This article from The Washington Post (run in our local paper with a slightly more provocative headline) greeted my wife and me over breakfast this morning. By way of introduction, my wife is as far to the left of center as I am to the right of center, has never taken an economics course in her life, and is as outraged by the behavior of large financial firms as I am. When I got to the following passage, I noticed a familiar expression on her face:
President Obama yesterday vowed to "pursue every legal avenue to block these bonuses." But that pledge might have come too late. About $165 million in retention payments started to go out Friday to employees at Financial Products, after numerous discussions with the Treasury Department and the Federal Reserve.
Attorneys working for the Fed had been examining the matter for months and determined that the retention payments couldn't be touched because AIG would face costly lawsuits and be subject to penalties from states and foreign governments. Administration officials said over the weekend that they agreed with that assessment.
The expression was the one she gets when one of the children (our son, 7, or our daughter, 3) disagrees with her about their behavior in a way that attempts to usurp her decision-making authority as the parent. I knew what was coming. It went something like this (with my responses):
Doesn't the government write the tax code? (Yes) Can't the government just tax away the bonuses after AIG pays them? (Yes) So why not just impose a 100% tax on bonuses paid to anyone at a firm that gets bailout money? (Indeed, why not?)
And there you have it. Right there on the Form 1040 for the year 2009, just add three lines:
For the employees of AIG Financial Products and other similar firms that work overseas, there is less ability to go after the monies, but the companies can be forced to pay an extra tax on the excess compensation on their corporate tax forms. (None of these companies will have positive tax payments, I suppose, but at least their losses will be smaller.)
Moms just know how to deal with poorly behaving children. There is no better metaphor for the conduct of these financial firms. I urge President Obama to fill all the vacancies at Treasury with moms of young children.
UPDATE: I see that a commenter on CG&G last evening had the same idea. It seems our readership here at the blog is another excellent hiring pool for the Treasury.
UPDATE #2: Some more suggestions about using the tax code, from Aaron Zelinsky at The Huffington Post.