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Bonus-busting on Capitol Hill, IV

Per sources interviewed by the Financial Times, last week's move by Congress to confiscate bonuses at giant TARP banks will send American finance "back to the Stone Age", with key talent likely to jump ship for European-based firms and less-regulated domestic competitors; even amid the wreckage it's worth remembering that finance remains among America's most internationally successful sectors. On news of the pending pay caps, per this table, the biggest U.S. banks -- whose health as business entities is crucial to the likelihood of repayment of their TARP advances -- plunged in value, while the biggest foreign banks slipped only slightly. Jared Bernstein, an economic adviser to Vice President Biden, agrees that the House-passed bonus tax may be "a dangerous way to go".

Today's Wall Street Journal (sub) editorializes that President Obama needs to face down lawmakers on their "amazing and senseless" move. Jonathan Clements, until recently a personal finance columnist at the paper, says the bonehead bonus bill creates incentives to knock off work in October, or earlier. And at Goldman Sachs, where there are apparently feelings of surprise and betrayal given the firm's prominence as a big-time backer of Congressional liberals, "[a]t least a few people ... have already called recruiters. And recruiters have stepped up efforts to poach Goldman employees offering jobs safe from the TARP bonus tax."

Earlier coverage of the bonus frenzy here, here, and here.

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Rafael Mangual
Project Manager,
Legal Policy

Katherine Lazarski
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.