The Power to Destroy

Is it legal for Congress to target the AIG bonuses?

Steve Chapman | March 23, 2009

Congress is outraged. Really, really outraged. Unbelievably, incredibly outraged. And there are certainly grounds for anger.

Not at the insurance company AIG, which paid bonuses that are seen as intolerable, but at Congress, which blithely declined to prohibit them but is now shocked to find AIG doing what it was allowed to do. The Democrats who control Capitol Hill want revenge, as do many Republicans. So the House voted by a 328-93 margin to impose a 90 percent tax on the payments.

In doing so, members resolutely avoided a couple of inconvenient realities. The first is that the fault, if any, lies with the same people who are now angry. The second is that the tax conflicts with the clear intent of the Constitution.

The pending fees were not exactly classified information. "AIG's plans to pay hundreds of millions of dollars were publicized last fall, when Congress started asking questions about expensive junkets the company had sponsored," reports the Associated Press. "A November SEC filing by the company details $469 million in 'retention payments' to keep prized employees."

In January, two House members urged the Federal Reserve and the Treasury to block such bonuses. Last month, the Senate passed an amendment outlawing such payments by companies getting federal bailout funds—and then dropped it.

The White House was also in the loop. Sen. Chris Dodd (D-Conn.) says that the administration asked him to attach a provision to the stimulus bill that authorized such bonuses. Dodd protests that he only agreed because he didn't understand what the measure would do.

Maybe other people who voted for it in the Senate and House didn't either. Maybe Dodd and the rest ought to read legislation before they approve it.

But if members had any pangs of remorse for their failure, they stifled them in favor of vilifying AIG and its personnel. House Financial Services Committee Chairman Barney Frank demanded the names of employees who "had to be bribed not to abandon the company." Rep. Michael Capuano (D-Mass.) urged that they be fired.

Until these staffers can be publicly tarred and feathered, though, the House will settle for subjecting their bonuses to a 90 percent tax levy—up from the normal maximum rate of 35 percent. Why not 100 percent? "State and local governments will take the extra 10 percent," said Ways and Means Committee chairman Charles Rangel.

So the bill aims at sanctioning supposedly bad people by confiscating their earnings. As such, it sounds an awful lot like something the Constitution expressly forbids—a bill of attainder, which is a punishment of particular individuals imposed not by a court of law but by a legislative body.

Many if not most legal scholars believe this furious retribution can be structured to pass judicial review. But not Jonathan Turley, a George Washington University law professor. "I am not so confident that it would pass constitutional muster," he told me. "While courts give Congress great discretion in the tax area, this would require a case of willful blindness."

Turley speaks with special authority on the subject because of a rare achievement: In 2003, he persuaded a federal appeals court that a law passed by Congress was a bill of attainder.

That statute revoked a divorced father's visitation rights because his ex-wife claimed he had molested his daughter—a charge that courts repeatedly rejected. But it was overturned because the court found the measure, though it didn't name him, was designed to place a severe burden on a specific person deemed to have done something terrible.

Ditto for this legislation. It's aimed at AIG employees who accepted payments guaranteed them by a legal contract, and it's intended to inflict pain to express disapproval of their conduct. Rangel, in fact, had earlier opposed the tax because it would be "punitive." But after voting for it, he explained that "we had very few weapons" to use against the recipients. Taxation as a weapon—if that's not punitive, what is?

To uphold the tax, says Turley, "the courts would have to ignore the open statements of members of Congress. They have done everything short of burning the AIG executives in effigy on the House floor."

Maybe the people in Congress are smart enough to figure out a way to sneak this act of targeted revenge past the courts. Maybe, in other words, they have more brains than scruples. But so far, they haven't shown much of either.

COPYRIGHT 2009 CREATORS SYNDICATE, INC.

Comments

|3.23.09 @ 7:10AM|#

Is it not amazing how the rule of law often winds up being a weapon of the rulers aimed at the ruled.

Untermensch|3.23.09 @ 7:46AM|#

I've been astounded that no one in the mainstream media has pointed out the obvious about bills of attainder. But then again, our mainstream media is pretty servile...

mike farmer|3.23.09 @ 7:47AM|#

Aside from the targeted taxes being an egregious abuse of power, the pretense of surprise at the bonuses, and the subsequent bluster, even after it was clear the language was inserted to protect the bonuses, reveals a political system corrupt to the core.

|3.23.09 @ 7:57AM|#

Don't forget the expansion of the bill to cover most of wall street - not just AIG.

|3.23.09 @ 8:00AM|#

But then again, our mainstream media is pretty servile...

