In which a sunbeam of reason breaks through a populist cloud cover as thick as we’ve ever seen. Isn’t much of the damage already done by now, though, regardless of whether any bill actually passes? AIG’s sending around memos to its employees warning them not to wear the company logo lest it attract the attention of violent nuts. One manager told the AP this afternoon how frightened everyone is even as “activists” are making plans to drive by some of the executives’ houses tomorrow, ostensibly to deliver letters of protest. Scan some of the choice quotes about McCarthyism and witch hunts collected by the Financial Times and ask yourself how any TARP company’s going to attract employees who know they could become targets for Congress or for vigilantes at any moment. The bonuses are almost irrelevant now. It’s the demagoguery, stupid:

Sen. Jon Kyl, the Republicans’ vote counter, blocked Democratic efforts Thursday evening to bring up the Senate version of the tax bill to recoup most of the $165 million paid out by AIG last weekend and other bonuses in 2009. The House had swiftly approved its version of the bill earlier in the day.

By rushing, Kyl said, Democrats were letting populist outrage trump informed decision making in the Senate, which is supposed to be insulated from the pressures of public passion.

“I don’t believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding the facts and the potential unintended consequences,” Kyl said on the Senate floor. “Frankly, I think that’s how we got into the current mess.”…

How to impose those taxes without running afoul of the Constitution or the law is a dispute that has Republicans urging a go-slow approach. Doing so, of course, would drag out the Democratic discomfort over administration missteps and provide plenty of time for the GOP and others to question Geithner’s performance.

Smart policy and smart politics. Follow the link up top for a description of just one unintended consequence, namely the fact that companies will inevitably try to skirt the tax by paying employees an increased salary rather than a bonus, which will leave them on the hook for compensation even if a worker underperforms or the firm has a bad year. The banks we’re supposedly trying to save, in other words, are being run further into the ground thanks to grandstanding crap like this. Exit quotation: “The real lesson here, unfortunately, is that it’s a disaster for the government to run private companies. We used to understand that. But ever since we started telling ourselves that we had to save bankrupt institutions by taking them over and pretending not to ‘nationalize’ them, we have apparently forgotten.”