The political storm in which Bermuda has found itself in Washington seems to have hit a lull - but may not have died completely.

Bermuda has become a bad word in US political circles because a number of American companies have opted to move the domiciles from the US mainland to the Island.

In normal times, these so-called corporate inversions would have attracted little attention, and in fact they did not when they were happening.

But a series of events - the war on terror, the general economic downturn, corporate scandals and the fact that there are Congressional elections in November - have combined to make Bermuda the whipping boy for some of the woes of the US.

The war on terror means that the costs of government have risen in the US at the same time that the economic downturn has driven down tax revenues.

At the same time, American chief executive officers have been transformed from heroes to goats as accounting scandals and evidence of their extraordinary greed have come to light.

Thus you have greedy CEOs depriving the US of tax revenue during a time of recession and war by moving their businesses to Bermuda.

With November looming, that's an election issue, especially for the Democrats who hope to recapture a majority in the House of Representatives and expand their razor-thin majority in the Senate. It is hard to blame them, but that does not make it any easier for Bermuda.

As the rhetoric has flown, some innocent companies have been caught up in the storm and Bermuda's good reputation has been badly damaged.

Indeed, companies that move to the Island purely for tax reasons and have no physical presence on the Island whatsoever do very little for the Island anyway.

But the problem is that the companies are vital for the economy, and provide a real service to the global economy get tarred with the same brush.

Thus Bermuda, whose companies were the first to step up and meet the insurance claims emanating from the September 11, will see its innovative and globally important insurance sector damaged as a result of the simplistic and dangerous political rhetoric emanating from Washington.

The good news is that the heat has cooled in the last ten days or so. One reason is that Congress has recessed. The other is the decision of Stanley Works not to reincorporate in Bermuda.

Stanley Works, a venerable US hardware maker, is also based in a Congressional district which is the site of a fierce Congressional election campaign.

So its decision not to move takes a good deal of the emotion out of the debate. That does not mean it is over. Congress returns in September and the elections take place in November. What should Bermuda do in the meantime?

It has to make the case that US companies choose to come to Bermuda for reasons other than taxation. And it also has to keep making the case that most countries other than the US do not tax companies' foreign earnings, meaning USA firms are at a competitive disadvantage, even if their overall tax bills are marginally lower than their European rivals.

Bermuda should also make it clear that it cannot turn the Tycos and Stanley Works of the world away. But it should also make it clear that it does not gain enormous benefits from their being here, especially when they have little or no physical presence.

But it should make it clear that there are good reasons for other companies to be either formed here or to move here and that the US Congress should take care not to throw the baby out with the bath water.