Thursday, March 19, 2009

AIG's Liddy grilled by Congress; Obama makes statement on AIG


Well, everybody (and not just Ali Velshi on CNN) is hopping mad about the AIG (American International Group) bonuses. Rep. Charles Rangel will introduce legislation to tax them at 91%, which was the top tax rate during the Eisenhower years.

The CSPAN video (3 hours and 54 minutes) of testimony of AIG GEO Edward Liddy, at the House Financial Services Committee, headed by Rep. Paul Kanjorsku, with all the pink demonstrations outside, can be viewed here. He was “impressed” (like a sailor before the War of 1812) into federal service at $1 a year after the collapse so cannot be one of the "culprits of the collapse"; but, despite assurance that “we do not intend to harass you”, “we” did.

Liddy indicated that employees receiving more than $100000 in bonuses were being asked to return part of the bonuses. Barney Frank criticized the employment contract structure, saying “heads we win, tails we break even” when the public loses.

President Obama’s remarks (March 18) about the A.I.G. bonuses were published as a transcript in the New York Times today, link here. Obama was critical of a culture and compensation that rewarded the creation of paper wealth rather than real wealth.

Obama's comments seem to match what Barbara Liviat wrote in the "10 Ideas that Are Changing the World" in the March 23 Time, "Jobs Are the New Assets", link here. No longer is it morally acceptable to expect to "sit" on wealth and accumulate it without "working" or "producing" -- that is suddenly too bourgeois. Instead of "jobs" I would have inserted the word "career". A social conservative like Phillip Longman would probably write "human capital" or "family". Later in the issue of Time is an article on the resurgence of "Calvinism."

While Congress looks at extending the punitive tax to other companies being bailed out (including Fannie and Freddie) Some Republicans are saying that a tax on bonuses borders on unconstitutional use of taxation powers. Some people affected were not highly compensated. The next time some party in some unrelated situation attracts public wrath, we will impose a punitive tax on them. Maybe it will be me because I didn't "pay my dues" as some people see things!

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