AIG clawbacks: barely legal

Our Conor Clarke asked Larry Tribe whether or not one could, legally, tax away the bonuses paid to AIG employees.  Larry Tribe seems to think that the answer is yes

This has interesting implications for the banks that have already taken government funds, and certainly, any banks that might be considering doing so in the future.  I suspect it would be hard to write a specific tax that applied only to AIG and not, say, to Citibank--and that's assuming that the Democrats in Congress would want to.  I think it's safe to assume that if this passes, any banks that possibly can will rush to return bailout funds to the Treasury.  And perhaps this is a good thing.  But the attempt to shield shaky banks behind a general distribution of funds will be over.

I suspect that it would also not do any good things for whatever future plans Treasury has.  All of the plans I'm currently aware of involve substantial voluntary participation from sound financial institutions.  I don't think you'll get much voluntary cooperation from banks if you declare that any acceptance of government funds will involve substantial risk that they will appropriate your paycheck.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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