Confiscate bankers' money!

[Darth Wong]

OK, can someone explain to me why the government can't claw back a lot of this money that the bankers took and clearly have no intention of helping anyone but themselves with?

I know a lot of it has been paid out as bonuses; why can't the government simply make a special 90% tax on bonuses paid from banks?

I keep hearing that they can't do this or can't do that because they've broken no laws; well no kidding, they've got lawyers and they know what they can get away with. But unless I miss my guess, the government writes the fucking laws. Why can't they simply write a law and do it? There's no Constitutional human right to bank bonuses.

Is this one of those cases where politicians wring their hands in impotent fury for public consumption, even though they know they could do something if they really wanted to?

[CmdrWilkens]

Once the bonuses have been paid and/or the money spent then we run into the issue of any legislation to seize the assets would immediately get struck down as being ex post facto. If the money was used improperly or illegaly within the bounds of how it was disbursed then yes the government could move in the problem being that the Bush Treasury department basically built the bailout's provisions of accountability around using the money in a pticular type of transaction then used an entirely different type of transaction (not covered by any accountability procedures) to actually bail out everyone. So it would be tough to get the banks for misusing the funds and it would be constitutionaly difficult to pass a law which seizes the money back. It may be possible but it would take an awful lot of legal nuance to pull off and I don't think anybody in DC is paticularly inclined to do so nor would most folks support the tedious process that this kind of sausage making entails.

[Darth Wong]

Who said they have to seize it? Why can't they just tax it? As I said, they could make a special 90% tax on bonuses paid from banks. That has the effect of seizing it, without actually calling it a seizure of assets.

[Big Phil]

Taxes are evil, and Communist, and Fascist, and un-American, and did I mention Communist?

Considering that the money was given to banks "no strings attached," I personally have an ethical problem now going back and taxing them. Morally, however, I think we ought to do it, as they are greedy fuckers who aren't using the money for anything but lining their own pockets. Realistically, moderate and conservative Democrats wouldn't support it, and the Republican party would oppose evil/Communist/Fascist taxation en masse. It would be a political nightmare

[Darth Wong]

Yes, well, if there was ever a time where the public mood was right to go after these people, it's right now. Their defenders can scream that it's socialism but I have a pretty strong suspicion that the average person will say "fuck 'em" anyway. I cannot recall any time in my life when there has been as much anger toward bankers as there is right now.

[Axis Kast]

I'd just like to clarify. Mike, your argument is that these banks have debt that needs paying, and so were unethical in their decision to pay out large bonuses to people who are (A) presumably responsible for the current market crisis, and (B) presumably financially well-off. Therefore, it is to the public benefit to tax those moneys. Is this a correct summation of your position?

If so, the problem is that you cannot impose retroactive taxation. The ex post facto forbids it. I guess it is possible, however, for law to be written that imposes new taxes on certain kinds of assets, beginning at a certain time in the future. I'm sure a great many politicians would be up in arms about a "rich tax," though.

[Darth Wong]

I'd just like to clarify. Mike, your argument is that these banks have debt that needs paying, and so were unethical in their decision to pay out large bonuses to people who are (A) presumably responsible for the current market crisis, and (B) presumably financially well-off. Therefore, it is to the public benefit to tax those moneys. Is this a correct summation of your position?

Not precisely. My position is that there is essentially zero "moral hazard" for bankers right now, and we need to create some. Quickly. Their insulated culture of unaccountability is so extreme that they honestly think they're being railroaded in the court of public opinion.

We might quibble on exactly how that should be done, but would you agree on the general principle? To put it in simpler terms, bankers are allowed to act like complete assholes with no consequences whatsoever, and I think the government needs to step in and do something about it.

If so, the problem is that you cannot impose retroactive taxation. The ex post facto forbids it. I guess it is possible, however, for law to be written that imposes new taxes on certain kinds of assets, beginning at a certain time in the future. I'm sure a great many politicians would be up in arms about a "rich tax," though.

The Supreme Court ruled that retroactive sex-offender registration laws are not a violation of ex post facto because they do not constitute criminal punishment. Surely taxation would meet this requirement even more easily.

