Reaping The Whirlwind

President Obama and his Liberal, populist coterie did the their best to stir up anger and resentment against AIG, its executive, and the affluent in general due to those AIG executives being given retention bonuses that totaled over $165 million USD, which is approximately 0.0916% of the $180 billion that AIG received so far through the TARP bail-out.

Yes, all the outrage, death threats, and political posturings are over slightly less than 1/10th of one (1) percent of the taxpayers’ money that AIG received through the TARP bail-out.

In the words of the much mourned Winston Churchill, President Obama and his Liberal gang “have sown the wind; let them reap the whirlwind.”

The Democrats in the US House of Representatives passed a bill that would enact a retroactive confiscatory tax of 90% on the retention bonuses given to the AIG employees. To the Republican party’s shame they did this with the unneeded help of nearly half of the House Republicans.

Democrats voted 243:3 in favor of the bill and Republicans voted 87:85 against it. So 85 Republican Representatives put re-election or personal outrage over the US Constitution and American values.

Now President Obama is apparently trying to soften the impact of this rage and nascent class warfare.

The Obama administration wants to soften the impact of bills speeding through Congress that would impose heavy new taxes on Wall Street bonuses. But some potential allies in the Senate are reluctant to cooperate, fearing the political consequences of watering down the legislation.

Financial-industry officials launched a campaign Friday to fight back but are finding their hands tied: Anti-Wall Street sentiment following the American International Group Inc. bonus payouts is making it difficult to reach once-friendly lawmakers to make their case. Key senators and their staffers, nervous about appearing to support the industry, are refusing all meetings, and, in some cases, turning away phone calls. “Unless you have a pitchfork and a noose nobody’s listening to you” on Capitol Hill, said one financial lobbyist.

The White House has yet to publicly criticize the bonus tax proposals. But administration officials say privately they are concerned the House and Senate bills could lead to an exodus of employees or whole companies from the Troubled Asset Relief Program, known as TARP, as well as other government-sponsored financial rescue efforts.

It’s amazing. President Obama is acting like he is concerned that punitive taxes and legislation might cause American companies to refuse to cooperate with the federal government since that government would have, at that point, proven beyond any reasonable shadow of a doubt that it was no longer operating in anything approaching the best interests or ideals of America. Who’d have guessed that?

Of course the operative part of the above paragraph is that “President Obama is acting like he is concerned.” We Americans have no proof, as of yet, that he is doing anything more than carefully separating himself in the public’s mind from the evil that he has wrought. This may be nothing more than a “washing of the hands” in the manner of Pontius Pilat after his carefully populist ploy. 😉

NOTE: I truly hate that these AIG executives are getting bonuses after their gross stupidity and mismanagment. At a solely personal level I can sympathize with anyone who wants to butcher them en mass. I’m just not able to put my personal feelings above my concern for what punitive action against these people will do to Aamerica in the long run.

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17 Responses to “Reaping The Whirlwind”

  1. Susanne Says:

    I think those 85 Republicans who voted with the Democrats had in mind that voters were angry that their tax money was going to pay million dollar bonuses. These constituents would think it’s true that Republicans were for big business over the average Joe. And these politicians wanted to show that they were for the little guys and NOT the ones making million-dollar bonuses while thousands of Americans were losing their jobs. KWIM?

    I’m glad you included your note. I have to admit people getting million-dollar bonuses with tax money hits a nerve with me. (Probably because I am against bailing out businesses with tax money in the first place!!!) That said, I don’t like how Congress is using its power in these crazy ways.

    Thanks for another informative post! Keep ’em coming!

  2. Phil Says:

    Why is taxing AIG bonuses illegal?

  3. jonolan Says:

    Susanne,

    Yes, supporting their own re-election bids is probably the primary cause for their voting in favor of such a confiscatory tax. I imagine that, if I looked it up, I’d find that most of those Republicans who voted for it are up for re-election in 2010. That doesn’t mean I have to approve of it.

    What they’re doing is essential legislating a Bill of Attainder against the AIG executives and using it to confiscate their property. That is illegal and violates Article I, Section 9; Clause 3 of the US Constitution.

    No Bill of Attainder or ex post facto Law shall be passed.

    I don’t really expect Liberals to care one way or another about the Constitution, except as to finding ways to circumvent it, but I expected better from Conservatives. You’d think they’d at least look at the major rulings and SCOTUS commentary on the issue:

    Cummings v. Missouri

    “Legislative acts, no matter what their form, that apply either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a trial, are ‘bills of attainder’ prohibited under this clause.”

    U.S. v. Lovett

    Legislative acts, no matter what their form, that apply either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a trial, are ‘bills of attainder’ prohibited under this clause.

    The last one, U.S. v Lovett, is especially ironic since the case involved the government confiscating the paycheck of government employees who Congress could accuse of being Communists. I guess the new charge is being a Capitalist.

  4. Phil Says:

    Good post

    But, I think you misunderstand the legal issues here.

