Congress has a panic attack

Wednesday, March 25, 2009

A 21st-century political maxim goes something like this: When the going gets tough, create a diversion.

Faced with a recession that appeared virtually unfazed by $3 trillion (so far) in federal bailouts and handouts, Congress looked for ways to detract from the failed policies that resulted in the credit meltdown, mortgage failures, home foreclosures, spiraling unemployment, bankruptcies and government spending of historic proportions.

And there it was: bonuses paid to AIG employees after the government had so generously propped up the company.

For more than a week, there was a rash of congressional madness approaching hysteria as demands were made for the the return of the millions of bonus dollars -- an infinitesimal part of the trillions being used to wage war on the recession. The House adopted legislation that would tax the bonuses -- never mind that the bill was so poorly crafted that it would likely affect bonuses paid to thousands of employees of Wall Street firms and banks.

The congressional panic over the AIG bailouts served as a smoke screen for failures on so many levels before, during and after the meltdown of financial giants like AIG. For example, where were the government-created regulators when goofy investments were being created and sold to profit-hungry investors? Where were the cooler heads who ought to have prevailed when Congress pushed Fannie Mae and Freddie Mac to make mortgages that were bound to implode at the first economic hiccup? Where were the congressional watchdogs when the House and Senate passed bailout bills with virtually no oversight and even less accountability?

The AIG bonuses, however, hit the rawest nerves of the American public, which gave irresponsible federal legislators the cover they needed to avoid answering the tough questions.

Where all of this is headed is anybody's guess. But let's hope there are some practical officials left in Washington who can be motivated by mounting deficits of trillions of dollars to restore some sanity.

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