Mar 20 2009
House Passes Clawback Bill
The House approved a bill today that would tax at 90 percent any bonuses collected by people who earned more than $250,000 at a firm that is receiving federal assistance. The measure enjoyed bipartisan support and now heads to the Senate.
Wall Street derided the legality and the feasibility of the legislation, as well as the chilling effect such a measure would have on financial institutions. In essence, bankers and stock traders think the prospect of retroactively taxing income is illegal.
Even if the government were to prevail in court, goes the thought, businesses would find other ways to compensate employees. Such payments are necessary to keep the best talent. Even in a down economy, high performers are always in demand, Wall Street maintains. Therefore, top-notch brokers and producers must be paid well, lest they use their skills elsewhere.
Since the taxpayers own 80 percent of AIG, for example, it’s to the people’s benefit that AIG recruit and keep the best people it can to fix the enormous problems facing the company. That’s the thought prevailing in business circles anyway.
I still say bankruptcy is a better option than continuing to throw good money after bad. At least the auto industry is trying to streamline its operations. The financial sector has done–and been forced to do–nothing of the kind.