[phongn]

United States v. Carlton (1994) indicates that retroactive taxation is not necessarily forbidden. Scalia's concurrence further notes that:

The reasoning the Court applies to uphold the statute in this case guarantees that all retroactive tax laws will henceforth be valid. To pass constitutional muster the retroactive aspects of the statute need only be "rationally related to a legitimate legislative purpose." Ante, at 9. Revenue raising is certainly a legitimate legislative purpose, see U. S. Const., Art. I, §8, cl. 1, and any lawthat retroactively adds a tax, removes a deduction, or increases a rate rationally furthers that goal.

[Coyote]

I hate to say it, but it is harder to apply post facto to the bankers. The child molesters can be easily seen as a credible and immediate physical threat to the community; the connection of the bank CEO to the bank to the loan officers, etc... down to the families that lost their homes is more tenuous.

The CEOs can say that they loaned money based on government rules at the time, which was government deregulation and loosening of standards by the SEC. When they went bankrupt, they asked for money and the government gave it no strings attached-- it was the government's responsibility to put conditions on the money before doling it out; if they didn't think of that beforehand it was their tough luck.

I agree a 90% "rich tax" would be ideal and no one in the public would complain (they'd probably also like to see a "windfall tax" on record oil company profits too) but the politicians won't do it because they get so much money from those sources. They'll tax the rich only if they think that the working class people were truly paying attention and ready to do things like strikes and work stoppages/slowdowns, and other acts of civil disobedience or even unrest, but they'll do what they can for public hand-wringing and scolding without real action as long as they think they can get away with it.

I'd think that a law that says a "Bonus Package" for CEOs must reflect a precentage of actual profits earned that year, and also all employees in the company that worked for at least 6 months of that year would also see a percentage bonus commesurate to the performance of the company as well, but there I go again, being a wealth-redistributing socialist or something.

[KrauserKrauser]

You would have to be careful in creating any law that would determine the bonus level by any profit or loss of the company. If the sound reasoning of the board causes a loss, but a much smaller loss than the previous director had put the company on course for, a blanket law against bonuses when operationg at a loss is needlessly heavy handed. Would this law only effect the TARP loaned to companies, or would it be used as precedent for an industry wide law. I'm all for regulation of the TARP loaned to businesses, but these regulations should have been put in place in the initial construction of the law, not all hap-hazard, willy nilly after the fact.

Ideally, this would just stick in everyone's mind that any idiot that voted for the bailout shouldn't be serving their next term in office as any legal solution to this is going to be shady at best and challenged with the full force of each company affected legal department. I would like to see how the mid-terms fall based on the votes made on the bailout. In a sane, rational world, anyone that voted for this boon doggle would be replaced before they even got out of the primaries as it simply reeks of stupidity and alarmism.

Ideally the 20-40 billion in bonuses would be recovereable, but the money was given out freely by idiotic politicians, now suddenly those politicians are shock, gasp surprised when the people use the money in ways they didn't expect and of course the oh so innocent congress can simply point the finger of blame at those horrible corporations. 500k salary caps, limits on bonuses, man such great ideas, maybe they should have taken a fucking second and thought about reuiring these things in the first place.

[Morilore]

Who said they have to seize it? Why can't they just tax it? As I said, they could make a special 90% tax on bonuses paid from banks. That has the effect of seizing it, without actually calling it a seizure of assets.

Amusingly enough, there was an op-ed in the NYT today (entitled "Please Raise My Taxes") wherein a wealthy corporate executive suggested exactly this kind of approach to the overpaid.

Here it is.

Los Gatos, Calif.

I’M the chief executive of a publicly traded company and, like my peers, I’m very highly paid. The difference between salaries like mine and those of average Americans creates a lot of tension, and I’d like to offer a suggestion. President Obama should celebrate our success, rather than trying to shame us or cap our pay. But he should also take half of our huge earnings in taxes, instead of the current one-third.

Then, the next time a chief executive earns an eye-popping amount of money, we can cheer that half of it is going to pay for our soldiers, schools and security. Higher taxes on huge pay days can finance opportunity for the next generation of Americans.

Clearly, the efforts over the past few decades to control executive compensation haven’t accomplished much. Improved public disclosure was supposed to shame companies into lowering salaries, and it obviously hasn’t worked. In 1993, President Bill Clinton changed the tax law to effectively cap executives’ salaries at $1 million a year, but that simply drove corporate boards to offer larger bonuses and stock options to attract and keep talent. More recently, “say on pay” proposals would have shareholders opine on their boards’ compensation decisions, but “say and pay” won’t change the fact that luring a top executive away from another company is never easy or cheap.

