Look for some seriously good real estate deals in Manhattan in the next few weeks.

So because you are named publicly you sell your apartment? Don't quite follow your logic.

Scratch the surface of most attractively priced listings - on the UWS and UES, at least, not to mention FiDi - and you'll find either an obituary or a LinkedIn resume that features a prominent financial institution. Merrill is just one among many. Obviously, the prospect of bonus clawbacks and litigation doesn't help.

This will crush manhattan if it passes:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ayTeeS9.fi3M&refer=home

House to Vote on 90 Percent Tax on Executive Bonuses (Update1)

By Ryan J. Donmoyer and Christopher Stern

March 19 (Bloomberg) -- U.S. House Democratic leaders plan to vote today on a proposed 90 percent tax on executive bonus payments by companies receiving more than $5 billion in federal bailout funds.

The bill is a response to the national furor that erupted this week when it was learned that American International Group Inc. paid $165 million in bonuses to 4,600 employees, including many in the financial products unit whose investments brought the company to the brink of bankruptcy.

“I expect it to pass in overwhelmingly bipartisan fashion,” House Majority Leader Steny Hoyer, a Maryland Democrat, told reporters yesterday in Washington. House Speaker Nancy Pelosi, a California Democrat, said, “The American people are very upset about what they’ve heard about bonuses.”

Companies covered by the legislation have received 75 percent of federal bailout funds, according to the House Ways and Means Committee.

“We go far beyond AIG, Citibank, Freddie Mac, Fannie Mae and others,” said committee Chairman Charles Rangel, a New York Democrat. “This is not going to happen again, the light is flashing and letting them know that America won’t take it.”

House Republican Leader John Boehner of Ohio denounced the Democrats’ bill as a “sham” effort to recover the money and said, “We don’t want 90 percent of it back, we want all of it back.” He said Republicans offered an alternative requiring the Treasury secretary to devise a plan within two weeks to get all the bonus money back.

Repay Half

The bill was drafted yesterday as AIG Chief Executive Officer Edward Liddy told a House Financial Services subcommittee that he asked employees who got bonuses over $100,000 to repay half. AIG so far has received $173 billion in federal bailout funds.

The 90 percent tax would apply to people with overall income exceeding $250,000, including bonuses. The tax would apply to bonus payments made after Dec. 31, 2008, and it would cease when the U.S. government’s investment in the company fell below $5 billion. The tax wouldn’t apply to any bonus returned to a company.

The legislation wouldn’t attempt to impose the tax on foreign employees of companies such as AIG, said Ways and Means Committee spokesman Matthew Beck. Many of AIG’s bonus recipients work in the London office of the credit-default swap unit.

Senate Proposal

The Senate is writing its own measure that would impose a 70 percent excise tax on the bonuses, split between the company and employee. That tax would be collected from foreign workers by making the company responsible for paying the employee’s 35 percent excise tax if the levy couldn’t be collected using normal withholding in place under existing tax treaties, according to a description released by the Senate Finance Committee.

The Senate has not yet set a date for taking up its version of the legislation.

Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and Senator Chuck Grassley of Iowa, the panel’s ranking Republican, said they sent a letter asking Liddy to identify who got bonuses from AIG, how long they worked for the company and whether they are still employed by it. They also asked Liddy for legal opinions on the risk AIG faced of being sued if it hadn’t paid the bonuses.

Congress is acting after Treasury Secretary Timothy Geithner said in a letter to lawmakers that his department’s lawyers determined it would be “legally difficult” to prevent AIG from paying the bonuses because they were required by contracts.

No ‘License to Steal’

“We passed a recovery act, we did not pass a license to steal,” New York Representative Steve Israel, a Democrat, said at the news conference. “The middle class will no longer subsidize pay for failure.”

Asked how lawmakers reached the 90 percent figure, Rangel said, “We figure the local and state governments will take care of the other 10 percent.”

Liddy said in his congressional testimony yesterday that he never would have approved the compensation contracts, which were signed before he took over at AIG last year, and said he asked employees to “do the right thing” on their bonuses.

AIG also budgeted $57 million in “retention” pay for employees who will be dismissed, according to a March 2 filing to the Securities and Exchange Commission.

The political heat generated by the AIG bonuses indicates declining public and congressional support for shoring up beleaguered financial institutions with government funds and may make it tougher for President Barack Obama’s administration to win approval for future bailouts.

‘Further Largess’

The bonus decision “may jeopardize our ability to get the majority of this Congress to support further largess, to provide funds, to prevent a recession, depression or meltdown,” Representative Paul Kanjorski, a Pennsylvania Democrat who heads the capital markets subcommittee, told Liddy at yesterday’s hearing.

Republicans have criticized Democrats for tacitly allowing AIG to pay the bonuses due to language in a $787 billion economic stimulus bill that became law last month. The law, in effect, allows bonus arrangements at companies receiving taxpayer bailouts as long as the bonuses were in place before Feb. 11.

To contact the reporters on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net; Christopher Stern in Washington at cstern3@bloomberg.net

Last Updated: March 19, 2009 10:39 EDT

manhattan real-estate will be absolutely crushed. i agree with you here. 250k cap on HOUSEHOLD income is crazy. Just quit your job and sell the house before this bill passes.

I don't think Senate would ever pass anything as insane as this. House is a different story. Its all posturing- politicians trying to gain mileage out of AIG mess.

why is this insane. this only applies to companies that are being propped up by the taxpayers. this is not a cap on income, it is a tax on high incomes being paid by companies that receive federal aid. seems eminently reasonable to me.

happyrenter, it's very simple: No one decent will want to work for companies like that. This will drive the companies even further down and tazpayers' money will go down the drain with it. You guys are so full of schadenfreude but do you realize it hurts evreyone in the end, not only the high-income people that you despise?

happyrenter, let me count the ways, its sad but this is why the politicians are doing this, people like you will vote for them I guess

HR, you have to realize that if there is dual income fam, the 250k AGI is easily passed and there literally is a cap on income.

ML bonuses were paid in 2008 and wouldn't be subject to the 90% tax.

lol, schadenfreude? bro, you can't say i despise high income people when i am one of them. the truth is, these companies WOULD NOT EXIST if they had not been bailed out by the taxpayers. but the pigs who run them think that they should still pay out huge bonuses to themselves and their buddies. they are using taxpayer dollars to pad their own pockets, and it is disgusting.

let me put it to you this way: no one decent DOES work for these companies--or at least, no one decent runs them. if they did, then they wouldn't be effectively insolvent and require enormous infusions of taxpayer dollars to stay afloat. you think the top executives at AIG have tons of job offers pouring in after the bang-up job they did destroying one of the great american companies.

personally, i think the government should have made the bailouts contingent on an orderly transition of the management and boards of these companies into retirement. but they idea that they should receive huge bonuses for destroying their companies, nearly bringing down the financial system, and leeching off the taxpayers to the tune of hundreds of billions of dollars is just absurd.

ccdevi/uppereast: Granted, the legislation is cheap pandering, and it probably won't achieve anything constructive even if it becomes law. On the other hand, alarmist declarations that bankers will rush for the exits seem a little overblown too. Where are they going to go? Deutsche can't hire everybody, and most of the boutiques that are hiring need fairly specialized skills.

If a few quants decide to teach math or physics because there's no money in banking, it won't be the end of the world.

Basically, Congress is responding rationally to the Lewis/Thain "We paid bonuses because we were legally obligated to do so" dodge. Congress's answer: "OK, we can't stop you from paying it out, but we can sure as heck take it back."

Just curious where they gonna work? No bailouts, it will be painful but in the end we'll all be better off. Free markets work when taking big risks means endgame is total failure. You want to play, then be prepared to pay.

streakeasy,

it is effectively a cap on income at AIG, yes. AIG is a company that has been bailed out to the tune of nearly $200 billion, so it seems to me a salary cap at that company makes sense. it is not an across-the-board cap on incomes. it only applies to the recipients of this enormous corporate welfare.

i assume most of you work for these companies and that's why you are getting so defensive and hostile. i used to work for one of these companies myself. many of my friends work for these companies. oh well.

"you can't say i despise high income people when i am one of them"

"no one decent DOES work for these companies--or at least, no one decent runs them"

in the same post. seriously, I'm not kidding.

"if they did, then they wouldn't be effectively insolvent and require enormous infusions of taxpayer dollars to stay afloat"

yeah that follows.

ccdevi, you think that the managers of, say city group, are decent-quality managers? you think the AIG traders who led to this $200 billion bailout are decent-quality traders?

if decent management leads to insolvency, what would bad management look like?

as for who i despise, i don't despise 'high income people' as a group. i DO despise some people who happen to be high income. and you don't? are you a fan of bernie madoff etc. etc. etc.?

by the way, the sort of 'decency' we are talking about here is decency as managers, traders, bankers, etc. not personal decency. i have no interest in commenting on the personal lives of these people. my interest is their competency.

west81st,

whether or not the legislation is effective remains to be seen. but otherwise i agree with you--this is the only logical response to thain, lewis, et al.

Happyrenter - "no one decent DOES work for these companies"
That is extremely insulting and offensive. No one "decent" works at Goldman, Citicorp, Bank of America, Morgan Stanley, Wachovia, Wells Fargo.. this affects 2 MILLION employees. But none of them are "decent"? What comes around goes around.

ugh, u2 W81? really?

say you're an investment banker, you know just your ordinary m+a deal maker. you didn't lose the firm any money. and say you're a star. you going to stay at citi or whereever when a boutique or some other non-tarp shop is calling? and of course this applies to plenty of people in businesses that didn't crater the company. say you're the head of insurance at aig.

say you're a superstar that aig needs to come in help this situation, you weren't there when the bad stuff happened but you can help fix it, you coming?

say you're just some guy, like a friend of mine at aig, he's just an in house lawyer, he may not make over 250, I'm not sure, but he might, he should give back 90% of his bonus? because middle america, charles rangel and unbelievably some of you guys think 250 is a lot of money in nyc. this guy lives in the nyc area, he's got two kids, he doesn't live a life of luxury, he lives reasonably comfortably and he's working 18 hr days trying to help aig sell everything.

say you're the govt. does 165 mil move the needle? no. as you said its pandering, pandering when we have real problems that need to be focused on. so aig pays the bonuses, the govt gets 90% of it back, is that money going to reduce the debt aig owes?

thats just some of stuff off the top of my head. and of course i haven't read the bill so to the extent these idiots actually tried to address some of these issues, good for them, but i doubt it. ya know them being idiots and all.

happyrenter, you are a bitter person. Kind of doubt that you are 'high income'.

