First, Let's Kill All Bankers

... and then we'll let the Money Fairy do her magic!

In a spasm of lynch-mob populism, the Congress and the President are passing a law to tax bonuses from those no-good, T^&@#*@T&* bankers. That's all good, right? I mean, we hate bankers, don't we? What do we care if they're chopped up like embryos and harvested for stem cells?

Err, not so fast. Dig this.

Today's frantic passage of the Populist Rage Tax was a new low in the US government's response to this crisis. It shows just how likely we are to doom ourselves to a decade or more of misery--by choking our markets, closing our borders, turning our banks into tools of social policy, and wrecking what's left of our economy.

In case you've been too outraged by AIG (justifiably) to notice what happened, here's a recap:

If the "TARP bonus" bill the House passed today becomes law, any of the hundreds of thousands of people who work for Citigroup, Bank of America, AIG, and nine other major US corporations will have to fork over 90 cents of every dollar they make that puts their household income over $250,000.

That's household income, not individual income.* If you're married and filing singly, you'll have to surrender anything over $125,000. Indefinitely.

If you're some non-bonus-receiving fellow making $100K and your spouse makes $160K, your household income is over the threshold and you will be punished, punished, punished! If you work for a bank that was doing fine, but took the TARP money forced on it by a government trying to free up the credit markets, you will be punished, punished, punished!

Talk about engendering an atmosphere of distrust and hatred between the government and the banks. With Obama and Pelosi in charge and their populist, ignorant hatred of capitalism coming into full bloom, they are methodically wrecking whatever spirit of cooperation remained between them and the banks.

If you don't think this matters, recall that the credit flow crisis was resolved through just this kind of cooperation under TARP where the Bush Administration forked over money to the banks to stabilize their reserves. Interest rate spreads dropped dramatically and we averted a meltdown. Now we've got this crew in town and all they can think of is that bankers everywhere must be punished, punished, punished!

The banks are responding by handing the money back so they can tell the Obama Administration and the Pelosi Congress to get lost. After that, the only leverage the government will have is the passage of ingenious laws like the one above.