The Price of a Bailout

America is having its Howard Beale moment.  The credit crisis may be convoluted and intangible, but everyone was able to wrap their heads around AIG employees getting million-dollar bonuses in their financial-products unit

Last week culminated with the House of Representatives passing a bill that would tax bonuses at 90% for individuals in U.S. firms that make over $250,000, and whose firm has received over $5 billion in Government bailout funds  

Gretchen  Morgenson, of the NYT, summed this up pretty well on the NYT Weekend Business podcast (which is an excellent program if you're not already a fan), she said that perhaps this is the price of a Government bailout

I think Ms. Morgenson is spot-on.  It is tough to rationalize large bonuses for employees in U.S. firms that have received government money, for if not for the Government, many would be unemployed.  The argument could be made that many on Wall Street are not responsible for the shenanigans in the credit market, which is surely true.  However, the innocent and the guilty alike would have, in all likelihood, lost their jobs and their bonuses without Government money

Tomorrow, Politco has reported, that at 8:45 am, the Treasury Department will hold a news conference to announce the Public Private Investment Program that will hopefully help remove toxic assets from banks' balance sheets.  There will be a lot of pressure for Geithner to provide rigid details of the plan, and to avoid the type of sell-off that followed what could only be described as an announcement of "a plan to have a plan" that happened in February

Unless the plan is spectacular, and I hope it is, I would expect to see a "sell the news" downturn in the markets tomorrow, especially following the bear market rally we saw last week