AIG Bonuses & The Bigger Problem

I got in a heated debate this weekend over the bonuses given to AIG employees.  Being partially responsible for bringing the financial system to its knees, I like everyone else am furious that bonuses were paid by my tax dollars to the Company’s employees.  Last week’s Gallop Poll illuminates the frustration, showing 76% of the American public believes the Government should block/recover the AIG bonuses.  The fundamental problem is clear, failure should not be rewarded.  However, I completely disagree with Congress’s decision to impose a 90% tax on the bonuses.

It’s always easy to point fingers in hindsight, but in this circumstance the problem was easily preventable (relatively speaking).  The Federal Government is well aware that bonuses are built into compensation packages on Wall Street.  So while everyone is shining a light on AIG (as they should), some focus needs to be placed on the Government who passed the bailout bill.  Taxing bonuses at 90% is not a solution, its a cover-up… a cover-up that still allows employees to keep 10%.

The AIG issue exemplifies the lackadaisical financial regulation that exists in this country.  I am not sure what upsets me more, the fact that AIG is rewarding failure or the fact that it is doing so legally.  Speaking purely as a lay person, the Government needs to develop a productive solution that sends the right message – not arbitrarily change the tax code.  Going forward, I believe President Obama said it well, “The best way to handle this is to make sure that you’ve closed the door before the horse get’s out of the barn”.