In today’s editorial, the Financial Times states that the bill passed in the House of Representatives this week regarding taxation of AIG bonuses is a “bad law.” Concerning the rage over the bonuses, the FT notes that “understandable or otherwise, the response smacks more of banana republic than good government.” The paper also states that “…these bonuses were paid not as a reward for past performance, which would indeed be absurd, but to retain people deemed necessary to the unwinding of its mistakes.”
First off, how do you reconcile the FT’s statement that the bonuses were paid to “retain” staff when a report in this week’s Economist (Cranking up the Outrage-O-Meter ) states that “…$57m of its ‘retention’ payments were earmarked for staff it [AIG] planned to lay off”?
Secondly, note the use of the phrase “its mistakes.” If we recognize that “it” is AIG, doesn’t the sentence say “…these bonuses were paid to keep the people who screwed up so they could have a go at putting things right.” How absurd is that?
Congress really needs to see the outrage over AIG bonus payments as symbolic. “Main Street” finally has something it can understand that doesn’t involve a swap, sweep or swindle. Although Main Street must be careful that it doesn’t lose sight of the trillion dollars or so that are being spread around far too liberally for the sake of $165m in bonuses. This would be like seeing the trees but missing the forest. And like Macbeth, when Great Birnam wood marches to high Dunsinane hill, that would not be a good thing.