AIG Bonuses & the Lynch Mob

There has been almost universal outrage expressed at the recent news that AIG gave out bonuses totaling $165 million to employees, including bonuses to almost all of the people who were in the financial products unit responsible for creating the exotic derivatives that caused A.I.G.’s near collapse and necessitated a taxpayer-funded bailout totaling $200 billion.

While I share in the utter disgust around what amounts to massive retention and incentive payments for galactically poor performance, what I find slightly alarming is just how over the top much of the anger is and some of the suggestions that are coming out of otherwise reasonable people. It's nothing short of a lynch mob mentality.

Republican Senator Charles Grassley not-so-subtly suggested that AIG executives commit a form of Japanese honor suicide in light of their poor performance, and a number of congressmen such as Chris Dodd and Barney Frank have been strategizing how they can somehow finesse tax laws so we can selectively strip recipients of their bonus. New York Attorney General Andrew Cuomo has demanded the names of the bonus recipients. To what end? Is his next step to post their addresses and telephone numbers on a website so people can bombard them with threats? Or is there a hope that by "outing" these individuals, they'll repent and return or refuse these bonuses for fear of their own or families' personal safety? Is that what we've come to as a society? If you think I'm being exaggerating, read this article in the New York Times which details the harassment endured by AIG employees and their families which has led many to hire personal security guards.

While we're at it, let's go ahead and leverage every government body to "legally" make it utterly distasteful for them to accept their bonuses. How about making it clear that the Internal Revenue Service will certainly be conducting heavy audits of their personal finances for the rest of their lifetimes?

My common refrain around other similar government attempts to regulate and adjudicate with a heavy hand is to be very careful in terms of how that power is used, lest we plummet down a slippery slope or get blindsided by unintended consequences. I agree that paying bonuses to these individuals is absolutely ridiculous, but are we really going to become a country which abrogates legally-binding contracts (or finds some other means of essentially doing so) because a small group of people have ludicrously, though legally secured compensation that we find hard to stomach? And are we going to start using extreme measures to somehow "make things right" in the mob's eyes? Even Democrat Charles Rangel, no fan of Wall Street, warned that the tax code should not be wielded as a weapon.

If I'm not mistaken, in the late 18th century there were also masses of people who felt that a small segment of the population were unfairly getting more than their due. The venue was France and it went far beyond an increasingly progressive tax code. The rumblings of class warfare might be on its way, folks.