They (and this seems to go for the politicians too) also tend to know Jack and shit about the constitution, and Jack left town. Shop smart, shop S-Mart. You got that?!?

TofuSushi|3.23.09 @ 8:25AM|#

Hey constitution "knowers", the Supreme Court said a long time a go that tax laws like this are legal.

Stop picking the parts of the constitution that you like and ignoring the parts that you don't.

Get real|3.23.09 @ 8:25AM|#

The execs should prefer paying a 90% tax on undeserved bonuses to facing peasants with torches and pitchforks...

TofuSushi|3.23.09 @ 8:29AM|#

Get real,

Right On!

|3.23.09 @ 8:32AM|#

Untermensch,

You're astounded that the mainstream media has failed to exhibit anything resembling sophisticated or erudite thinking?

You are familiar with the so-called "mainstream media," yes? They are, among other things, documenters of the public appearances of Britney Spears's vagina. They've incubated and nurtured people like Anderson Cooper, who is already such a caricature that he can't be parodied.

Excuse me, must begin drinking.

|3.23.09 @ 8:35AM|#

Tofu-er
m, Neil:

Why do you do what you do? Do you troll Daily Kos or LGF, as well? Are you like some sort of professional parody troll? Note that I'm not taking you seriously- I don't believe you're anything but a fiction. I do think that all or most of the parody trolls around here are the work of one person (namely, you). So...why do you do it?

TofuSushi|3.23.09 @ 8:40AM|#

Jim Bob,

I shall not respond to someone with such a fake name.

|3.23.09 @ 8:41AM|#

On friday I emailed my Senators (D-Scum-of-the-Earth) Article 1, Section 9 of the Constitution.

I expect them to report me to the police for sending threatening and obscene communications to them.

|3.23.09 @ 8:48AM|#

Tofu,

As I have explained here before, Jim Bob is my real name.

TofuSushi|3.23.09 @ 8:54AM|#

Blue,

I hope they mail back to you the 9-0 Supreme Court decision explaining that part of the constitution as it applies to taxation.

Sot-Weed Factor|3.23.09 @ 9:01AM|#

"I've been astounded that no one in the mainstream media has pointed out the obvious about bills of attainder."

That's like asking why no one in the mainstream media has pointed out that the federal law permitting these bonus payments was part of Obama's Stimulus Package, that was vital to saving our economy from imminent complete and total destruction, a piece of emergency legislation so vital that it had to be enacted "as is," without any time being wasted searching for hidden things like, say, protection of bonus payments.

|3.23.09 @ 9:03AM|#

We are barely 60 days into this and I am frankly finding it very wearisome to sustain this much anger and frustration for this long toward the government. And toward all of Obama's rosy-viewed supporters, and all the "Bushdidit" caricaturists. You have to hand it to them, they're certainly not wasting their crisis.

I know a lot can happen before mid-term 2010, and it's pretty clear the hoi poloi respond to emotional vicissitudes which are easy enough to manipulate-- but I just can't see how the Democrats come out of the next round of elections without sustaining serious body blows.

Alan Vanneman|3.23.09 @ 9:25AM|#

Steve make some important points, but, obviously, random abuse of tax policy* doesn't compare with whether it should be OK to have sex with a beagle (or whether anyone dumb enough to have sex with a beagle and then make a video of it merits any rights at all under the U.S. or any other constitution. Hobbes I think would have said "no.")

*It's a pretty good bet that most congressfolk don't really care if the bill becomes law. What counts is being able to run ads saying "S/He voted against million-dollar bonuses for Wall Street crooks!"

smartass sob|3.23.09 @ 9:41AM|#

but I just can't see how the Democrats come out of the next round of elections without sustaining serious body blows.

Perhaps they will postpone the elections in order to better deal with some "emergency".

|3.23.09 @ 9:44AM|#

TofuSushi | March 23, 2009, 8:40am | #

Jim Bob,

I shall not respond to someone with such a fake name.

That one sent the coffee through my nose!

|3.23.09 @ 11:09AM|#

Stop picking the parts of the constitution that you like and ignoring the parts that you don't.

I will if you will.

Ben|3.23.09 @ 11:10AM|#

...a bill of attainder, which is a punishment of particular individuals imposed not by a court of law but by a legislative body.

You're living in a fantasy land where the constitution is treated seriously.

