Bonuses, Rank Populism, Class Warfare

The House's move yesterday to tax at a rate of 90%, bonuses (in excess of $125,000) paid to employees of firms who have taken government money as part of the bailout continues our slide into a dangerous level of class warfare fueled by populism, and our elected officials are doing nothing to stop it.

Very few people feel that large bonuses paid to executives in the financial industry are warranted; even fewer feel that they ought to be paid out of the taxpayers pockets. There are questions of the sustainability and appropriateness of the modern Wall Street compensation structure, and they ought to be asked and answered. This however, is not that time.

The more I read about the bonuses at AIG, the more convinced I am that very few of the folks who guided the Financial Services arm down the toilet are still working there. Hired since are a group of people--experts in the securities industry--who are unraveling some of the most difficult financial transactions there are. AIG's continued solvency is something the Federal Government OBVIOUSLY feels is important. Let's face it, the Secretary of the Treasury had Chris Dodd insert the language he did in the stimulus bill EXACTLY because Geithner understands the way Wall Streeters are compensated and exactly how mobile their skills are. Read this story about the scene inside AIG as their CEO testified--working there are a group of people who've largely come in SINCE the trouble, who are looking at this and saying "is it worth my time to work here anymore?". These folks can pack up and leave, selling themselves elsewhere on Wall Street where the government isn't acting like a petulant child and the compensation levels are commensurate with their skills and input.

Should Wall Street review its compensation structure? You bet. Should short term bonuses be the overwhelming chunk of compensation, seemingly undercutting a long term approach? Nope. But at some point, we've got to get ourselves around the fact that WE ARE IN TROUBLE, and WE NEED TO CONCENTRATE ON HOW TO GET OUT OF IT. Going back and passing vindictive taxes aimed at particular people will not contribute a lick to getting us out of this problem. If anything, it will exacerbate it. The President and those in Congress screaming for the scalps of these guys would do much better if they came up with a real plan to remove the toxic debt from the banks balance sheets--rather than bitching about how the folks are being paid who are working to get them out of the mess.

America doesn't want to hear it, but there is similarity in the compensation of Wall Street execs and those paid to our sports stars....they just seem to hold Wall Street in higher contempt. We see LeBron James, and we think, "well, I can't do that, and neither can most people I know--so he's worth it, and better yet, I'll pay to see him do it." Guess what? You and your friends can't do what those folks at AIG are working to do EITHER. People working in the financial industry there are the PROS, the ones who worked hard in grad school, churned out 80hour weeks at trading desks in their 20's, the people at the very top of their professions. That they make a lot of money strikes people as odd, or irresponsible. Strikes me as proper and logical. How that money is paid to them (bonuses) seems illogical, but the sums don't bother me a bit.

But the country is hurting, we blame Wall Street (couldn't be us, our addiction to debt, our inability to budget?--or Congress for goodness sake), and we want scalps. So the mob has assembled and it is marching to Connecticut.