Bonus Backlash Stirs Congress to Act — and Posture
Standing in his driveway, the AIG executive was asked by a New York Times reporter about his life since the AIG bonuses were disclosed. The Times offered this account of his answer: "'You have to understand,' he said, 'there are kids involved, there have been death threats….' His voice trailed off. It looked as if he was fighting back tears. 'I didn’t have anything to do with those credit problems,' said James Haas, 47. 'I told [AIG chief executive Edward M. Liddy] I would rescind my retention contract.' He ended the conversation with a request: 'Leave my neighbors alone.'"
The article puts a human face on the the much reviled, bonus-blessed executives of bailed-out financial firms. Clearly, some don't see the bonuses as a blessing. Haas, labeled "Jackpot Jimmy" by the New York Post, is not the only bonus recipient who has offered to give the money back.
If Congress has its way, he and other "bonus babies" (another label from the ever-colorful Post) will be giving back at least 90% of the money in a special tax on bonuses paid to executives at firms receiving assistance from the Treasury. In his Times column today, David Brooks suggested the government was paying too much attention to the bonus backlash: "The Washington political class has spent the past week going into made-for-TV hysterics over $165 million in AIG bonuses. We’re in the middle of a mult-itrillion-dollar crisis, and our political masters — always willing to throw themselves into any issue that is understandable on cable television — have decided to risk destroying the entire bank-rescue plan because of bonuses that account for 0.001% of the annual GDP."
From The Washington Post comes this editorial comment: "By changing the terms of a deal months after it was entered into, Congress will show the government to be an unreliable partner, further draining confidence from the financial system and endangering long-term recovery."
Even before the AIG bonuses came to light and fueled broad public outcry, the bonus backlash was building. In a recent article, Wharton accounting professor Wayne Guay told Knowledge at Wharton that the government, under the leadership of President Obama and a Democratic-controlled Congress, would attempt to limit executive pay. "It feels like something the public wants." Guay noted the political importance of the issue: Companies receiving taxpayer assistance "can't afford to be giving the public a feeling that they're being excessive in any way, shape or form."