Last week, Congress and the president found rare agreement in the way that rare agreement is usually found - a common enemy. Executives at AIG, they declared, would not be getting millions of dollar in bonuses so long as Washington had anything to do with it.
Now, Congress is backing off the heavy taxes that would effectively have eliminated those bonuses.
“This bill ought to slow down, and we ought to think about the ramifications of what we are doing,” said Republican Sen. Mitch McConnell of Kentucky.
Why the change?
The big picture reason is a reluctance to use tax laws as such a micro form of punishment.
The more practical reason comes from the other big news of the day - Treasury Secretary Timothy Geithner laying out the administration's Toxic Assets Plan, Part 2, in which the administration would partner with the private sector to buy the bad loans that have crippled the economy.
The worry: Would private investors be wary of doing business with the government if strings were attached to behavior outside the purchase of bad assets?
It's a legitimate concern, given the tendency toward very public legislative finger pointing during this recession. But this week, pragmatism - and potentially, the economy - are winning out.
The big picture reason is a reluctance to use tax laws as such a micro form of punishment.
The more practical reason comes from the other big news of the day - Treasury Secretary Timothy Geithner laying out the administration's Toxic Assets Plan, Part 2, in which the administration would partner with the private sector to buy the bad loans that have crippled the economy.
The worry: Would private investors be wary of doing business with the government if strings were attached to behavior outside the purchase of bad assets?
It's a legitimate concern, given the tendency toward very public legislative finger pointing during this recession. But this week, pragmatism - and potentially, the economy - are winning out.
When times are tough, Americans turn to sugar, the New York Times reports.
Obama's administration is full of great minds, but he may need a couple more great talkers, the L.A. Times writes.
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10 comments:
“This bill ought to slow down, and we ought to think about the ramifications of what we are doing,” said Republican Sen. Mitch McConnell of Kentucky.
RIGHT ON !
Watching those folks up there barrel through unprinted money, without second thought, or even reading the bills upon which they attach their signatures is like watching all the C- rated Judd Nelson movies from the 80's, in one fell swoop. Uncomfortably unpleasant, and unnecessary.
Hope they take the time to find some qualified folks to help lil' Timmy up there before moving one inch more forward. What a hard job that man has undertaken.
The threat of taxing bonuses has put a bit of a chill on several companies who use bonuses as incentives.
My wife was considering an offer from one of the former "investment" banks which took the government money and even at her level ($150K salary and about $60K bonus) there was some concern what the tax changes might do.
However, companies can always just adjust the salary to compensate for the loss in the bonus, say $180K salary and potential $30K bonus without demoralizing most of their staff or losing new talent.
One argument I heard which is total BS is that talent will flee to "foreign" companies (most likely Europe).
Well, that would depend.
US citizens would still be subject to US tax laws even if working in a foreign country, so they could not escape the bonus tax by working for a European company (unless they changed citizenship)
And, if they chose Europe, they would still have to pay the higher local taxes which are typical in Europe.
There probably is a place where the tax burden would be less, but it is unlikely that everyone would be able to take advantage of it or that all major financial/industrial centers would migrate to that location.
"Executives at AIG, they declared, would not be getting millions of dollar in bonuses so long as Washington had anything to do with it."
REALLY? Why, the politicians had EVERYTHING to do with it. They are the ones who confiscated $170 BILLION from the taxpayers in the first place in order to give it to a failing company who had noone but itself to blame for its missteps.
And the taxpayer gets punished as a result.
The hypocrisy of the outrage at the $165 Million AIG bonuses while so few batted an eyebrow over the original $170 Billion giveaway is beyond belief.
That's like being outraged over a $1 expenditure while ignoring the loss of $1,000.
I guess when it comes to millions and billions in stupid taxpayer giveaways, most Americans cannot comprehend the numbers.
This bill sets a nasty precedent of the government being able to tell companies who and how much they can pay. Nobody wants that. Congress knew very well it wouldn't get past the Supreme Court, but they are into symbolism, not substance. They don't really care about fixing anything - they just want to get re-elected.
