90% bonus tax ties Obama’s hands. Hurray !

Robert Waldmann

via Atrios

How The Gamblers See Things

George Stephanopoulos from twitter:

Early read on Geithner plan from plugged in investment source asset managers he knows just won’t play until sure WH can control Congress

See that’s the cost of acting from anger. The Obama administration is offering asset managers a chance to play heads they win tails the treasury loses and they won’t take it.

The proposal is to offer no recourse loans to finance bids on banks’s bad assets. That is basically to write an in the money put and give it away. This makes it possible for the Treasury to grab the down side and burden itself with even less of the up side that it would have had under the original Paulson TARP proposal. If a few of the suspect assets turn out to be OK private investors will win and the Treasury will just get some of its money back.

Sounds good, but asset managers are afraid that if they pick the right toxic waste or are lucky, congress will tax away their winnings on the grounds that they weren’t bearing most of the risk the Treasury was.

If the public and congress had remained calm and not lost their heads over the AIG bonuses, the plan would have worked smoothly.

I think this shows the huge advantage often obtained by acting from anger. A terrible plan will be blocked, because it will be obvious in retrospect that it was terrible and the 16th amendment means the US government can’t commit itself to giving to the rich for no good reason.