    Let’s say I file a tax return with the government and they write me a check for $500. A month later they realize they made an error and the check was supposed to be for $50. Can they legally take away that $450? Yep.

    Politics aside, this is the fundamental legal issue with AIG’s tax bonuses. Can the federal goverment recoup misallocated funds ex post facto.

    The Supreme Court has consistently ruled in favor of retroactive tax laws. The most recent example occurring in the unanimous 1994 Supreme Court case United States v. Carlton. Here’s a relevant passage from conservative Justices Scalia and Thomas:

    United States v Carlton:

    The reasoning the Court applies to uphold the statute in this case guarantees that all retroactive tax laws will henceforth be valid. To pass constitutional muster the retroactive aspects of the statute need only be “rationally related to a legitimate legislative purpose.”

    But what about the bill of attainder issue? Does the House bill unfairly punish a small group of individuals? Nope. Here’s why.

    When drafting the House bill media outlets reported it as a tax on AIG bonuses. But you know as well as I do that the MSM, often…um misreports news. Laurence Tribe, a constitutional law professor at Harvard Law School explains:

    The measure doesnt single out employees at AIG and instead uses general language affecting all companies receiving more than $5 billion in federal bailout money. Bonuses for employees at Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley would be affected.

    The House took additional steps by allowing corporations that pay back federal funds to pay the bonuses minus the 90% tax. Thus, if AIG REALLY wanted to pay these bonuses they could just return the federal bailout money.

    Are all of these laws and language sneaky legal wording? Yes, most laws are. Do I feel bad for AIG. No. These executives, don’t deserve the bonuses as you pointed out. If we can legally recoup them, which 90% of the evidence points to then the government should use ever legal option it has to recoup taxpayer money.

  5. jonolan Says:

    Phil, you do actually bring up a good point; sophistry is a large part of the legislative and judicial process in America. 😉

    I don’t feel bad for the AIG execs either. I feel bad for America, because – while possibly technically legal, as you pointed out – the House’s action still contravenes the intent of the law and most court rulings on the matter.

    I’d rather see the execs get their retention bonuses than see the law twisted for the purpose of punitive action and maintaining a populist stance – which is what I think is happening more than a desire to “to recoup taxpayer money.”

    If this confiscatory tax makes it through the Senate, I’d be interested to see if it’s challenged in court and what the ruling would be.

    BTW: My problem is that this fits the model for a Bill of Attainder, not that it is “retroactive,” since I did know such things have been in court before and if done “right,” this would all hit in the upcoming tax year and not be retroactive.

  6. Phil Says:

    I don’t think the House bill violates the intent of a ban on bill of attainders.

    The government doesn’t dislike AIG per se, they just dislike the idea of any bank receiving billions in government bailout funds and then paying out huge bonuses with taxpayer money. If Bank of America had done this then we’d have the same law . If Bank of America does try to do this in the future, payout lavish bonuses, then they’re subject to the same law.

    If the law said AIG YOU AND ONLY YOU can’t do this, then you might have a case for a bill of attainder.

  7. jonolan Says:

    Phil, please reread the following:

    Legislative acts, no matter what their form, that apply either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a trial, are bills of attainder prohibited under this clause.

    Since only AIG executives would be currently affected by this legislation, it’s clearly within the scope of “[sic]…named individuals or to easily ascertainable members of a group…” Even spread out over the other executives, it’s still a case of finding “a way as to inflict punishment on them without a trial.”

    All of the bonuses in question were legal and part of properly signed and recorded contracts – no matter how stupid those contracts were. How can anyone take the House’s action in any other way than as a Bill of Attainder?

    It does feel good though; I admit that.

  8. Phil Says:

    jonolan

    Excuse me for saying, but the passage you cite is completely irrelevant.

    First, this laws like many laws act as a preventative measure in addition to a punitive measure, to the extent that the law is punitive at least.

    The intent of the legislation is to prevent ALL banks that receive bailout money from giving out bonuses, not just AIG. In other words, the law was passed not because the government dislikes AIG, but because the government dislikes the idea of paying bonuses to bankers with taxpayer dollars.

    The main point though is that the law could reasonably be applied to any of the “bailout banks”.

    Second, the Supreme Court stated quite clearly that we can target specific people/groups with legislation. (Cigarette taxes for example?) In Nixon v. Administrator of General Services the court ruled that a law forcing Nixon to give up his presidential recordings was not considered a bill of attainder.

    The law in question explicitly demanded that Nixon, and only Nixon, comply with the law.

    The lesson here is that proving legislation intentionally targets a group or an individual is only ONE of the tests necessary to invoke a bill of attainder suit.

  9. Phil Says:

    This passage explains why your “the law currently only effect AIG” argument doesn’t matter

    Nixon v. Administrator of General Services

    Thus, in the present case, the Act’s specificity — the fact that [p472] it refers to appellant by name — does not automatically offend the Bill of Attainder Clause. Indeed, viewed in context, the focus of the enactment can be fairly and rationally understood. It is true that Title I deals exclusively with appellant’s papers. But Title II casts a wider net by establishing a special commission to study and recommend appropriate legislation regarding the preservation of the records of future Presidents and all other federal officials. In this light, Congress’ action to preserve only appellant’s records is easily explained by the fact that, at the time of the Act’s passage, only his materials demanded immediate attention.