"ccdevi, you think that the managers of, say city group, are decent-quality managers? you think the AIG traders who led to this $200 billion bailout are decent-quality traders?"

does this bill only apply to the people at the top directly responsible for the issues these companies had? does it only apply to aig traders? so every single trader at aig is bad at what he does? every one? what were they the unluckiest hiring department in the world? and the same thing happened at citi? what were the odds?

Manhattan real estate was crushed when these kinds of bonuses began to be handed out, effectively making it impossible for anyone not employed on Wall Street to afford a decent place to live in Manhattan. AIG and other companies are being kept afloat so that the entire US economy is not brought to its knees, not to reward with taxpayer money the swindlers who have enriched themselves without conscious.

ccdevi: Of course the legislation isn't fair, and it may not be smart. I think politicians will vastly overstate the good it will achieve, and bankers will probably overstate the harm it will do. Sensible people can see through the smoke from both sides.

no fair and not smart. so then why did you term it rational? i think you meant kneejerk

regarding the harm, you don't think it hurts NYC?

further it doesn't bother you that our leaders don't try to help us, they just try to convince us to vote for them?

i abhor the incompetence,and against unjust erichment of incmpetence...but contract law is bedrock annd fundemental to our society.after the fact punitive taxes gives too much power to political demagogues.

CCDevi your argument is why NYC is too expensive for someone making 250k /yr base, in the first place. A company is at the brink of failure. Not JUST one sector, but the entire company. Who your attorney friend SHOULD be mad at are the decision makers at the top, and the sector that has crippled every other department within AIG. After he gets over his anger, he should be happy that he is even able to KEEP his job, whether or not he works 18hrs/day, because the taxpayers have kept his employer afloat DURING A FUCKING DEPRESSION. Then, he should be thankful that without these bonuses, the NYC area will become a little bit more affordable for everyone including himself (who still has a job).

When you make 250k, sometimes you put in a lot of hours. That's the deal that EVERYONE on that track knew going into it. If you don't want to work 18hrs/day at points in your life, then maybe you need a 9-5 paying you $50k/yr. Life is about tradeoffs, and making "only" $250k base salary is no reason to assume you should also be taking it easy and putting your feet up on your desk. It is EVERY reason to assume that you carry more responsibility and burden to your employer, and therefore have to shoulder that as a MATURE ADULT. Grow UP!

ccdevi: Maybe kneejerk AND rational. An action can make sense without being the best possible course.

We live in interesting times.

The idea is not insane, but the numbers are - 250K per household!!, $5B in fed (assuming TARP) funds. We are not talking about AIG or Citi where you are just trying to avoid systemic risk. This legislation will also capture Capital One, PNC bank etc- almost 80% of the commercial banking sector- recipients of TARP funds.

This is classic DC "locking the barn door after the horse has bolted." Will this bill get the Merrill bonuses that were paid in 2008--the fast one Thain pulled over on Ken Lewis? That was a real crime, but it's relatively 'old news' and not quite as easy for the public to latch onto as the initials 'AIG'. Chuck Prince, Stan O'Neal, Richard Fuld, the Greenberg Family at AIG, Peter Kraus (of Merrill), Sandy Weill and a host of others set all of this in play, under the 'unwatchful' eyes of Washington regulators, following the 'free market' mantra of both Democratic and Republican legislators. All those guys have retired with 100s of millions, and are laughing as legislators go on a witch hunt/lynch mob party against the 'small fry' left behind to clean up the mess and watch their equity positions dwindle to nothing.

The 'taxpayers' won't stand for this anymore!!?? Give me a break--who, exactly, ARE the taxpayers--the people that are going to be nailed by this silly legislation--they make up the bulk of the 1% of the American population paying more than 50-60% of the taxes, not 'Joe the Plumber'. Those are the same people who are also major shareholders in these financial institutions, not voluntarily, but because huge portions of past bonuses were paid in stock at a valuation of many multiples of what the stock has fallen to now.

The people who really caused this mess are long gone, and I doubt there's much appetite to go after them, since I'm willing to bet they were also important political contributors.

Most of you will feel no sympathy for these folks, and I certainly understand that--but you should really channel your anger at the 'masters of the universe' who got out last year and are now starting new hedge funds with their 100s of millions, or forming vulture capital funds poised to buy assets from the government very cheaply and/or with government guarantees to boot.

What is happening in DC is very, very scary--it truly is a modern day equivalent of a Salem witch hunt or Wild West lynch mob. I guess one advantage for all those who have to return their bonuses is that in the future, they won't have to worry about carrying so much of the US income tax burden on their shoulders. No, this won't help NYC real estate at all--just how many apartments in excess of listing prices of $1.5 million have entered into contract since January? Also, I think there is a real danger that more of the international financial markets and its talent will move offshore (China, anyone?) because our leadership is completely irrational . . .

