Friday, March 20, 2009


More economic fun!  Lot's of anger over AIG managers getting bonuses even though they've basically burned through the whole $170 billion we gave them to keep them from blowing up.  Now Congress wants to tax the bonuses at 90%.  A few thoughts on this:

a) I'm really nervous about Congress making retroactive tax changes.  This is just larceny, but legal.  If they want to prevent *future* bonuses of this kind, fine.  But given this precedent, what's to stop them from re-taxing income from 2007, and asking me for an additional $100 or $200?

b) With that caveat in mind, I'm not sympathetic at all to the argument coming from the financial industry in general, and AIG in particular.  They will say that they have to pay these bonuses to keep the upper management types around who actually know what's going on in these companies and are capable of cleaning up the mess.  I'm calling bullshit on this one.

Upper management types at financial companies (and I know I'm grossly over-generalizing here) are not the "best and the brightest" of the world.  They are, by and large, those really fun guys you knew in college who always were scoring chicks and getting C's.  They're salesmen.  While they do know the details of the contracts they wrote, it's quite clear from the past two years that they didn't actually know what they were doing.  So why exactly do I want them "fixing" this mess?

I explicitly want new people to go in and clean up AIG.  I want people without emotional attachments to the business, and in particular, without personal ties to anyone involved in the contract.  I want cold-blooded killer CPA's with a mean streak and some repressed daddy-issues. 

I want to get *rid* of the golf-course financial deal-makers who couldn't be bothered to think about the risk implications of their deal-making.  They were never hired to be good risk-managers.  They were hired because they knew how to stroke pension-fund managers and were a good time in the corporate box at the Super Bowl. 

If those kinds of guys are going to leave AIG, or any other financial company, because their bonuses are going to be taxed away, then let them leave. 

No comments: