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WORD COUNT
502
APRIL 15, 2009
CONGRESS
AND TREASURY BOTH BLEW IT – by Ryan Alexander
The
recent contortions of Congress and the Administration over lucrative
bonuses to executives at American International Group (AIG) are a
predictable result of the failure of Congress and the Department of
Treasury to be clear about what taxpayers deserve in return for their
investments. And unless lawmakers and the Administration step up to the
plate it won’t be the last of the outrages.
If
there is any recipient of bailout funds for whom Treasury should have
laid down clear, unambiguous standards, it’s AIG. After a $182.5
billion investment taxpayers own roughly eighty percent of the company.
Further, AIG just reported a $61 billion loss for its most recent
financial quarter.
We have
heard a litany about how the $165 million in bonus payouts were
contractually obligated. But contracts can be renegotiated, revised and
rewritten, particularly when there is a major change in circumstances.
Say … for example … the federal government provides a significant cash
injection into a company. Hmm, sounds kinda like AIG. But Treasury did
not suggest AIG alter bonus contracts as a condition of their receiving
a massive public investment. Strike one.
Not
only did Treasury fail to demand the renegotiation of these contracts,
but Congress may have added an extra hurdle to making changes. A
last-minute addition to the stimulus bill purported to limit future
bonus payments but may have actually added legal protection to those
already paid. Strike two.
Now
there are efforts to create a special tax scheme to claw back some of
the bonus money. Politically seductive as that may be, micro-targeting
the tax code to punish specific contracts is the wrong way to make tax
policy. Strike three.
Congress and the Administration screwed up and they need to take their
lumps and learn from their mistakes. The “Good Cop” routine has failed.
Instead
of pleading with executives to do what is in the national interest,
those executives need to be given a dose of tough medicine. If you want
our money, you’ll have to become a good citizen. Otherwise, you are not
going have a job. Every step of the way, Congress and the
administration have given the financial industries flexibility to
respond to this crisis. The failure to set clear, tough standards has
left us with little ability to hold banks accountable.
As Bob
Dylan sings, “steal a little and they throw you in jail, steal a lot and
they make you king.” The kings of AIG and other Wall Street titans are
working hard to abscond with as much taxpayer money as possible, while
refusing to take any responsibility for the financial mess that is
bringing the U.S. and world economy to its knees. AIG is the most
glaring and stupefying example of questionable spending. But hundreds
of other financial institutions and a couple major car companies have
also received billions from taxpayers. The outrage of AIG bonuses –
small potatoes in dollar terms – should reinvigorate Congress and the
Administration to do their constitutionally appointed duties and hold
recipients of taxpayer dollars accountable.
--
Ms. Ryan Alexander is President, Taxpayers for Common Sense --
a
non-partisan federal budget watchdog.
www.taxpayer.net
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