No doubt NYC will survive in one form or the other. But I suspect that for my neighborhood, if this goes through, there will be not a small number of people walking away from their big mortgages.

Princetonbabe: agree with many of your points.

wv7, another having no idea about what he speaks.

first of all regarding my friend, he could have left 6 months ago but stayed because they offered him a retention bonus. he made a deal, now the govt is going to just take that away? and you don't think he can be mad at the govt?

but regardless he is hardly the point, he is not a profit center. so what if the company is on the brink, some of their businesses make money, how do you think its good business to rape the good businesses? especially when you (the govt) now owns a huge piece of the company. its idiotic. so i'm a #1 m+a guy citi has and Lazard comes calling, why would I stay? so now the business that we (the govt) just bought, just lost a guy who was making $x a year for our business. nice work.

and the 250 thing is just stupid. actually he left big law, the tract where you do expect those hours, for what was supposed to be a 9 to 5ish job. but no one is saying he shouldn't ever have to work hard but don't act like 250 is rich in and around nyc.

"An action can make sense without being the best possible course."

well sure, but this makes no sense.

well done princeton

I am a former banker at Merrill and I had a great run now own my company. Thain is a pig! Plain and simple. For all the years I worked there our bonuses were paid on the third week in January and now this year it is moved up to December. I am disgusted by the unethical behavior - we are all in this together and i can see why main street thinks we are greedy bastards.

ccdevi: If you start out from the premise that those bonuses shouldn't be paid in the first place (as many people do), reclaiming the money through taxing power is a rational government response. I don't agree with the premise, or the legislation, but the action does follow logically from the premise.

We're splitting semantic hairs here. I'm not endorsing the legislation, just saying that I understand the dynamic at work - and I think you do too.

upper east,

i am bitter because i don't think the taxpayers should be providing huge bonuses to executives at failed companies? strange that you consider that bitter. i find it bitter to complain that the government isn't going to foot the bill for bonuses at failed companies. we've kept these people their jobs by propping up the firms. now we need to give them huge bonuses? a lot of my best friends work at these companies, as i said. i started my career at one of them. shit happens, grow up and stop complaining that the government isn't willing to just pay up.

please.

as for princeton babe and this 'blame the masters of the universe' canard, look, there is plenty of blame to go around. i am one of the people who left wall street to start a hedge fund. and you know what? i think it would be perfectly fine for the government to impose a high tax on my high earnings. i think that a federal million-dollar tax bracket should be reinstated, and i'd support brackets at $5 million, $10 million, $20 million, etc. which is what we had through the 1940s, 50s, and 60s--not coincidentally the period of our greatest economic expansion.

i make an obscene living in large part because of the opportunities provided for me by this country, and if i have played a part in wrecking our economy that you can be damn sure i have no problem paying to help set it right. i'm willing to pay my share even if i personally didn't do anything to mess it up. rich people complaining about paying taxes, complaining that the government won't keep them in mink, complaining that they won't be able to afford luxury real estate in manhattan: this is just beyond gross.

west81st,

you disagree with the premise that those bonuses ought not have been paid? please explain. you think it is appropriate for functionally insolvent companies surviving on the federal dole to pay million-dollar bonuses to their executives?

I'm only going to type this one thousand more times.
Manhattan RE is dead for the foreseeable future (at least 5 years). Does anyone out there have any long term memory? I purchased My first apartment in Manhattan in 1986. In '87 the market droped as did the value of the apartment. Sure, IT BOUNCED RIGHT BACK...................... 11 years later. By the way, at that time RE had not escalated as a result of easy money and the entire financial system did not collapse. Prices are going down,down,down,down,down,down,down,down,down,down,down,down. Don't listen to to RE pundits, they are so hungry they will say or write anything to eat.
That doesn't make them bad people...just desperate.

happyrenter: I think it's right for contracts to be honored. Part of the price of rescuing a company is that you also rescue its contractual counterparties, whether they deserve it or not. If you don't want to honor the contracts, then let the company fail.

On the other hand, if a bonus was discretionary, or paid under false pretenses (see Merrill), that's a totally different story.

I should have said, "...let the company fail, or attach appropriate strings to the bailout."

west81st,

several points:
1. contracts can be renegotiated, and if anyone with an ounce of political sense were running AIG that would have been done.
2. the contracts are being honored. the government is not a party to the contract and has every right to levy taxes.
3. there may be constitutional problems with this bill--i've seen arguments on both sides--and if it does pass it will eventually get hashed out in court.

"a lot of my best friends work at these companies"

HR, do they still work there? You think none of them are "decent" at what they do?
You sure have "a lot of" schmucks as "best friends".

Happyrenter--most gracious of you offering to pay more taxes . . . just send your name and address to Barney Frank for publication on the internet . . . and as far as concerns about lunatics coming to your home to garrot you and your family out of envy . . . well, as Barney says . . . that's probably not a credible threat . . .

let the record show: I DID NOT INTRODUCE THE TERM 'DECENT' INTO THIS CONVERSATION.

