AIG Bonuses

With the handing out of $165 million worth of bonuses to AIG executives, some are upset. In large part the reaction to this is on pure emotion and the remedy disregards respect for due process. The anger directed at Edward Liddy, the CEO of AIG, is downright absurd. He joined AIG after the disaster in the credit default market, taking a salary of $1 and compensation in equity. If there's no value left in the company, Liddy will not profit.

Only a part of AIG was part of the mess that resulted in a government bailout. AIG lost huge sums of money on credit default swaps that they wrote. Many of AIG's business units are profitable, and there is no reason why the executives that lead those businesses shouldn't receive bonuses. Since AIG is planning to sell some of its business units, it would be very unwise to push their leaders out and sell a business that is in shambles. Such a policy punishes those that had nothing to do with AIG's failures. If we still believe AIG is an investment for the government, this policy destroys the value of the investment.

The bonuses as a percentage of the bailout money received are a very small part of the total. The bonuses in question are $165 million compared to the bailout of at least $90 billion, perhaps more by now. The federal government is running a deficit of $1.7 trillion. Even if the bonuses are completely undeserved, this is no reason to invalidate contracts and throw out the rule of law.

The bill passed by the House to tax the AIG bonuses at 90% is a clear violation of the spirit of the Constitution. I am not a Constitutional scholar by any means, but this is a clear example of a bill of attainder. The text of the bill does not explicitly single out AIG or this group of executives, but the intent is clear from the words that Congressmen use.

"Our message is clear: If you won't give the bonuses back, we will tax them back," Rep. Steve Israel, D-N.Y., said at a Wednesday press conference to announce the legislation.

Taxing these bonuses at 90% reduces us to mob rule.(Should we not consider this confiscation just because they get to keep 10%). The intent of this bill is to:

1. Punish by taxing at a 90% rate
   
2. Single out a specific group of individuals
3. Impair private contract

My guess is that many of the same people that oppose Guantanamo Bay are in favor of this bill of attainder. Where is the ACLU on this one?