The AIG bonuses do indeed pose an affront to fundamental values. They should be defeated.
At various times, we have used a variety of techniques to correct aberrant behavior. The idea has been to get results, even at a sacrifice of politeness. In 18th-century New England, for example, we simply would have locked the culprits in stocks on the village green. But we don'êt do that any more.
Today, two techniques might be available. One is a financial strategy, well suited to the offense and very apt in demonstrating that even financial wizardry can quickly be brought to heel in a representative democracy. Congress should immediately pass a simple amendment to the Internal Revenue Code putting a new line on every Form 1040 for April 2010. Enter the amount here for any bonus payment you received in 2009 from AIG. Add the amount entered on this line to your tax otherwise owing (but never to less than zero) and pay the new grand total to the Internal Revenue Service. 100% tax rate. A little ham-fisted, even Draconian, but gentler and kinder than the old methods of Chinese governments that shot rice speculators.
The second strategy is a little harsher. It works off the new transparency cum accountability approach and it goes like this: Announce the intention to publish the names and addresses of every AIG bonus recipient on the front pages of the New York Times and the Wall Street Journal. And their home addresses. And the addresses of their vacation houses anywhere in this country or abroad. And the names and employers (if any) of their spouses. And the names of their children and their schools. Exempt from publication anyone who turns his or her bonus back in before the end of the week. There would be very few people'ês names in the papers, because almost all the money would be back by Friday.
A bit reminiscent of the old-fashioned village threat of the stocks, isn'êt it?
UPDATE from the author: Drat. The risks of our marvelous electronic age. The morning after I filed this bit of bloggery, Rep. John Dingell was on C-SPAN introducing a nearly identical tax remedy. I am beaten, I think, in a fair race to the soapbox. A soft spot in his bill — possibly the result of better legal advice — is his notion that the applicable tax rate should be just 95%. But it seems to have broader coverage, extending to any bonuses paid by TARP-recipient firms to the bigwig executives. That's called the in terrorem effect of prospective tax legislation, a perfectly conventional device.