Reflections on AIG's Bonusgate
... because nothing in this country has been deemed scandalous in the last thirty years without a "-gate" appended to it.
I like to think that I'm more qualified than most televised talking heads on this issue because:
In one respect, this is a false populism. It is easier to shake the puppetry stick of the demon-of-the-day AIG (whose masters are hasrdly blameless, but still) than it is to reflect on the fact that no, repeat, no, double-up, no NO bank or company which received TARP funds from the taxpayers has deigned to answer reporters and lawmakers on what they've actually done with the money. I mean, which would worry you more: $160 million in funds whose destinations you know, or $700 BILLION in funds whose destination you don't?
Too, what the Bonusdoggle is all about is a question of control. The Lords of Undiscipline in the financial and corporate sector have been running the show for far too long, whether you believe that to be based in the Bush Doctrine of letting the roosters build, oversee, secure, and raid the henhouses, or whether you take it all the way back to military and diplomatic policies being dictated by the oil industry (Iraq, 1953) or by the United Fruit company (Costa Rica, 1954) or by the sugar industry (Cuba, 1898-1959), and so on and so forth
("I spent 33 years and 4 months In active service as a member of our country’s most agile military force - the Marine Corps. I served in all commissioned ranks from a second lieutenant to Major-General. And during that period I spent most of my time being a high-class muscle man for Big Business, for Wall Street and for the bankers. In short, I was a racketeer for capitalism.
[...]
Thus I, helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers 1909-12. I brought light to the Dominican Republic for American sugar interests in 1916. I helped make Honduras 'right' for American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went its way unmolested."--Major General Smedley Butler, USMC, in 1935)
So this ordering that AIG do something the government wants it to do is a power play--and one that must be played; the corporations must be made to step back a bit, especially in the case of AIG, which is after all, 80% taxpayer-owned at this point. If we're the majority stockholder, we should have a say in the doings it's doing, n'est-ce pas?
But.
First, the bonuses were contractually guaranteed--and you don't break a contract lightly. Oh, the government can sue to have these contracts voided, basing said suit on them having been bargained in bad faith or having been based upon illegal means--and it might work. But that will take lots of time and court costs.
Second, the bill which just passed the House of Representatives--with a lot of bipartisan support--which will cause these bonuses to be taxed at 90% is a bad idea. It's a bad idea because it sets a horrible precedent--the retroactive taxation of one type of income, belonging to one select group--and because it will likely be overturned by the Supreme Court as unconstitutional. More court costs, and no reward. It's even a bad idea if it succeeds--because then, we'll be saying, "Have fun with the ten percent we don't think you boys deserve!"
You'll be happy to know, however, that there's a solution. And I can has it.
My solution, let me show you it.
President Obama calls a press conference, at which he says the following:
(I do a pretty good Obama impression, but this will appear to you as no more than the electron dance of computer text, so I'm going to just have to ask you to imaging the speech below as rendered in Obamacadence, complete and replete with pregnant pauses, stern sincerity, and the confident Kennedyesque side-glances and chuckling smiles aimed at the press corps.)
"Good evening.
Once again, I'm here to talk to you about the economy--and, I'm sorry to say, once more, I'm here to talk to you about what must be done by this country to correct the actions and greed of a few.
The past week has seen a great deal of outrage over the tens of millions of dollars in bonuses paid out by AIG--paid out of federal bailout monies; paid out of taxpayer dollars. There has been outrage, yes--but there has been very little responsibility laid at anyone's feet. There's bveen debate on who allowed this to happen, there's been AIG's charman, Mr. Liddy, testifying before Congress and essentially throw his hands up, saying, 'There's nothing I can do. There's nothing we can do to call back these contracts; to halt this waste of taxpayer dollars.'
Well, once again, I must repeat: I take responsibility. Whether the situation was created by Wall Street, by Washington, D.C. insiders, or whatever, I am the President--and as Harry Truman famously said, the buck must stop here. The buck must stop with me.
That responsibility, of course, also means that it is my responsibility to address this issue; my responsibility to right this wrong.
Unfortunately, Mr. Liddy was right when he said that the bonuses were contractually obligated. Going back a thousand years, to the signing of the Magna Carta, the document from which the heart of Western common law springs, we have seen contracts as ironclad. Inviolable. sacred. You shake on it, it's a done deal. You sign on that dotted line, you're bound by what you say you're gonna do.
