Cash Cows
The American people are fuming about TARP-supported bonuses. Congress is being pushed and prodded, aided by the outrages of out-of-touch corporations. There is a new, counter- revolt of finance specialists, many working for reputable firms that have little in common with AIG and Citigroup. They say that they will head for greener pastures if punitive laws are passed.
European banks are waiting in the wings to poach the best and brightest willing to fold their American tents. One commented that punitive legislation written to return up to 70 percent of U.S. taxpayer-supported bonuses will “send the American economy back to the stone age.” It is argued that the ghpending laws could decimate the very talent needed to put the economy back on its feet. Others say that there needs to be a house-cleaning and if it takes a decade to build a sounder, more diversified economy, now is the time to do it correctly despite the cost.
It is our view any punitive laws by Congress need to be much more specific and discriminatory to be effective. Despite the unprecedented greed, corruption, and failure of governmental regulatory instruments, there’s no sense of wiping out an industry that will be part of an eventual recovery.
The real need is for consistent, long-term international regulation of financial services and banks. The volume of this governance can be debated, drawing a balance between the wild-west approach of the last two decades and incentive-sucking, South American style neo-socialism. Regulations and penalties, when well-conceived, must be applied consistently and globally.
With unemployment levels inching toward 10 percent, the U.S. electorate is in little mood for compromise. In the short term, let’s make sure any law penalizing the worst financial bailout offenders is narrow and to the point: a discriminating, legislative neutron bomb that scorches the bad guys but leaves the human and administrative infrastructure needed for tomorrow’s recovery standing is preferable to laying low the entire industry by poorly conceived laws written in haste.
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