    If we applied this to AIG we could say “at the time of the House bill’s passage, only AIG bonuses demanded immediate attention”

  10. jonolan Says:

    “The intent of the legislation is to prevent ALL banks that receive bailout money from giving out bonuses, not just AIG.”

    How is a confiscatory tax of 90% – with the stated hope that the states and municipalities will take the remaining 10% – legislation to “prevent ALL banks that receive bailout money from giving out bonuses?” It seems to be nothing in form or intent than a desire to fine these people without the need for charges or due process – i.e. a Bill of Attainder.

    Legislation to prevent or control such bonuses moving forward would be another story, one that has already been told and is currently enacted – with an explicit exemption for situations like AIG.

    I understand that I’m not going to convince you that what the House is trying is wrong. You firmly believe that this is the proper course. There’s little point in our arguing it further, since we could go back and forth, citing relevant case histories and discounting the relevance of each.

  11. Phil Says:

    Rhetorical questions are no match for Supreme Court precedent

    No offense, and I do mean this, but your post is completely non responsive.

    Look, I understand that you look at the law and it “feels” like its targeting AIG specifically and it “feels” like its punitive. I look at it and feel the exact opposite. if it were only a matter of opinion then yes we’d be going around in a circle.

    But this issue isn’t a matter of opinion its a matter of legal precedent.

    When determining if a law is a bill of attainder the Supreme Court doesn’t use the it “feels” like test. Instead they rely on legal precedent dating back to English Common law and other legal definitions to determine what legally constitutes concepts like punishment, targeted individuals, and intent. They have specific tests created to decide whether a law is a bill of attainder. Hence, the language of the courts is not our own. The words, don’t hold the same meanings.

    This is why rhetorical questions are irrelevant compared to constitutional case law. I give you props for the originally citing various Supreme Court cases, but the problem is that the cases i’m citing post date your cases. In fact they use your cases to prove my point.

    Anyways,

    good debate

  12. jonolan Says:

    Phil,

    One thing – aside from our divergent beliefs – that this debate tells me is that there would certainly be room for contesting such a law, were it to be passed, in the courts.

    I’d be interested in seeing how that went.

  13. chiefopiner Says:

    I am in agreement with Phil on the issue of this bill being targeted at AIG only. The bill does apply to all contractual bonuses at institutions receiving bailout fund from the government.

    That being said, I do see this is an issue that will – if passed and signed into law – most likely be litigated in the courts. Specifically argued along the lines of whether this was a bill of attainder or not.

    The bigger problem I have with this whole issue is that Congress enacted legislation that contained language to allow the payment of these contractual bonuses in the first place, even if the institution received bailout monies. It goes to show how rushing a bill forward so quickly creates problems when the time is not taken to carefully review and debate the full aspects of the bill in the first place.

    Now Congress, after the uproar this bill is – in part – responsible for causing, rushes out another bill to ‘undo’ what the first allowed to occur. Had there been more time spent over the bill this provision may well have not remained in it. Instead there may well have been language requiring these institutions to rescind or renegotiate these contractual bonuses before bailout funds could have be received.

    I am not pleased with AIG’s bonuses. Regardless of how minor a percentage they are of the bailout funds received, for me it is the principle of the issue that you shouldn’t get bonuses when your company has ‘begged’ for public funding to prevent their downfall. It just stinks and, rightly so, is a point for outrage by the American public.

    Just my two cents.

    Great discussion though jonolan and Phil. Thanks.

  14. jonolan Says:

    There’s one issue with that. Only a very few firms were able to give such contentious bonuses, with AIG being the largest and most public of those. All future bonuses given by companies receiving TARP funds are already controlled and limited by existing legislation.

    Let’s just say that, while I sympathy with the desire to punish those executives, I’m not comfortable with either the means the government want to use or the government’s belief that they have the right to draft targeted punitive tax codes in order to correct their mistakes.

    I guess one’s opinions on this matter come down to what one’s values and priorities are, and – this time – I say that with no weight of judgment on the worth of values and priorities. 😉

  15. goodtimepolitics Says:

    What concerns me is Obama getting more power to take over American companies, and his bigger government plans!

  16. jonolan Says:

    True, goodtimepolitics, and that worries me greatly as well. It’s really a topic for another post though since it’s a bit tangential to the specific issues in this. One I’m sure I’ll be putting up here soon. 😉

    😆 There’s just so much going wrong that I’m forced to try to focus these posts on specific issues – or accept that they’ll go runaway.

    Thanks for stopping by, as always.

  17. The Legality of AIG Tax Cuts: The Debate « Cognitive Dissonance Says:

    […] The Legality of AIG Tax Cuts: The Debate Rather than rehash all of the different legal arguments for and against the tax on AIG bonuses I;ll refer you here. […]

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