So we the people can't just go around breaking contracts willy-nilly whenever we don't like what they do. Now, what we can do is follow the law--and, using the rule of law, we can file suits in federal court to void these contracts, due to irregularity and bad faith bargaining. But that will take time. And it may well be, as some have said, that such lawsuits would actually cost more to prosecute than the bonuses themselves.
This week, Congress has taken a bold step of its own, passing a law in the House of representatives which would tax these bonuses at a rate of ninety percent. While I applaud the swiftness to action taken, and the bipartisan nature of this bill, I fear it sends a terrible message: "If we don't like you, we'll tax you more." This bill is certainly unconstitutional, and will likely be struck down by the Supreme Court. But worse than its being unconstitutional, this bill is unfair. Our tax system is based on a progressive model; a fair model. The rates are the same no matter if you're black or white, if you're Christian, Jewish or Muslim; if you're an executive on Wall Street or a blue-collar worker on Main Street. As I recall, it was the people's outrage over unfair taxes that got the Revolution started; that sparked this great country into existence. We must hold true to that ideal of fairness, or else we are not America.
Because this is America, I call upon all individuals and companies who are set to receive these bonuses: Stand up. Be patriotic. Do the right thing.
Refuse these bonuses, and join us as we work to set this country's economy right again.
In the end, of course, it is a choice only you can make; I cannot force you to refuse this tainted money.
... There is, however, something you may wish to know. I have been speaking with Treasury Secretary Geithner, and Commissioner Shulman of the Internal Revenue Service, and Chairman Schapiro of the Securities and Exchange Commission.
And what they tell me is that, due to financial irregularities with the company, as well as the laissez-faire nature of enforcement under the previous administration, the acceptance of these bonuses--or any similar bonuses paid out of federal bailout funds--will be considered a "red flag" which would greatly increase the likelihood of any individual's or corporation's being the subject of an IRS audit, or of an SEC investigation. This is in full compliance with all current law, and is in line with these Agencies' past and current practices.
Is this a guarantee that those who accept these bonuses will be audited or investigated? No; of course not.
It does, however, make those possibilities a lot more possible. Of course, those who refuse the bonuses won't have to worry about it ...
Thank you all for coming. God bless you all, and God bless America."
**********************
I honestly think that this would work--and it would be fully legal and constitutional, as well as reminding OTHER companies that we will not take shenanigans lying down any more.
I like to think that I'm more qualified than most televised talking heads on this issue because:
- I'm beholden to no one;
- I don't have to worry about ratings;
- I actually WORK for the Treasury (albeit in a peon-y role);
- As a union steward, I deal on an everyday basis with contract law;
- ... and I'm not batshit crazy.
- ... mostly.
In one respect, this is a false populism. It is easier to shake the puppetry stick of the demon-of-the-day AIG (whose masters are hasrdly blameless, but still) than it is to reflect on the fact that no, repeat, no, double-up, no NO bank or company which received TARP funds from the taxpayers has deigned to answer reporters and lawmakers on what they've actually done with the money. I mean, which would worry you more: $160 million in funds whose destinations you know, or $700 BILLION in funds whose destination you don't?
Too, what the Bonusdoggle is all about is a question of control. The Lords of Undiscipline in the financial and corporate sector have been running the show for far too long, whether you believe that to be based in the Bush Doctrine of letting the roosters build, oversee, secure, and raid the henhouses, or whether you take it all the way back to military and diplomatic policies being dictated by the oil industry (Iraq, 1953) or by the United Fruit company (Costa Rica, 1954) or by the sugar industry (Cuba, 1898-1959), and so on and so forth
("I spent 33 years and 4 months In active service as a member of our country’s most agile military force - the Marine Corps. I served in all commissioned ranks from a second lieutenant to Major-General. And during that period I spent most of my time being a high-class muscle man for Big Business, for Wall Street and for the bankers. In short, I was a racketeer for capitalism.
[...]
Thus I, helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers 1909-12. I brought light to the Dominican Republic for American sugar interests in 1916. I helped make Honduras 'right' for American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went its way unmolested."--Major General Smedley Butler, USMC, in 1935)
So this ordering that AIG do something the government wants it to do is a power play--and one that must be played; the corporations must be made to step back a bit, especially in the case of AIG, which is after all, 80% taxpayer-owned at this point. If we're the majority stockholder, we should have a say in the doings it's doing, n'est-ce pas?
But.
First, the bonuses were contractually guaranteed--and you don't break a contract lightly. Oh, the government can sue to have these contracts voided, basing said suit on them having been bargained in bad faith or having been based upon illegal means--and it might work. But that will take lots of time and court costs.
