Saturday, March 21, 2009

Did the U.S. House of Representatives just become an out-of-control mob?

Congress rushes to the defense of the people

Cornered by popular anger over the obnoxious A.I.G. "bonuses," which Congress and the Administration both knew about in plenty of time to have blocked, members of the House of Representatives are in a full-blown panic, lest some of them lose their phony-baloney jobs.

First, they held a "hearing" the sole purpose of which was to allow as many Representatives as possible get video tape of themselves belatedly lambasting A.I.G. and its bonuses. Then, in order to grandstand as courageous defenders of the people and scourges of Wall Street, Democrats and Republicans joined together in the biggest display of bi-partisanship we've seen to pass by a 328-to-93 vote an insane bill.

Instead of retrieving bonuses that went to people who shouldn't have got them, or better yet, holding someone -- including themselves -- responsible for permitting the bonuses to be paid out in the first place, this execrable measure would punish potentially tens of thousands of people who had absolutely nothing to do with either the A.I.G. fiasco or the broader financial crisis. If it becomes law, the bill will tax 90% of any bonuses paid in 2009 by 11 big financial institutions that received at least $5 billion in federal money to individuals earning more then $125,000 or families earning above $250,000.

What this means is that if you're an assistant manager at a bank branch earning $60,000 married to a doctor who makes $200,000 and in January you got a $10,000 bonus for 2008, your bonus will be effectively confiscated to make politicians who were asleep at the wheel look better.

And it won't matter that the bank you work for didn't want the federal dough in the first place, as John Hinderaker explains:

Wells Fargo didn't want any TARP money, but the government forced it to take more than $5 billion worth, so Wells Fargo employees who receive bonuses would be subject to Pelosi's proposed tax. Say you're a teller at a Wells Fargo branch in Minnesota and you're married to a lawyer who makes $250,000 this year. You get a $10,000 bonus for your good work during 2008. The government steals it all (90 percent federal plus 8.5 percent state plus, unless it's included in the 90 percent, 3 percent Medicare). That is simply insane.
Spare me the details, some might say. This'll show 'em on Wall Street! We have to take a pound of flesh!!

Maybe so, but it might be nice to cut the flesh from someone who actually got fat on the greedy financial escapades of the past few years.

The House bill won't touch Joseph Cassano who headed A.I.G.'s Financial Products unit and played a leading role in pushing the high-stakes gambling that brought the company to its knees, because he left A.I.G. a year ago. Cassano was finally fired for losing billions of dollars but got to keep his $34 million in bonuses, not to mention the hundreds of millions that he and his associates at Financial Products raked in over several years.

It won't punish Martin Sullivan who was bounced as A.I.G.'s CEO in June 2008 as its financial troubles worsened. Sullivan "earned" $13.9 million in 2007 for his great work, and was long ago home free.

And if it's ill-gotten bonus money we're after, what about the $2.5 billion that Merrill Lynch paid to its employees just before its forced merger with Bank of America in December -- including 700 payments of more than $1 million? Nope, the bill won't get back a penny of that loot.

The bill would, of course, zap the bonuses of perhaps 100 of A.I.G.'s too-well paid execs who have the bad luck to still work at A.I.G. But the price for that is to punish a far larger number of uninvolved people.

Besides punishing mostly the wrong people, the House's crazy bill threatens to make a huge mess of efforts to coax and pressure the financial system back into working order so that all of us can avoid a far worse recession than the one we've got so far. New York Times business columnist Joe Nocera explains the risks of misdirected anger and irresponsible Congressional action today (read the whole thing) and sums up this way:

There are times when anger is cathartic. There are other times when anger makes a bad situation worse. “We need to stop committing economic arson,” Bert Ely, a banking consultant, said to me this week. That is what Congress committed: economic arson.
This week, the House of Representatives became an out-of-control mob throwing gasoline on the flames of an economic crisis. Let's hope that the Senate and President Obama can deal with these troubling issues with calm good sense, not panic, anger and cheap theatrics.

What do you think? Post a comment.


  1. The politican posturing over all of this leads me to an even more disturbing question: why are we entrusting these people with our entire economic future through the so-called Stimulus Package?

  2. What a mess. I can understand the public outrage, but every single person voting for this bill understands that it violates the constitution, at least in spirit, which ought to be enough.