Bashing big banks is all the rage this week, with White House officials and New York Attorney General Andrew Cuomo scolding Wall Street fat cats ahead of the Financial Crisis Inquiry Commission, which gets underway Wednesday.

At issue is what level of bonuses are appropriate for publicly traded firms that posted record profits in 2009 thanks to the government's largess and after being rescued in 2008.

Simon Johnson, professor at MIT's Sloan School of Management and former chief economist of the IMF, says there's a simple solution to this seemingly complex problem:

• "People working at our largest banks - say over $100 billion in total assets - should get zero bonus for 2009."

Looking back, all the big firms were saved by the various government programs, including  Goldman Sachs and Morgan Stanley were allowed to convert to bank holding company status in 2008, Johnson says.

• "There were unconditional bailouts for all our big banks - it was a decision made on the fly in the crisis. Let's not second-guess," he says. "But no way that strategy implies, requires, or is consistent with the banks then paying all that money out to their employees."

By contrast, when the government instituted a similar "recapitalization" strategy for banks after the Latin America debt crisis of the early 1980s, the banks retained the money to help rebuild their balance sheets, he recalls. "In this case they're going to pay out 40% [of profits] - that's not good economic policy."

But, let's put our selves in the (expensive) shoes of the bankers for a moment.  Henry points out in the accompanying clip, on Wall Street it's a 'bonus' in name only.  Most bonuses are part of a guaranteed pay package negotiated when employee contracts are signed.  The Wall Street Journal notes limiting bonuses after the fact will create some high class problems.  "Since many people plan their household budgets around bonus expectations, they may need the cash to cover mortgages, school tuition and other expenses." Of course, firms that limit pay always risk the threat of a brain drain.

Johnson discounts these arguments wondering, if Goldman Sachs paid no bonuses this year, would employees really leave?  Where would they go?

If the "too big to fail" banks insist on paying bonuses for "retention" purposes or other reasons he deems fallacious, Johnson says they should be subject to a "steeply progressive windfall income tax" -- paid by the employees and not the firms, as is the case with the U.K.'s recently announced 50% bonus tax.

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Transcript.