The knives were out in Congress last week as members of the House of Representatives piled on American International Group's management for approving about $156 million in bonuses, and for the treasury secretary and the White House for letting it happen. The House of Representatives, traditionally closest to its constituents, was responding mightily to a public outcry.
What to do to the recipients of the bonuses and their enablers - other than to threaten medieval tortures - was, and is, unclear. The House, showing its rage, passed a retroactive 90 percent tax on the bonuses. With that too-broad brush, bonuses earned at other more worthy companies may also be caught in the tax, and combined with some states taxes could equal more than 100 percent. More importantly, it was a tax that was likely unconstitutional: The law does not permit the taxation of income earned previously.
It was personal. AIG's chief executive officer, lured out of retirement for $1 a year to straighten out AIG's finances to the best of all concerned, took a continuous verbal beating by the House panel. At AIG's headquarters in New York, pickets challenged even the most junior level employees, and employees who were hired so recently that they could not have had anything to do with the faulty investments that would have collapsed the company had not the treasury stepped in.
In Congress and on the street, it was glorious theater.
We do sympathize with the critics; taxpayer money in such large amounts should not be going to those who caused such economic harm.
But the emotional response by members of the House committee, and their enthusiasm for creating a highly questionable tax, do have us wondering about Congress' ability to come up with the thoughtful and likely complex legislation that will be required to set the financial houses in this country in order and operating fairly and fully for Americans' benefit in the years ahead.
Perhaps House members can regain their composure, flip a switch, and settle down to the likely arduous job of putting together the expertise and ideas that will lead to a proper operating framework for financial institutions. The country - and the world - must have regulations that prevent the leveraging that overwhelmed so many institutions' capital core, yet retain the resiliency and dynamism that generally make American financial dealings so successful and the envy of all.
That is a significant task, and the time to get started is now.