Remarkably Bad Policy

I can't figure out the logic - does Congress truly believe that firms can be rescued if they lose all their top staff while attempting to stave off insolvency? I suppose it comes down to a question of performance based compensation, but what the government has done in its ire over AIG is destroyed the ability of the firms the government has bailed out (that include Bank of America, Wells Fargo Bank, Chase Bank, JP Morgan, CitiBank, Morgan Stanley, Merrill Lynch, Wachovia, Washington Mutual, Countrywide, Goldman Sachs, AIG, Fannie Mae, Freddie Mac) from compensating for performance. But it's a lot worse than that (Club for Growth):

Under this law, a bank teller at Wells Fargo could receive a bonus of $1,000 for doing a great job. If that bank teller was married to a physician who made $175,000 and they had some additional investment income, that bank teller would pay a tax of $1,055 on the bonus of $1,000 that they received for doing a good job.

I want to believe it's one of those unintended consequences of government policy but I can no longer tell. Killing these firms off or restructuring them in bankruptcy would be a far more effective use of time and tax payer dollars than the trickle of losses that these firms will experience losing their best staff in their descent into oblivion. More from Donald Luskin.

Absolutely stunning. The bill passes in the House 328-93.

Update: from the WSJ's DealJournal - "The prospect of living with a 90% tax rate is unbearable to people working at TARP-funded banks — and even those who don’t, and see a larger anti-capitalist message in Congress’s actions this week." No, I'd say it's their stupidity but that would be an insult to stupid people.