House passes bill to tax AIG bonus at 90%

Among the public anger at coporate bonus for AIG executives, Congress just pass a bill to tax AIG bonus at 90%. Anyone with a family income of $250,000 at companies that have received $5 billion in government bailout money will be taxed at 90%.  The bill covers most big financial companies like Morgan Stanley, Citigroup, Fannie Mae, Freddie Mac but excludes community banks and other smaller companies that recieved less bailout money.

While I believe the bonus was excessive, the contract was drafted at a time where it was normal for partners and managing directors to receive millions of dollar in bonus.  Whatever happened to the John Smith’s invisible hand policy?  Though in this case, there is no right answer.

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