This is not Washington’s finest hour. The blame shifting and finger pointing about the AIG bonuses are not especially heroic. Worst of all, the intellectual quality of the debate is pathetic, especially among conservatives.
Charles Krauthammer indicates this morning what he thinks of the entire brouhaha with a piece entitled "Bonfire of the Trivialities." He, like too many economists and too many politicians, has failed to grasp that the ground has shifted, that the house must be rebuilt not repainted. Krauthammer is normally quick to see the moral consequences of any given policy so it is especially odd to find him dismissive of the outrage. "Now, in the scheme of things, $165 million is a rounding error," he writes knowingly. "For this we are going to poison the well for any further financial rescues, face the prospect of letting AIG go under (which would make the Lehman Brothers collapse look trivial) and risk a run on the entire world financial system?" Well, yes, if the people at AIG and other large financial institutions, and those who exercise legislative or regulatory oversight of those companies, continue to act as if the only thing that mattered is cashing their overlarge compensation, the American people will say no to any more rounding errors.
Michael Gerson looks at the details of the amendment that permitted the bonuses, which had been limited in the original stimulus proposal, takes a slap at both Congress and the White House for their "hollow outrage" and also worries that the credit crisis will become worse because further bank bailouts will be impossible. To be clear, further bank bailouts should be impossible unless the bankers learn to restrain their greed.
It is worth noting that the Republicans, be they in Congress or merely on the pages of the Post, seem to have forgotten that only a few weeks ago they were outraged at the government "meddling" in corporate America, claiming loudly and repeatedly that it was not the place of the government to tell companies how much to pay their employees. Now, the failure to meddle is the problem. The hypocrisy watch is now the hypocrisy Big Ben.
Krauthammer and Gerson are both men capable of deep thinking, so it is strange, too, that they do not recognize how the fundamental need in this crisis is to change the nature and the degree of the rewards the financial services sector have previously commanded. Bonuses should not go to those who do a terrible job just because they stay at their desks. Multi-million dollar stock options should not be a part of anyone’s contract because it merely invites them to drive up the stock price, artificially or not, to reap their personal harvest. And, the only problem with the retroactive taxing of AIG’s bonuses is that it limits the new higher tax rate to companies drinking from the government trough. Bringing back a sixty or seventy percent tax rate might do a lot to change the culture of greed that is the true source of the crisis.
The Democrats may be fumbling. Senator Dodd should have smelled a rat. Secretary Geithner still does not seem to understand that most of the bad actors he deals with are part of the problem not the solution. But, their sins are sins of the flesh, which are the easy and small sins, while the sins of the GOP are sins of the spirit. They still do not get that the Reagan Revolution has come undone, and brought the nation’s economy with it.