This is the USA, where laws that are both ex post facto and bills of attainder are happily created, passed, and approved by the highest courts in the land. Despite both being constitutionally forbidden in the clearest possible terms.

Examples? Easy:

People who had already been sentenced for a crime, having the added penalty of being forbidden to own firearms after their sentences had been set and served. This is specifically ex post facto, and it is also clearly a bill of attainder, as it intentionally punishes specific individuals without any need for them to be processed by a court to have this legislative punishment applied.

Likewise, registration of those convicted of sexual offenses forced upon those where it was not part of the actual sentencing of the individual, after the individual has been sentenced and served their punishment. Again, both ex post facto and a bill of attainder.

In both those examples, the questions were brought all the way to the supreme court, and in both cases, they were upheld.

The legislature does what is popular, not what is constitutional. The courts are the same. Perhaps worse.

The system is in a place where "shall make no law" means "lets make laws!" and "shall not infringe" means "infinge and be merry!" and a clear prohibition against unreasonable searches, provided directly alongside the specific definition of reasonable, results in quacking by idiots about the "undefined definition of unreasonable", where the grant of interstate commerce regulation has been magically turned into intrastate commerce regulation and a hornets nest of associated unconstitutional regulation and worse.

As Bush indicated, the government considers the constitution "just a piece of paper." You should have paid more attention. One of the rare truths the man ever burped out.

We're living under an entirely arbitrary rule of 545 individuals, without benefit of constitutional limits. The examples are everywhere... if you can't see them, that's your fault. But you sure aren't going to accomplish anything blathering about the constitution unless you can get the government to actually obey the thing, and I don't see a single thing that Reason does that would accomplish such a goal. You're just like everyone else: The government blatantly violates its constituting authority and Reason just changes the subject. You're every bit as complicit in this as is the supreme court and the legislature.

I'll be impressed when I see plans to force the government to comply with its constituting authority. I'll be even more impressed if anyone actually takes action. I'll be bloody *amazed* if the action results in compliance.

John|3.23.09 @ 12:36PM|#

You're living in a fantasy land where the constitution is treated seriously.

The constitution is a living document, it is interpreted in a way that is appropriate for the times.

Mike M.|3.23.09 @ 1:07PM|#

I believe that Obama is now indicating he may actually veto the bonus tax. He seemed to suggest as much on 60 Minutes and said we shouldn't govern "out of anger" (when his bizarre laughter wasn't prompting Steve Kroft to politely question his sanity).

arbitrageur|3.23.09 @ 1:12PM|#

The funny thing about this is that by tarring and feathering these AIG traders, the govt is shooting itself in the foot. There are only a few thousand hedge funds out there who would kill to know all of AIG's positions and have the opportunity to front-run the government as it unloads them. These traders will get snapped up pretty quickly. Playing the AIG unwind will be the biggest layup since all the old drexel guys faded the RTC and made their fortunes in the early 90s.

Gilbert Martin|3.23.09 @ 1:15PM|#

Ben, you left out one of the most egregious examples:

The one where regulating interstate commerce is magically transformed into regulating anything and everything on earth that is claimed to have some "effect" on interestate commerce.

nothingherekeepmoving|3.23.09 @ 1:19PM|#

Just another bastardization of commerce clause as mentioned above. I'm not one to scream slippery slope, but we got on the sled a long time ago and we're still hauling ass down the hill.

I'm curious as to how far the legislation will go. Big O says he doesn't approve, but that seems more like an ass covering move than anything.

|3.23.09 @ 1:46PM|#

The constitution is a living document, it is interpreted in a way that is appropriate for the times.

Indeed, since we now live in a socialist/fascist state, it is interpreted to guarantee no individual rights whatsoever.

|3.23.09 @ 1:54PM|#

Disappointed than no one has yet quoted Twain: "There is no distinctly American criminal class except Congress"

jtuf|3.23.09 @ 2:06PM|#

I don't know which is sadder, congress pointing a finger at AIG for following the rule of a bill they passed, or citizens getting swept up in the hate mongering instead of chastising their congress reps.

|3.23.09 @ 2:15PM|#

anonymoose:

There's also, "Suppose I were an idiot. Now, suppose I were a Congressman. But I repeat myself."

Unfortunately, I think today's Congressmen are more evil geniuses than idiots. We need to bring back the inept legislators of Twain's day.

|3.23.09 @ 2:23PM|#

Is it not amazing how the rule of law often winds up being a weapon of the rulers aimed at the ruled.

