We Cut A Bad Deal

03/18/2010 05:12 am ET | Updated May 25, 2011

All taxpayers feel a tremendous sense of frustration as they see many tens of billions of dollars of bonuses paid to the same mega banks that were on the brink of bankruptcy and were only saved by massive government rescue money and support. We are not satisfied by the fact that many of them have paid the money back, nor should we be.

Let me be clear, massive government intervention in the market at the time of the crisis was exactly the right thing to do. The Treasury Department and the Federal Reserve had no choice but to take the actions they did. We faced an utter collapse of the financial system (think financial commerce seizing, credit cards not working), and they had to do it. It is pointless and unfair to criticize the specific action that were taken, particularly considering the speed of the collapse. In fact, the bold, smart, and successful actions taken by government officials in both administrations should be applauded, particularly the stress testing exercise that led to the recapitalization of the banks.

I also don't think it's a problem that many of these firms are earning massive profits. I strongly believe in a free market, and it is great when companies make money and pay their people well.

So why am I -- like you -- unsettled by headlines that show these same firms earning record profits and paying record bonuses? The reason is that we taxpayers don't own enough of these firms. In many instances we own nothing. That's my problem. For example, would you really care if some investment bank made $5 billion and paid huge bonuses if the US government owned 50% of the firm (that would be a cool $2.5 Billion in our pockets). I think the answer is no.

Do I think it is good policy for the government to own companies. Normally, I'd say "no." But in my world, if a firm puts itself in a position that it needs a last minute rescue and the future is uncertain at best, then the investor who steps into that breach ends up owning the company. Full stop. That's the way it works on the bloody streets of non government subsidized financial services. But it didn't work that way in the Wall Street bailout, which was a "heads I win, tails you lose" approach.