The reality is that the boards of public companies hate overpaying for anything, including executives. But picking the wrong chief executive is an enormous disaster, so boards are willing to pay an arm and a leg for already proven talent. Putting limits on the salaries at public companies, or trying to shame them into coming down, won’t stop this costly competition for talent.

Of course, it’s galling when a chief executive fails and is still handsomely rewarded. But with the concept of “tax, not shame,” a shocking $20 million severance package would generate $10 million for the government. That’s a far better solution than what we have today, not least because it works with the market rather than against it.

Another advantage is that it would also cover the sometimes huge earnings of hedge fund managers, star athletes, stunning movie stars, venture capitalists and the chief executives of private companies. Surely there is no reason to focus only on executives at publicly traded companies.

This week, President Obama proposed imposing a $500,000 compensation cap on companies seeking a bailout. It’s a terrible idea. We all want the taxpayers’ money returned, and capping compensation at bailout recipients will just make it that much harder for those boards to hire and hold on to the executives who can lead their companies to compete and thrive.

Perhaps a starting place for “tax, not shame” would be creating a top federal marginal tax rate of 50 percent on all income above $1 million per year. Some will tell you that would reduce the incentive to earn but I don’t see that as likely. Besides, half of a giant compensation package is still pretty huge, and most of our motivation is the sheer challenge of the job anyway.

Instead of trying to shame companies and executives, the president should take advantage of our success by using our outsized earnings to pay for the needs of our nation.

Reed Hastings is the chief executive of Netflix.

It's not exactly the same situation, he doesn't go far enough, and he combines it with inconsistent "If we don't pay our best people..." reasoning, but it suggests that the spirit of Mike's suggestion at least is palatable.

[Coyote]

Damn, Moriloe, you beat me to it!

I was on my way here with the article from HuffPo on the Netflix CEO's offer.

[Havok]

Speaking as an American middle/lower class worker, I would be all for this. Either Mike's suggestion, or the CEO's (Netflix?) version. Possibly a combination of both.

[CmdrWilkens]

Who said they have to seize it? Why can't they just tax it? As I said, they could make a special 90% tax on bonuses paid from banks. That has the effect of seizing it, without actually calling it a seizure of assets.

The problem is you would either have to tax all bonuses (including those from companies that did not take bailout money or otherwise may have actually been performing) or you would have to target it so narrowly that you make the legislation open to an equal protection suit.

[Darth Wong]

Since when does equal protection apply to companies which did or didn't take TARP money?

[Rogue 9]

The way I see it, the banks in question were entrusted with our money to fulfill a specific purpose, which they then proceeded to not even begin to address. I would have a problem with seizing bonuses awarded from money that the banks had justly earned, but this is the money of the United States taxpayers, not earned income. If they're going to abuse our trust and waste it, they don't need to have it.

[Col. Crackpot]

Who said they have to seize it? Why can't they just tax it? As I said, they could make a special 90% tax on bonuses paid from banks. That has the effect of seizing it, without actually calling it a seizure of assets.

As long as there is pay grade floor to that system! If not you'd be hurting a lot of people needlessly. Many bank employees, and just about every person you see in a bank branch rely on incentive pay right on down to the folks cashing your checks at the teller window.

[Big Phil]

Who said they have to seize it? Why can't they just tax it? As I said, they could make a special 90% tax on bonuses paid from banks. That has the effect of seizing it, without actually calling it a seizure of assets.

As long as there is pay grade floor to that system! If not you'd be hurting a lot of people needlessly. Many bank employees, and just about every person you see in a bank branch rely on incentive pay right on down to the folks cashing your checks at the teller window.

I don't think Mike is suggesting that everyone getting a $200/month bonus from their bank have 90% of it taxed

[Darth Wong]

Who said they have to seize it? Why can't they just tax it? As I said, they could make a special 90% tax on bonuses paid from banks. That has the effect of seizing it, without actually calling it a seizure of assets.

As long as there is pay grade floor to that system! If not you'd be hurting a lot of people needlessly. Many bank employees, and just about every person you see in a bank branch rely on incentive pay right on down to the folks cashing your checks at the teller window.

