The rapid exploitation of obvious public anger at Wall St bonuses to distract attention from blowing the Kennedy legacy in Connecticut might be smart (if obvious) politics. It is also likely to be costly and generate capital flight from the U.S.
Costs we can see already – S&P finance stocks shed 4% of value on the boy scout’s heroic announcement – losses which ripple through to the returns which his beloved widows and orphans were hoping their mutual funds and pensions might produce for them. Very clever.
One of Obama’s concern turns out, it seems, to be fair enough – he doesn’t like the idea of taxpayer “investments” (his giving in to bailout demands and stimulus nonsense) being used, albeit indirectly, to pay bonuses to banks which are “too big to fail”. Neither should he.
There are three solutions here.
One – don’t give taxpayers’ dollars to banks. Their investors and depositors took the returns – time to wear the risk.
Two – do not get sucked into “expert” mumbo jumbo about “too big to fail”. It sounds quaint. That sound is a politician getting sucked in. If Lehman’s can fail so can the rest.
Three and more practically…. now that both these solutions have been roundly ignored and it’s far too late – make sure the contract under which he props up these banks with taxpayer funds has a clause which says “no bonuses till you pay back all the debt”.
Dead simple. This stops the bonuses and creates an incentive to pay back outstanding taxpayer debt.
It would help if the ridiculous statutory deposit insurance and fidelity schemes which say “fine – do it again only harder I’ll save you” were removed as well….
This stuff is so obvious that a reasonable question becomes “why is this not happening?” A reasonable answer is that most of it would remove the marvellous political opportunity which the vote winning celebrity hangings provide for the guy whom the Connecticut result says can easily enough be put on the slippery slope to oblivion.