Friday, March 20, 2009

3 Better Solutions to AIG BonusGate

In reaction to the hot AIG BonusGate Scandal, the House took major action by passing a bill imposing a 90% tax rate on employee bonuses paid by AIG (AIG) and other recipients of bailout money. It would affect those with a family income of $250,000 or more.

Formerly big-paid employees of AIG will effectively have no bonus at all, and that's just not fair. So I've come up with three solutions to BonusGate that are a lot more entertaining for the public than some boring tax bill:

1) Cage Fights

That's right. Cage Fights. At South Oak Cliff High School in Dallas, troubled students were forced by the principal to fight in cages to settle disputes and be discliplined. Well, if it's good enough for the teenage population of Dallas, it's good enough for credit derivative traders.

Here's how it works. You get in a cage with a UFC fighter like Georges St. Pierre. If you can last five minutes, you keep the money. If you win, you get double, tax free. If you lose, well, you'll be broke financially and physically. Put it on pay-per-view and it will make millions!

2) Call Options on the FAS or FAZ ETFs.

I've spoken about the Direxion FAS and FAZ ETFs before, and we're well aware of how wild these things are. So let's pay the bonuses with FAS or FAZ call options, and have them throw the rest of their retirement savings in there too. These guys like to gamble, right? Let them flip a coin, and then watch the FAS and FAZ bounce around for a year or too. Sure the AIG guys might get rich off this, but they could also end up with nothing - a perfect antidote to Wall Street's typical 'Heads I Win, Tails I Win' attitude.

and finally...

3) Become a Registered Sex Offender

Okay, you can keep the money. But you'll have to register as a sex offender and go door-to-door to your neighbors telling them so. This may work for some people willing to leave the country and never come back, but overall, it's a big hurdle for most to jump.


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