Get a grip. Some cant see the forest for the trees. Look at the big picture. This AIG bonus fiasco is a scapegoat diversion to the real problems. AIG got 180 billion in bailout and this 200 mill is a drop in the bucket with 80% of it paid to European execs anyway.
There are 900 200 millions in 180 billion so this 200 billion bonus is .002%. Peanuts. AIG should have been allowed to go under but we know Bushs Treasury Sec neocon Paulsen ex-CEO of Goldman Sachs was buds with AIG ex-chairman neocon Hank Greenberg who lifted 6 billion off shareholders and was sued before he left the co 2 yrs ago but got off the hook.
What about the tens of thousands of liars who took out loans lying about their income and employment to bankers? Dateline interviewed a foreclosed minority female who went in hock millions for 6 condos and a daycare business. Dateline showed her a copy of her IRS filings where she posted a net loss every year but had lied to the banks saying she was make 15k monthly. She sidesteped her lies and said she was not in anyway at fault? Gimme us a break here and now here comes Obama her messiah to the rescue on the backs of taxpayers to deepen the debt trillions?
Why did the banks invent derivatives anyway? Because they were tired of being accused of redlining so instead of the age old practice of separating good and bad loans banks combined all loans together and mortage bankers like Lehman AIG Goldman Bear Sterns etc sold them as stock equities across the globe by the trillions that tied all 1st world nations into this mess even though they had their own problems.
Were banks and loan applicants both at fault? Yes but these derivatives composed of good and bad loans allowed for these liars to take out loans by the trillions and now the foreclosure mess.
In the end we see a double whammy as not only are taxpayers screwed for trying to get unqualifed liars into homes that took down the economy to hell but now messiah comes to their rescue while creating a backlash against the corporate world with the AIG diversion scapegoat bonus deal. He and Geitner know about the bonuses months ago.
Why hasnt Obama chastized the liars who shirked responsibility?
We know who will pay for this mess in the end and it is the responsible citizens, if America even survives.
This is why he is being called socialist president trying to take out capitalism.
>> The big picture reason is a reluctance to use tax laws as such a micro form of punishment.
That's because it's unconstitutional to use the tax authority of the Federal government to punish selected individuals without benefit of a trial.
Article 1, Section 9 ... No Bill of Attainder or ex post facto Law shall be passed.
In other words, if Congress were to pass a bill taxing these bonuses *after* they were paid (ex post facto), then what's to stop them from one day deciding to tax everybody who used to drive a green car or whose last name ends in "k" or any other arbitrary reason.
These AIG bonuses are ridiculous. There's very little disagreement on that. But we need to deal with them in the right way and not abuse the law.
Thankfully, class warfare lost the battle this time but Obama & co. have plenty of time to pick their next fight. Stay tuned...
Sorry Peter, your bait'n'switch ain't working. Look at the other comments. People know the problem is CONgress and Obama and Bush and Paulson and Geithner:
THEY RAPED THE TAXPAYERS AND THEY WROTE THE CHECKS TO AIG.
THEY are the ones who need to be imprisoned RIGHT NOW.
I believe the outrage and proposed taxation of the AIG bonuses was planned stright from the White House. Geitner was in on the original Stimulus meetings, he knew in September these bonuses were on the table. Dodd claims someone in the administration (although he won't say who)forced him to add the part in the new bill that allowed the bonuses. Why? So they would be there for the Dems to holler about, then more to tax them at exorbitant rates. This is part of their socialist plan to redistribute the nations wealth, anyone they don't like, slap a 90% tax rate on them. The people were behind first attempt, even some Republicans, so what's to stop them from going further, the press?
Anonymous at 8:44. Foreign firms would benefit as talent would go to UBS, Deutsch, Credit Suisse, Barclays and others in NY. They, nor their employees, are bound by the proposed tax as they did not receive TARP. The House version applies to any company that received $5 billion + in TARP money, while the talk in the Senate is more expansive with maybe any company that received TARP subject to the tax. Foreign firms could poach the best talent and pay them for superior performance.
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