Uppereast wrote:
happyrenter, it's very simple: No one decent will want to work for companies like that. This will drive the companies even further down and tazpayers' money will go down the drain with it. You guys are so full of schadenfreude but do you realize it hurts evreyone in the end, not only the high-income people that you despise.

i assumed that by 'decent' he meant 'decently competent.' so when i wrote that the executives running these companies are not decent, i meant 'not decently competent.' if we are talking about the personal morals of these people, then i have no opinion, nor do i care. we are talking about competence.

i believe i explained this above when i wrote:
by the way, the sort of 'decency' we are talking about here is decency as managers, traders, bankers, etc. not personal decency. i have no interest in commenting on the personal lives of these people. my interest is their competency.

i do not work for a bank any more (as of four years ago). i run a hedge fund.

happyrenter - if you work at or run a hedge fund, you are as responsible for the current financial mess as a lawyer or currency trader working at Citigroup. You want to see a $5mm tax bracket - but this bill makes the tax bracket 90% over $250,000. Do you think your "fair share" is all your income over $250,000?
By the way you are way to ignorant to actually be a hedgehog, since there were never "$5 million, $10 million, and $20 million" dollar tax brackets. In 1964 for example the highest tax bracket was 77% on income over $127,235 (head of household).
And when the government gives you a loan, and you pay it back, you're not costing the taxpayers anything. Furthermore, guess who pays 60% of the taxes? Those making over $250,000. The government doesn't keep anyone in mink, it is the rich who pay for the rest of the country to be obese.

princetonbabe,

not only does barney frank already know that i would be more than happy to pay higher taxes, but i am an active and public supporter of several organizations fighting for a more progressive tax structure, a higher estate tax, and reform of the payroll tax to shift the burden onto high earners.

thanks for the advice, but already done.

I think it's fair to refer to people who lack decent competency as schmucks. You have a bunch of those as best friends, yes?

i make $250 in NYC in media and can't afford a 3-br apt b/c of the finance millionaires who've driven the market up to these crazy levels. Hard to have sympathy...

However, just saw some amazing 3-brs with river views for under $2M for the first time (were over $3M a year ago) ..think I'll wait for 6 mos to a year to see if they go down to $1.5M or $1M

There is simply too much “bonus bashing” doing on. Of course Merrill and AIG bonus are unconscionable. But just to present the other side of the argument, most of investment banking is simply glorified sales - and thus compensation structure is composed of low base salary and a variable payment depending on the amount of revenue you generate. Asking a top M&A banker to give up his entire bonus if the firm lost money is like asking your top salesman to give up his commission because the company screwed up in the manufacturing process. The banker will be poached immediately by a rival firm.

happy renter, i do not work for a tarp co... but my wife does. however, what happens when my income is the push into the 250k cap? how is this fair? the bill says for household income. My wife is penalized for being married once again.

"said the congressman did not realize he had to declare the money as income, and was unaware of the semiannual payments from the resort because his wife, Alma, handled the family finances and conferred with their accountant, John Viardi, on tax matters." Rangel is a hypocrite.

brodie,

first, it's not possible to be 'too ignorant to be a hedgehog.' there are plenty of imbeciles who run or work at hedge funds.

but you are also quite wrong about federal income taxes. in 1913--the first year of the estate tax--there was a tax bracket that began at 500k per year--obviously in the millions of dollars in current terms. In the 1940s there was a bracket that kicked in at $5 million per year--again, obviously that would be tens of millions in current dollar terms. the 400k and 200k top rates in the 50s and 60s also equal well over $1 million in todays terms.

Valueseeker: If you're right, and successful bankers are poached by rival (generally smaller) firms, is that really such a bad thing?

Gradually winding down monster banks that are too big too fail, and dispersing their top talent among boutiques that carry less systemic risk might actually be OK. Unfair to the affected individuals, perhaps, but what's the real harm in slowly killing the big banks by making it impossible for them to retain top talent?

streakeasy,

again, you have a horse in the game, which is fine, but is isn't really the top priority of the federal government to safeguard your wife's high earnings.

it is fair that the government should get back the tax dollars that are being used to pay bonuses, yes. that's fair.

By "Killing", I don't mean actually putting them out of business - just forcing them to downsize by withdrawing for risky business lines.

i think 'fair' went out the window when waitresses in detroit had to bail out investment bankers on park avenue.

west81st,

i thought by killing you meant killing, as in murder. even i wouldn't go THAT far.

:)

I agree with Happyrenter and my rationale is as follows:
- without government injection of $170 billion of taxpayer money, AIG would have failed;
- not only would there be no bonuses, but there would be no salaries at all;
- if AIG thinks that in these times of austerity, it is then appropriate to pay bonuses at all while receiving $170 billion plus of taxpayer money then they are drinking way too much kool-aid;
- regardless of the rationale behind a certain amount of bonus payments (protecting your star players, honoring existing contracts), we have all read that some of these bonuses rewarded those that don't even work for AIG any more;
- even if some of the bonuses were justified, this just totally fails the smell test;
- if AIG is so stupid and thumbing its nose at the government hard on the heels of Merrill and others (when there is nothing that the government could do so of course they have to look tough and mad in this situation now) then they deserve to have the government respond accordingly;
- the government taxing the bonuses is the government sending its own f*** you signal and given that this is probably about the only way that the government can send its own signal, I think it is appropriate. What's the other option, ask politely for the bonus money back? Isn't the point of government to step in when the market fails?
- and let us all forget - for a minute - about what this might mean for the Manhattan real estate market. Probably not a whole lot because beyond AIG and the other companies taking over $5bn of government funds, this is not going to affect a whole lot of people. But even if it does, I support the principle involved.

