Burning AIG executives in effigy will not fix the economic crisis

Over spring break I managed a feat I thought was impossible for me. I went a luxurious seven days without once opening my laptop. I did not check my email, type a word document or scan nytimes.com for a week. It was blissful, but I am now facing the grave consequences of my decision.

No, I did not fall behind on my life, nor did I have so many messages in my inbox that it became a list of never-to-be-opened documents. The calamity was much more grave. I missed out on a perfect opportunity to become righteously angry about AIG. By the time I did catch the news the US Congress had already gone farther in the name of disproportionate responses and pointless ranting than I ever could.

Apparently the international insurance/banking/world domination firm AIG received $170 billion from the recent stimulus bill, and end of year terms showed 165 million of those dollars went towards bonuses. The American public, in their unending wisdom, decided to react more violently to the news that AIG had spent .09% of their budget on bonuses than the rest of that week’s headlines combined.

Mexico is on the brink of war at our southern border? Darn. Canada announces that it has not had a single bank failure? Big deal. But gosh darn it. The stimulus bill that our government was pushed into passing without any oversight clauses spent money on discretionary expenditures! Burn them at the stake!

After this display of rage, Congress at least had the courtesy to act. By the time I got back to the civilized world of the information super-highway there were already bills introduced to tax the bonuses given out by AIG by 90%.

I agree, the idea that an upper-level executive at a firm that is on the verge of collapse has done work deserving of a bonus is a bit ridiculous. They deserve to be fired immediately and let go with as few benefits as the company can get away with. However, the people in charge of those decisions are the boards of directors of those companies, or any internal auditing or management powers within the firms.

The US government had the opportunity to put constraints on the money handed out in the stimulus bill before they passed it. Instead of dealing delicately with the financial allocation that openly presented the US people with billions of dollars in federal debt, Congress choose to rush through a bill without through checks and oversight measures.

When AIG handed out bonuses to their employees they did so with no notification that this standard business practice was not permitted under the contract they assumed when they accepted the federal aid. While it was not entirely ethical, there was no legal restriction on them doing so.

Taxing AIG executives 90% of their bonuses is punishing “criminals” for actions that were not crimes at the time they committed them. It goes against the concept of innocent until proven guilty which is the base of our legal system. Furthermore, the idea of setting up a different system of taxation based on professional affiliation is blatant discrimination.

Congress needs to come to terms with the AIG debacle as an example of the multi-faceted origins of the current economy. The executives of the firms that received federal aid are human beings, with devaluing homes and growing debts.

Keep in mind, this taxation would not just be taxing a few individuals, but every single bonus handed out under the umbrella of AIG. Regional managers, bank managers and sales directors would have money they received in January taken away on the premise that Congress is not happy with the decision to reward their work.

Instead of blowing the numbers out of proportion and blaming the entirety of an economic crisis caused by the unwise financial decisions of an entire country on a small community of financial professionals, Congress should use this case as an example of the need for overall reform of both the economic and political system.

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