Saturday, March 21, 2009

You Don't Make Deals With the Devil Or The Government

Well, it seems that you can fool all of the bankers some of the time but not some of the bankers all of the time. Some of the banks that received TARP money and bailouts are now wishing they hadn't chummed with our lovely government because now they cannot run their businesses as they see fit. They are obliged to kow-tow to political hacks who have never run a business in their lives. The government is raging mad that AIG would dare give the bonuses promised to their top managers in contracts signed and sealed. Imagine that - honoring a contract! Well, AIG and other banks were fools to agree to accept money from our government. Now these banks have to check with government officials for every action they wish to undertake? Is that any way to run a corporation? I don't think so. One does not make deals with the devil - er I mean politicians!

A bill passed by the U.S. House of Representatives to tax employee bonuses at companies getting $5 billion or more in government bailout funds could send bank employees rushing to the exit sign if it becomes law.

The largest banks in the United States would be affected by the legislation, approved on Thursday, which would add a 90% tax on bonuses for people earning more than $250,000.

The result of public and government outrage over $165 million in bonuses paid to employees of American International Group Inc's Financial Products unit, some sources said the legislation would have repercussions far beyond the insurer, which is getting up to $180 billion in public funds...(READ)

"It's terrible public policy with respect to trying to bring institutions back to health," said Robert Sedgwick, head of the executive compensation practice at law firm Morrison Cohen in New York.

"These institutions are under siege and their primary asset is their people," Sedgwick said, explaining that adding taxation to shrinking compensation for bankers will drive people from the business.

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