Valueseeker--agree with you about the 'bonus bashing'; many parts of these institutions are still making money through the efforts of smart, hardworking people. It's kind of like telling Ann Lenane that she won't be paid her commissions on the properties she has managed to close because Elliman is overall having a horrible year, to bring this back real estate.

West 81st: I understand and partially agree with the premise of the tax, but the problem is that Congress is trying to kill one fat pigeon with a small A-bomb--the nuclear fallout will be severe. AIG Financial Products is clearly one of the 'flashpoints' of this economic firestorm, and it is galling that in this case, bonuses seem to be going directly to people who actively participated in creating and promoting instruments that are capable of imploding our whole financial system, but as usual, the cure will be far worse than the disease.

you know what, princetonbabe? if the federal government has to bail out douglas elliman for billions of dollars in order to keep the economy from collapsing, i dare say that ms. lenane would be well-served to forgo million dollar bonuses for this year.

Glad to see that some people here feel that raising taxes on $250K ain't OK. A few weeks ago, this issue was discussed & a number of people posted that it was peachy keen & that those who earn $250K are rich. Well, if ya make $250K & ya live in NYC, you're not rich & you're already heavily taxed. And, if fed tax goes up, so will city & state.

I also think it's ridiculous that the $250K (& up) people pay 60% to 90% (whatever the statistic is) of taxes. The tax system should be revamped.

Raising taxes on high earners is not good for NYC, nor NYS nor the nation. We need to cut spending & stop squeezing the high earners.

LOL dwell, so basically you think that taxes should go up on waitresses so we can cut taxes on heiresses and professional golfers? brilliant suggestion.

the reason the rich pay most of the taxes is not because of high marginal tax rates, since marginal tax rates are quite low by historical standards. the rich pay most of the taxes because they earn most of the money.

personally, i think taxes should go up a bit on people earning 250k (and if they can't afford to live in nyc they can move). but i think taxes should go up a LOT on people earning more than $1 million. or does $1 million a year not qualify as rich either?

If the U.S. Constitution still matters in this day and age...:

http://www.techlawjournal.com/glossary/legal/attainder.htm

Full disclosure: I don't work for any of these insitutions and no one in my family does.

"The 'taxpayers' won't stand for this anymore!!?? Give me a break--who, exactly, ARE the taxpayers--the people that are going to be nailed by this silly legislation--they make up the bulk of the 1% of the American population paying more than 50-60% of the taxes, not 'Joe the Plumber'."

That's the crux of it that the pols and populists won't acknowledge. Based on 2006 income tax figures the top 1% paid 40% of the taxes, the top 5% paid 60% of the taxes. Adjusted gross income thresholds for the top 1% and 5% were $388,806 and $153,542 respectively. Obama cited the 2006 income figures in his Budget, but only to highlight that the top 1% pulled in 22% of the income (page 9, referencing Figure 9).

Take a guess what happens a year hence when those budgeted tax revenues evaporate.

> Valueseeker: If you're right, and successful bankers are poached by rival (generally smaller) firms, is that really such a bad thing?

It sure is if the nexus of investment banking moves to London, which by the way, it was creeping that direction anyway the last 5 years.

streakeasy, I have read the Rangel bill - the 90% tax rate applies only to the TARP company employee's bonus and only to the part of the bonus that pushes combined income above 250k (if other income didn't make it above 250k)

Saying this does not mean I support this in the least bit.

Happyrenter: you sound quite smug for someone who admits to having been part of the problem . . .

West 81st, as usual, seems to have her finger on the pulse of things. My own theory, too, is that the 'monster banks' will die and the talent will fan out to 'boutique firms', but I would take it a step further and say that a lot of those boutiques will not be based in NYC or anywhere else in the US.

> LOL dwell, so basically you think that taxes should go up on waitresses so we can cut taxes on heiresses and professional golfers? brilliant suggestion.

If you're going to raise taxes, raise them on everybody. Everybody who pays income taxes got a tax break in 2001 and 2003. We should not promulgate a system where the poor and lower middle classes only ever get tax breaks while the rich's rates move around based on which party is in office.

"We should not promulgate a system where the poor and lower middle classes only ever get tax breaks while the rich's rates move around based on which party is in office."

