The Right Way to Punish AIG
March 24, 2009 11:54 AM
The House of Representatives has passed legislation that would tax the bonuses of senior AIG representatives at a 90% rate. In one sense that approach is a good first step forward, and serves as a good example for how to approach similar abuses in other financial services firms. The step forward is that it is aimed at individuals rather than the companies. Companies don't make decisions, their senior executives do. Fine a company and you're really only punishing the stockholders, who in many cases are consumers who own the company's stock in their IRs, 401Ks or stock market accounts.The mistake is that the House approach uses a shotgun where a scalpel is needed, it leaves the real culprits in place to wreak future havoc to our pocketbooks and the economy, and it micromanages personnel policies.
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