The Washington Post spins this clawback as a bad thing, but I read it as win-win. Excessive bonuses, if paid by companies receiving a bailout, will be clawed back at 90%. If it doesn’t prevent the bonus payouts, at least most of that money will go back to the tax base. Why stop there? Make it a 100% tax!:
A quickly assembled House bill was approved 328 to 93. It struck hard at Wall Street’s compensation system, which has come under fire because of the $165 million in bonuses distributed last week by American International Group to executives of the troubled unit that helped lead the insurance giant to the brink of collapse. Under the legislation, [b]those who received bonuses of more than $125,000 would surrender 90 percent of their payments to a special income tax[/b].
But the bill’s reach would extend to bonuses paid to tens of thousands of employees at the nation’s nine largest institutions that have received at least $5 billion in assistance under the $700 billion financial rescue package Congress approved last year. The measure also applies to Fannie Mae and Freddie Mac, the mortgage giants the federal government took over in September.
My bold. First off, if this is like every other income tax in existance, the 90% won’t kick in until the bonus reaches $125,000. $125,000 (at a normal tax rate, assuming these people don’t have dishonest ways to hide that sort of payment from the IRS) sounds like a pretty good fucking bonus for gambling on Ponzi schemes and credit default swaps. So the 90% tax will basically act as a clawback on bonuses above $125,000, which from now on I shall call “anal raping of the average American taxpayer”.
But wait! More winning:
“It will have a chilling effect on participation in any government recovery effort,” warned Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, an industry group. “It harms middle management and the rank-and-file sales force, thereby weakening the very firms we are working to strengthen.”
What’s that now? Firms who plan to pay out exhorbitant (i.e. >$125,000) bonuses to their executives will balk at taking federal cash if they can’t waste the money on overpaid paper pushers, rather than using it as intended: to open up the credit market? And this is a bad thing? Fuck you, Scott Talbot. If a bank wants to overcompensate some middle manager who’s lost millions gambling on arcane financial instruments so he can buy a new Maserati, maybe that bank should balk on the bailout. Maybe they should be allowed to fail, and have their assets (and debts) swallowed up by a more honest institution (if such a creature exists).
Although leading Democrats thought the bill’s chances were threatened when House Minority Leader John A. Boehner (R-Ohio) condemned it, about half of the GOP House members backed the measure. The lopsided House tally sent shock waves across the financial sector. Officials predicted dire results, saying the brightest talent could flee institutions that remain wobbly as the firms themselves leave the rescue program prematurely.
Go where, exactly? What firms will hire them, and under what magical conditions will their dismal failures be so handsomely rewarded? Another win!
In another article, I read that AIG executives are being treated more or less like murderers and child molesters outside their office. To which I say: another win!