Right. The system needs revamping.

wall street millionaires were financing tax receipts for decades. Not only that, they were financing state budgets, local town and city principalities with police/fire/mail/education... since they pay an overwhelming majority of the taxes in this country. With that being said, the waitress in detroit never even knew who was providing her entitlements she has been enjoying for years.

princetonbabe,

i don't acknowledge being part of the problem. i acknowledge that i have profited from a system that has become corrupted. i don't engage in any of the activities that led to this crisis, but i did make a shit-ton of money because of the outrageously under-regulated financial system of the last decade.

angler,

why don't you provide us with the total INCOME of these groups of people, not just the percentage of taxes they pay. on its own, the percentage of taxes paid by one group or another is irrelevant. you have to know how much they earn for the statistic to be meaningful.

streakeasy,

come on, you must have a somewhat more sophisticated understanding of the tax and governmental system than THAT. basically, you think that high earners earned the right to government bailouts because they paid high taxes in the past? wow. so much for the social contract. i always thought high taxes were warranted because without the benefits of the system i happen to be a part of i would not have two dimes to rub together. i didn't think i was paying in so the government would keep me in mink if i went belly up.

just like i have a horse in the game, you don't. i wouldn't talk.

huh? dude, i'm not arguing to change things to favor my own damn horse? i'm willing to pay up for the sake of the system and the country and i don't expect the federal government to pay for my luxury lifestyle.

I'm with spqsydney and the other posters. It's absolutely appropriate to start playing hardball with these guys. Their conduct has been utterly thuggish. The arrogance, entitlement and contempt they have displayed are breathtaking. (BTW, as a lawyer I find the arguments of Summers, Sorkin et al. about the "rule of law" and "sanctity" of contracts disingenuous, especially when we consider the givebacks unions are being asked to make to save the auto companies-- they too had binding, fairly bargained agreements.) AIG and company are attempting to hold the U.S. economy hostage, taking a page from the political playbook Paulson used when he nearly succeeded in getting Washington to hand over the keys of the U.S. Treasury to him and his corporate cronies, with no political accountability or oversight whatsoever. Our (ostensibly) democratic political system and our patently undemocratic economic system have long been on a collision course. The political posturing aside, would it be too much to hope that the events of past few days will be the first step in addressing the democratic deficit that has permitted such unchecked private corporate power over public resources? And now, mesdames/messieurs, back to NY real estate.

cherrywood: the voice of reason.

thank you.

You're welcome.

Wow! this is what i wrote 4 months ago - before the election and the experiment in wealth re-distribution began.

jake
about 4 months ago
ignore this person
report abuse With Obama increasing his lead in the polls, markets not only in the US but around the world are cratering. Investors are fully aware that Obama's plan is to raise taxes on successful and hard working Americans in order to give money to those who are less so. The increasing probability of an Obama win which would raise taxes on productive Americans and productive capital at exactly the wrong time has increased the probability of a deep and prolonged recession in the US and globally. The possibility of a Japan style deflation with 15 years and counting of anemic economic growth is very real with an Obama presidency.

If you live in New York City or work here you must understand that you are looking at Nancy Pelosi and Barney Frank deciding how much you get paid (a "moratorium on bonuses") with Barack Obama then deciding how much of that pay you get to keep (not much).

And no this will not be good for New York City real estate.

They're workfare queens. They should pull themselves up by their bootstraps.

And where are the elected officials from New York on taxing bonuses at 90%??? Instead of standing up for New Yorkers, Charles Rangle wants the states to take the other 10%. Where is Schumer on this?Nadler? Mahoney? I thought the dems controlling everything was going to fix the blue state/red state imbalances.

Doesn't anybody get what this means to the New York City and New York State economies? Buh bye!

And New York City real estate? Well, last one out grab the flag.

cherrywood--the ones who engaged in the thuggish conduct and displayed breathtaking arrogance, entitlement and contempt (Paulson, his Goldman Sachs cronies, Thain, Fuld, etc.) already have their money and are counting it in their Park Avenue pads--this legislation is not getting back one red cent of their fortunes, but it will trash a large part of the rest of the Wall Street community, who might have helped stabilize the NYC economy a bit this year.

The 'bailout': (i) is in a not insubstantial part being funded by employees of the institutions getting 'bailed out' through their tax payments; (ii) is not being undertaken by the federal government out of the goodness of its heart but because it let this mess happen through the revolving door of Wall Street lobbyists and cabinet members; and (iii) is necessary to keep the financial system functioning day-to-day on a somewhat normal basis for all citizens--'Joe the Plumber' and 'Happyrenter the Hedge Fund Operator'.

You supporters of this 90% tax can't seriously believe tying the hands of Morgan Stanley and Citigroup against foreign banks and hedge funds is a good thing for US and New York City's business competitiveness. Oh, by the way, the government is invested in these companies and impairing their own positions.

Most people on this board should be smart enough to know there is substantial differentiations in types of jobs at the investment banks. Plenty of employees added value and made profits for the firm - bill like this lob them all in together and distort the labor market at everyone's expenses.

Vengeance is a bad basis for engaging in any optimization task. If the government wants these companies to be successful, they need to act in concert with everyone else in the stakeholder universe. Do the social engineering elsewhere.

Now if you're rooting for the real estate market to go into further depression, I can see why you like this...

