It looks like AIG’s bonuses are going to dominate the news cycle for another week or so. Every politician in Washington has to get ahead of this and there are still some talking heads carrying Wall Street’s water, trying to convince us that it was a real smart idea.
Just to shed a little light:
The Wall Street rap is that the bonuses were necessary to retain the best and the brightest at AIG and to prevent them from trading against AIG’s position as independent players. The first notion is that the future of the company depends on brilliant minds and that they are the only ones who can unravel the mess they made. This is nonsense for three reasons: First, if you can’t buy enough brain power for $165 million to unwrap this crap, then Harvard’s business school ain’t what it’s cracked up to be. (I am beginning to suspect that the Ivy League business establishment is behind the problem. Better to hire a handful of MBAs with allegiance to the Big 12.) Second, the future of the company was pretty much doomed by these geniuses. Third, the retention bonus did not retain 11 of the bonusees.
The second notion is doubly stupid. There are laws against trading on inside information. Since this idea was advanced by a business writer for the New York Times, I have to conclude that this is another example of the Wall Street establishment’s disregard of the rules.
As to the noise on Capitol Hill, Congressional Democrats have to do whatever they can to stay ahead of the tsunami, so they are proposing to tax away the bonus. Wrong. The bonus babies are all living in London. They can’t be taxed by the US. Hopefully the voters won’t notice that.
We now learn that Congress was offered an opportunity to stop this when they passed the Stimulus Package but rejected the amendment that would have prevented the paying of bonuses. Did the GOP, which got the amendment killed, know Geithner would be dumb enough to pay them and give them this wonderful opportunity to disrupt the President’s agenda?
I am not sure they are that capable, but there are some good chess players out there. The any case the GOP must see this aa manna, and we need to get it behind us quickly.