CONGRESSIONAL RESPONSE TO THE AIG BONUS SITUATION

Just a quick post on this – it doesn’t deserve more.

Our Congress has proven once again that it is a national disgrace. The proposed tax of 90% on AIG bonuses is certainly popular, but will never and should never become law. Here are a few reasons why:

Congress itself approved of the bonuses. Restrictions on executive pay should have been a part of the original TARP legislation and not some retroactive and hastily conceived measure designed to absolve Congress -- rather than to fix the real problem of executive pay for poor performance -- which is all too common in Corporate America.

Congress has highlighted one of its major problems that doesn’t get much publicity – it doesn’t read. Yes, members of Congress read poll numbers – but apparently they don’t read their own legislation. We have learned over the past few days that Senator Chris Dodd apparently forgot he inserted the bonus provision himself. Although Mr. Dodd could have just been telling an outright lie on national television when he denied knowledge of the amendment, the more disturbing possibility is that he really didn’t know. My impression is that members of Congress not only don’t read the legislation they vote on – they may not do the actual writing of it either. In any case, all of Congress is to blame for this, not just Mr. Dodd.

The legislation is likely unconstitutional. The U.S. Constitution prohibits bills of attainder and ex post facto laws. This bill, at the very least, comes uncomfortably close to being both. If passed, the U.S. Government can expect to spend a lot of money defending itself in court for years to come.

The real problem here is the TARP program itself. This was a giveaway of your money to a few large corporations. Anybody who expected Wall Street executives to feel badly about taking some of it for themselves doesn’t understand the mentality of these people. They work on Wall Street because they want to make money – as much money as they can. When there is money for them to take – they take it.

Congress and the previous several administrations can share the real blame for not only the bonus situation, but for the financial mess in general. Yes, Wall Street behaved appallingly – but they played, for the most part, within the rules that were (or in this case weren’t) given to them BY OUR GOVERNMENT. The deregulation and lack of enforcement of existing regulation allowed companies like AIG and Citigroup to become so large that their failures affected the world economy. The lack of enforcement led to massive fraud in the form of mortgage-backed securities, Bernie Madoff, and others. The “hands-off private enterprise” attitude our government (more associated with Republicans, but Democrats are guilty as well) is really to blame more than anything else. For those who still cling to the idea that getting government off the backs of private industry will create wealth for all, consider a sports analogy. Think of private industry as a basketball game. Think of government as not only the refs, but as the league that ultimately decides the rules of the game. If you have too many rules and the refs call everything, the game grinds to a halt. But if you have no rules and no refs, you get Rollerball – not basketball (for those unfamiliar with the movie Rollerball, the two teams at the end play each other in an ultra-violent sport without rules and essentially kill each other until only one man is left standing). Either extreme and there's no more March Madness.

More on reasonable regulation later. Thoughts on Bernie Madoff and Dick Chaney shortly.

I hope to have my weekly video segment up shortly as well.