Again, as I have said for 30 years Merrill paid bonuses in the third week of January. Surprise, this year bonuses were paid in December - real ethical. With respect to NY RE it was overvalued as prices were rising based on income that was not real from Wall Street firms. So, of course, something has to give. I do not agree with congress taxing bonuses it is a bad precedent, but i do not agree with Wall Street trying to beat the system either.

it strikes me that this "sanctity of the bonus contracts" talk is quite similar the discussions i read about on streeteasy re: renegotiating for one's 10% downpayment back in new developments and renegotiating rental terms with a landlord -- the point being that contracts are not carved out in stone, and can be renegotiated as situations change. am i off the mark here?

i'm also not sure about this argument that there are plenty of good people that work within an investment bank that had nothing to do with the bad stuff going on and should therefore not be "punished" along with the "bad guys". isn't the point that when you join a firm you are implicitly taking the risk that the firm -- as a whole -- is a going concern? it's like laying off factory workers when they were actually doing very hard, diligent honest work. well, tough luck, that's the risk you took in working at this company. i understand that you are being punished for the poor forecasting/marketing/distribution work of the higher-ups, but that's just the way it is. everyone under the umbrella of a firm is exposed to firm-wide risk.

"And New York City real estate? Well, last one out grab the flag.'

& turn out da lights

bottomline it is the end of the Wall Street business model
take high risks
if you fail you are fired
go on to the next shop
try again
if your high-risk gambles work you become one of the big swinging dicks
you buy a wonderful Fifth/Park Avenue apt, a great place in the Hamptons on the right side of the road, a 10,000 sqf ski valet in the Rockies etc.

or if you like a joke better
What's the difference between a farmer and a banker/WS guy?
Both houses catch fire, the financial guy goes short against his house, leverage that up to be short the equivalent of 40 houses, both houses burn down, farmer is bankrupt, financial guy buys both places and puts a 20,000 sqf house on the combined property. With the rest he fills up his 10door garage with the usual trophy cars and goes for a nice trip down south to check out his new 50-foot yacht.

West81st- it the strategy of the new owners (Govt and Tax payers) was to wind down these institutions, I would totally agree- let em burn, let em leave, no soup for anyone. But that is not the strategy- we are throwing money at these institutions to keep them alive, make them lend, motivate them to do deals. Under that context the house proposal is totally retarded. This too shall end badly.

I am no constitutional lawyer, but I think you can argue that this violates their 9th amendment right. This is the government seizing their property (their money) without due process.

Just a thought. Anyone else?

Congress has the right to levy taxes. It's right there in the Constitution. They are not seizing anything. Now, if Barney Frank broke into your house at 2 AM and took your bonus money, that would be unconstitutional.

I think they will use the Equal Protection Clause (14th Amendment). Most tax laws are subject to “rational basis” review under the Equal Protection Clause. May not work because to be constitutional they must simply have a rational relationship to a legitimate legislative purpose, but they'll try.

happyrenter - The statistic is meaningful on its own. If 5% of the people are paying 60% of the federal income tax revenue, then the face of the put-upon taxpayer is not the waitress from Ohio.

As far as your request for total income, all we can go by is IRS indications of total reported individual income and income tax:

For 2006 total individual income was about $8.1-Trillion and the related income tax revenue was $1.02-Trillion.

The top 1% represented about 22.1% of the adjusted gross income and 39.9% of the tax revenues, or $1.79-Trillion and $408-Billion respectively.

The top 5% represented about 36.7% of the adjusted gross income and 60.1% of the tax revenues, or $2.98-Trillion and $616-Billion respectively.

alpine - that would be pretty funny, right? You wake up to a noise and barney is in the other room loading up a pillowcase with your bonus money!

Seriously, though, I am about as far left as you can get and I don't like this at all. I hope the Senate can use some restraint and common sense and fix this. before this deteriorates into a Dem vs. Repub argument, let's also remember that this was both parties of knuckleheads in the House that passed this.

One final note: they were all pissed about Merrill, but they got their cash in 2008 and got to keep it.

"as for who i despise, i don't despise 'high income people' as a group. i DO despise some people who happen to be high income. and you don't? are you a fan of bernie madoff etc. etc. etc.?"

But it doesn't make it anything lessr than an ignorant statement.

Swap in "black" for high income and try making that statement again.

"Bills of attainder, ex post facto laws, and laws impairing the obligations of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation. ... The sober people of America are weary of the fluctuating policy which has directed the public councils.  They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less-informed part of the community."  James Madison, Federalist Number 44, 1788.

If we lived based on the principles of the Federalist Papers, we'd be in good shape. However, I think we are turning into a Scandinavian Venezuela.

nyc10022, you can swap in any word you like. there are people who happen to be black, white, protestant, catholic, jewish, buddhist, hindu, muslim, female, male, tall, short, russian, german, finnish, and kazakh who i happen to dislike. and there are members of all those groups who i happen to like. what's the point? if i happen to dislike a wall street CEO who ran his company into the ground and continues to enrich himself at the expense of the taxpayers then i am some kind of bigot? please.

angler,

if person A earns $10 million a year and pays $8 million in taxes, and person B earns $50k per year and pays $10k in taxes, which one is the 'suffering taxpayer.' it is clear to me that person B is getting the short end of the stick--those 10k make a real difference to that person, whereas the 8 mil to person A are icing on a very large and delicious cake.

our tax system is nowhere near as progressive as the example i just gave, but even that example would still be beneficial to the wealthier person. this is why it is irrelevant to simply talk about who pays what in flat dollar terms. you have to look at how much they earn and compare that to what they pay.