I have been meaning to write about the AIG bonus debacle for a few days now, but while I have been working late to prepare for an important board meeting later this week, it seems like everybody and their brother has written a piece about the subject. Nevertheless, I wanted to use this opportunity to make a few comments about the intersection of politics, economics, populism and morality.
Passing the Buck - if there is anyone that can be blamed for the AIG bonus debacle, it's the government. Never mind all this crap about AIG having a legal obligation to pay the bonuses. That's a red herring. There was no legal obligation for the government to bail-out AIG and they could have conditioned any financial support on waiver of those bonuses. However....
Everyone Knows Better After the Fact - look, government agencies are under tremendous pressure here. They are not thinking of everything and can't be expected to think of everything. Anyone who has ever done a major deal knows that there is always something you wish you had done better in retrospect. And...
Are These Bonuses Really Wrong? Again, anyone that has been involved in a major acquisition, knows that it is very common to offer folks a retention bonus to keep them from bailing when you need them to wind down their projects in an organized fashion. I don't know if this is truly the case here, but there is a lot of evidence pointing to the bonuses being paid in this context.
Government Can Be Dangerous - if you think that Congress is watching out for you by trying to pass retroactive legislation to tax bonuses, think again. You may think that retroactive laws are good for clawing back ill gotten gains, but if Congress can enact retroactive laws, what's to stop them for making something you did last week a felony? Until time travel becomes a reality, retroactive laws should be unconstitutional . They are not only wrong and immoral, they simply makes no sense.
If I don't say it often enough, let me repeat this: my confidence in Congress is pretty close to zero.
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