foreign ones will be taxed 70%, split between the company and the employee. This is only if standard withholding tax policies fail to take the required amount.
2.- It's 90% of the BONUS. So if you earn $250,001, then only the bonus portion of that is taxed at 90%. (ie.- $100k + $150k bonus, means you make $115k, minus standard taxes on the $100k). It doesn't mean that you get taxed 90% on the whole amount.
3.- These are retention bonuses. They aren't performance bonuses. They're for employees (and executives) in areas that are being wound down. These people have essentially been told they're fired, but are needed to shut down their own department. As to the "where would they go?" question, do you not think that many of these people don't need to GO anywhere? They're already worth hundreds of thousands, if not millions, of dollars. They can wait out the recession if they need to. In many cases, the bonus is the only thing keeping them from walking away now and creating a mess for the shutdown. Nobody's going to stick around out of the goodness of their heart.
That said, AIG should have been allowed to declare Chapter 11, just like every other bank and financial institution and automaker out there that "needs" a bailout.
ANTINOUS asked:
The only way I'm able to rationalize this "action" is to look at it this way - many (but not all) of these employees took $1 is "salary" with a balloon payment of up to $6.4M (most are much, much less) if the company is still around in 12 months and the employee in question is still working for the company. "Bonus" is a misnomer, a handy cudgel to hammer on a populist theme.
I think at the time the contracts were signed, the future of the company wa sin doubt, so it may not be accurate to call them guaranteed in the strictist sense, but since conditions were met (the company didn't actually go away), the obligations came due.
Sadly, several good lawyers are apparently making the point that such a tax is almost definately unconstitutional, and the lawsuits following it could result in the recipients getting paid even MORE in the long run. It IS all rediculous though.
AJ proclaimed:
Winner, winner - chicken dinner!
From AP, via Yahoo.com:
Now, let me predict the next s*it-storm, all the employees that made $1 in salary are well under the $250K household income levels, so they will be exempt from the tax because their bonuses came in 2009 for work done in 2008? I can see a few (not all, but a few) employees falling into that group and being exempt, causing another media circus to correct another oversight in hastily-drafted legislation...
I don't think this is really specifically a Bill of Attainder, as it would apply to stop future behavior.
(Like for other corporations that pay such bonuses..Freddie Mac anyone?) And let's not forget, we won't be immune to another cycle of depression- this might prevent scathing acts of corruption in say 2200 when the laser-robot market crashes.
Sure it was brought on by a specific instance, but so are a lot of laws. (Lilly Ledbetter anyone? Rosa Parks?)
to post #59
you made the tax sound like a good idea.
If you're an exec. and want to be a fat, decadent, filthy rich pig on shareholders money.... Pay back the people, the taxpayers.
IF you're on private funds, you can do what you want.
I don't like the idea of a bank or insurance company being to big to fail anyway. Too much power leads to too much abuse.
If it's true that these retention bonuses were to keep people that could help liquidate the company efficiently and with least impact to rest of economy, then that's the best idea I ever heard.
Cannot see if anyone mentioned, but here:
'(iii) The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary.'
I.e.: The stimulus explicitly said that those bonuses were to be paid. Why? Possibly because AIG supported and donated money to various Democrats. So what changed? They go caught.
Congress has gone mad. You can't take a 90% tax on a bonus that's already been paid and that CONGRESS THEMSELVES APPROVED. Of course, they're all lying about who knew what and when. This should be called the "righteous indignation" bill. I can't wait for these clowns to be voted out of office. They're the ones who are disgusting...not some working stiff that got a bonus check for trying to untangle a financial nightmare.
...but where IS John Galt?
Article 1 section nine clause three:
“No bill of attainder or ex post facto Law shall be passed.â€
@Timothy Hutton:
The Meyer quote is REALLY out of context here. The way you used the quote makes it lose its meaning. Not allowing rich people who exploited and still exploit a system to get even richer, has nothing to do with taking away people for their beliefs or for what they are. An organized society is obliged to at least somehow warn people who endanger other people (or who are partly responsible of leading half of the world in an economic crisis) for their personal comfort.
timoth hutton - stop being obtuse.
the tax is on every dollar OVER 250K. For a talented writer your reading comprehension lacks at the most convenient times.
I'm not going to hold my breath waiting for the 100% tax on members of Congress.
I am really really wary about imposing a tax like this. It sets a major precedent. I mean, who will be next to get assessed at some burdensome tax level?
It's amazing to me how surprised and outraged we become when things like the AIG bailout happen.
We put these guys in Washington. They gave AIG a chunk of money for which there were little or no stipulations or guidelines. Much like the other bailouts, it just continues to show a lack of governmental control over spending.
Why are we surprised?
Dr. Seuss Explains The Bailout:
http://www.it-takes-work.com/2009/03/dr-seuss-explains-the-bailout/