Who are you talking about, the people getting punished ex-post-facto for payments that were explicitly permitted, or the people having their tax dollars appropriated a-priori in order to make them?

Craig|3.23.09 @ 9:34PM|#

Hey constitution "knowers", the Supreme Court said a long time a go that tax laws like this are legal.

Stop picking the parts of the constitution that you like and ignoring the parts that you don't

Nice try, but the part where the Supreme Court can decide the opposite of what the Constitution says is what the Constitution really means, isn't in the Constitution.

Most of the Constitution-respecting libertarian posters on this site don't want to ignore any part of the Constitution. It's the liberal apologists that want to ignore the inconvenient parts, or hide behind obviously flawed Supreme Court decisions.

Ben|3.23.09 @ 11:40PM|#

> The constitution is a living document,
> it is interpreted in a way that is
> appropriate for the times.

The constitution is what it is. Not what it would be convenient if it was. It is intended to limit government authority, and consequently, government power.

If you, or anyone, want to change the constitution in any way, there's a mechanism for that, as defined in article five. There is no excuse whatsoever sufficient to enable "interpretation" that results in the polar opposite of what the constitution authorizes the government to do.

The constitution is literally the authorizing document for the federal government, and one that has overriding authority for state governments in areas where it says it does. The document represents what the government is *authorized* to do; anything outside those lines is use of unauthorized power and is the act of a government out of control.

Again, if you want change, the constitution is amenable to it, and offers a specific mechanism. It does not authorize judicial revision; it does not authorize "interpretation", and it does not authorize exceptions.

If you support a situation where the government can change any part of the constitution as it finds convenient, then there is literally no reason for the document to exist. And that is *precisely* what the "living document" position is. You get to make up what is convenient.

Your entire position is nonsensical.

Ben|3.23.09 @ 11:44PM|#

@Gilbert Martin:

> Ben, you left out one of the most egregious examples

Nope, I covered it, albeit briefly. From my post:

...where the grant of interstate commerce regulation has been magically turned into intrastate commerce regulation and a hornets nest of associated unconstitutional regulation and worse.

Chad|3.24.09 @ 6:37AM|#

Why we haven't thrown a few hundred bankers in prison (and stripped them of EVERYTHING they own) is beyond me. For anyone to pretend that they weren't committing fraud is beyond me.

No one with with even a peanut for a brain or stitch of honesty could possibly claim that being leveraged 30:1 on top of an obvious bubble is anything other than absurdly risky. Triple AAA my @#$#.... Those guys knew exactly what was going on - keep your two and twenty on the way up, laugh your way to the bank on the way down.

We need punishment. Severe, nasty punishment. If we weren't quite so civilized, it should be darned bloody business. But I guess we will have to settle for simply wiping them out and locking them in cage for a while.

Save the banks. Screw the bankers.

|3.24.09 @ 5:45PM|#

Good article.

John Brown|3.26.09 @ 1:29AM|#

Since we are ignoring the constitution anyway, would it be OK if we stirred up a lynch mob, and really "cleaned house"?

Ben|3.26.09 @ 7:51PM|#

That would be foolish. First of all, if you want anyone to ever serve in government again, threatening such servants with violence, unmitigated by trial or jury, is just plain stupid. Secondly, it doesn't solve the problem.

The problem, since you seem to be too dim to see it, is that the constitution itself has no teeth; people swear an oath to it, but violating the oath (by violating the constitution) engages no process of any kind that results in social justice for the crime.

The result of this is what we see today; violations that are arbitrary, violations that are "justified" by sophist and outright specious argument, violations that are explicitly contrary to the obvious intent of the document, violations due to the uneducated trying to read terminology as a literal modern context.

When laws have no teeth, they are ignored. This is why the constitution is ignored.

Imagine for a moment if there was no penalty for stealing. Laws against it aplenty, but no penalty. Do you think this would serve as a sufficient bulwark against stealing? Or would you contend that punishment and restitution are part of the process that lets those laws work for our actual well being?

I'm going to assume your IQ is at least a little larger than your shoe size, and that you understand that laws without punishment are going to have very little effect.

So why is it then that we allow the highest law in the land to be violated in so many ways, and yet extend no punishment of any kind to those who are doing the violating?

The criminals here are in the legislature and in the courts. They commit their crimes based on anything from outright ignorance to acts in service of corporate and political interests. Without punishment, it's all benefit.

Lynching them is a stupid answer. Holding them to the standard they swore to uphold if convicted by a jury of their fellow citizens is something else again.