Obviously, I'm thinking more of the well-paid employees. Besides, it wouldn't apply to banks which didn't take TARP money at all. Banks which did take TARP money have no business paying out bonuses to anyone. And frankly, their employees should be happy to still have jobs at all. When the government hands out taxpayer money to prop up a failing business, its employees have a lot of fucking gall to demand bonuses.

[Sea Skimmer]

Obviously, I'm thinking more of the well-paid employees. Besides, it wouldn't apply to banks which didn't take TARP money at all. Banks which did take TARP money have no business paying out bonuses to anyone. And frankly, their employees should be happy to still have jobs at all. When the government hands out taxpayer money to prop up a failing business, its employees have a lot of fucking gall to demand bonuses.

Most of the bonus money was fulfilling contractual obligations. TARP could have easily had the power to invalidate those contracts had anyone like say Obama, bothered to make a point of inserting the necessary provision into the bill. But that didn’t happen, and at that point the banks had to pay those contractual bonuses or else they could be sued over it.

[Patrick Degan]

Obviously, I'm thinking more of the well-paid employees. Besides, it wouldn't apply to banks which didn't take TARP money at all. Banks which did take TARP money have no business paying out bonuses to anyone. And frankly, their employees should be happy to still have jobs at all. When the government hands out taxpayer money to prop up a failing business, its employees have a lot of fucking gall to demand bonuses.

Most of the bonus money was fulfilling contractual obligations. TARP could have easily had the power to invalidate those contracts had anyone like say Obama, bothered to make a point of inserting the necessary provision into the bill. But that didn’t happen, and at that point the banks had to pay those contractual bonuses or else they could be sued over it.

The flipside to that argument is that the bankers had contractual obligations to perform in exchange for the TARP money. If they have not in fact performed according to their obligations, then any agreement is invalidated and the monies received are subject to forfeiture for breach of contract.

[CmdrWilkens]

The flipside to that argument is that the bankers had contractual obligations to perform in exchange for the TARP money. If they have not in fact performed according to their obligations, then any agreement is invalidated and the monies received are subject to forfeiture for breach of contract.

Except that TARP, as applied at least up through 1/20/09 basically had all of the money disbursed unde a system which imposed virtually no contractual obligaitons. In other words the TARP money, as many folks poitned out, had no or virtually no provisions for oversight of the money. Oh sure it makes sense that we shoudl be able to do (insert x,y, or z statement) however the actual language of the bill only allowed for oversight and limitation on executive pay (as well as other provisions) in the case of certain transactions. Paulson then went out and bought up assets from the various firms using different transactiosn which means all of the accountability provisos don't apply.

Since when does equal protection apply to companies which did or didn't take TARP money?

It applies to everyone. In the case of the banks which received TARP funds they did so under a system (and thank Paulson and spineless congressional Dems for this) which imposes essentially no oversight or obligation. To turn around and have a law specifically target those companies AFTER they have received the money in compliance with the existing law (shitty as it may have been) creates a very real case to be made that it is either an equal protection or ex post facto law.

Basically what is happening right now is the nightmare scenario that every non-Beltway Democrat was worried about: The law, as passed and applied, makes no requirements of the companies which accept the funds and any attempt to retroactively impose requirements or oversight is fraught with concerns as above. Now as a note none of this applies to money which has not yet been disbursed. I fully support the idea that the remaining funds shoudl carry with it some hefty requirements in terms of executive pay, bonus pay, financial disclosure, etc. For the funds already used up I think the best bet for some means of enforcement would be to change any stock or ownership interest purchased with teh TARP funds into common stock which would give the US Government basically veto rights over every board member and executive at each company which has sold off those assets to the government. It neatly avoids any implicaitons of what I've spoken about AND it could certainly work to seriously dent rising executive payscales.

[Darth Wong]

If equal protection is interpreted so broadly, how can we even have different regulations for different industries? How can we even have antitrust regulation?

[Illuminatus Primus]

Clearly we should at least try. At the very worst we maintain the status quo.

[SirNitram]

Probably relevent: Pay cap just got instituted on anyone taking TARP money in the future. Retroactive application of it was put into the Stimulus by unanimous Voice Vote. Only TARP bailout beneficiaries, and the cap is 500k.

And the whining is in full force.