Second, the bill which just passed the House of Representatives--with a lot of bipartisan support--which will cause these bonuses to be taxed at 90% is a bad idea. It's a bad idea because it sets a horrible precedent--the retroactive taxation of one type of income, belonging to one select group--and because it will likely be overturned by the Supreme Court as unconstitutional. More court costs, and no reward. It's even a bad idea if it succeeds--because then, we'll be saying, "Have fun with the ten percent we don't think you boys deserve!"
You'll be happy to know, however, that there's a solution. And I can has it.
My solution, let me show you it.
President Obama calls a press conference, at which he says the following:
(I do a pretty good Obama impression, but this will appear to you as no more than the electron dance of computer text, so I'm going to just have to ask you to imaging the speech below as rendered in Obamacadence, complete and replete with pregnant pauses, stern sincerity, and the confident Kennedyesque side-glances and chuckling smiles aimed at the press corps.)
"Good evening.
Once again, I'm here to talk to you about the economy--and, I'm sorry to say, once more, I'm here to talk to you about what must be done by this country to correct the actions and greed of a few.
The past week has seen a great deal of outrage over the tens of millions of dollars in bonuses paid out by AIG--paid out of federal bailout monies; paid out of taxpayer dollars. There has been outrage, yes--but there has been very little responsibility laid at anyone's feet. There's bveen debate on who allowed this to happen, there's been AIG's charman, Mr. Liddy, testifying before Congress and essentially throw his hands up, saying, 'There's nothing I can do. There's nothing we can do to call back these contracts; to halt this waste of taxpayer dollars.'
Well, once again, I must repeat: I take responsibility. Whether the situation was created by Wall Street, by Washington, D.C. insiders, or whatever, I am the President--and as Harry Truman famously said, the buck must stop here. The buck must stop with me.
That responsibility, of course, also means that it is my responsibility to address this issue; my responsibility to right this wrong.
Unfortunately, Mr. Liddy was right when he said that the bonuses were contractually obligated. Going back a thousand years, to the signing of the Magna Carta, the document from which the heart of Western common law springs, we have seen contracts as ironclad. Inviolable. sacred. You shake on it, it's a done deal. You sign on that dotted line, you're bound by what you say you're gonna do.
So we the people can't just go around breaking contracts willy-nilly whenever we don't like what they do. Now, what we can do is follow the law--and, using the rule of law, we can file suits in federal court to void these contracts, due to irregularity and bad faith bargaining. But that will take time. And it may well be, as some have said, that such lawsuits would actually cost more to prosecute than the bonuses themselves.
This week, Congress has taken a bold step of its own, passing a law in the House of representatives which would tax these bonuses at a rate of ninety percent. While I applaud the swiftness to action taken, and the bipartisan nature of this bill, I fear it sends a terrible message: "If we don't like you, we'll tax you more." This bill is certainly unconstitutional, and will likely be struck down by the Supreme Court. But worse than its being unconstitutional, this bill is unfair. Our tax system is based on a progressive model; a fair model. The rates are the same no matter if you're black or white, if you're Christian, Jewish or Muslim; if you're an executive on Wall Street or a blue-collar worker on Main Street. As I recall, it was the people's outrage over unfair taxes that got the Revolution started; that sparked this great country into existence. We must hold true to that ideal of fairness, or else we are not America.
Because this is America, I call upon all individuals and companies who are set to receive these bonuses: Stand up. Be patriotic. Do the right thing.
Refuse these bonuses, and join us as we work to set this country's economy right again.
In the end, of course, it is a choice only you can make; I cannot force you to refuse this tainted money.
... There is, however, something you may wish to know. I have been speaking with Treasury Secretary Geithner, and Commissioner Shulman of the Internal Revenue Service, and Chairman Schapiro of the Securities and Exchange Commission.
And what they tell me is that, due to financial irregularities with the company, as well as the laissez-faire nature of enforcement under the previous administration, the acceptance of these bonuses--or any similar bonuses paid out of federal bailout funds--will be considered a "red flag" which would greatly increase the likelihood of any individual's or corporation's being the subject of an IRS audit, or of an SEC investigation. This is in full compliance with all current law, and is in line with these Agencies' past and current practices.
Is this a guarantee that those who accept these bonuses will be audited or investigated? No; of course not.
It does, however, make those possibilities a lot more possible. Of course, those who refuse the bonuses won't have to worry about it ...
Thank you all for coming. God bless you all, and God bless America."
**********************
I honestly think that this would work--and it would be fully legal and constitutional, as well as reminding OTHER companies that we will not take shenanigans lying down any more.