Worst of Both Worlds

Despite its overwhelming support in Congress, this AIG bill is giving me a little heartburn. Josh Marshall makes an excellent case against the legislation. However, he neglects to address a major component of the bill: its impact on the economy and financial markets.

"Debating the 90% tax bill has the potential to kill TALF (and any public/private partnership for that matter) and irrevocably damage TARP. It’s a problem for TARP because recipients will repay as soon as possible even if it means massively restricting capital access and which is precisely what lawmakers have attempted to avoid so far and is what could send the country into a depression."

It gets worse:

"It’s potentially a substantially bigger problem for TALF because if you’re considering participating in the TALF you now definitively HAVE to look at the Government’s willingness to tax your profits on your TALF participation if they deem them to be outsized at any point."

As Marshall notes in his post, this bill could represent the "worst of both worlds." Don't get me wrong, I'm no fan of AIG execs walking off with taxpayer money. I simply believe that complex problems demand complex solutions. This bill is pure politics. Let's hope the Senate steps up.

Note: I have purposefully elected not to cite a source for the passages above.