pageok
pageok
pageok
"Would a Super-Tax on AIG Bonuses Be an Unconstitutional Bill of Attainder?"

David Kravitz (Blue Mass Group) -- a very smart appellate lawyer and a former law clerk for Justice Sandra Day O'Connor -- writes on the subject. The most recent case I know of involving bills of attainder in the business law context is Consolidated Edison Co. v. Pataki, 292 F.3d 338 (2d Cir. 2002), which struck down as a bill of attainder the following New York statute:

§ 1. Declaration of legislative findings. The operator of a nuclear generating facility has a high duty of care to protect the health, safety and economic interests of its customers. Rate regulation of nuclear operators should discourage the taking of risks with regard to potential threats to public health and safety.

By continuing to operate steam generators known to be defective, and thereby increasing the risk of a radioactive release and/or an expensive plant outage, the Consolidated Edison Company failed to exercise reasonable care on behalf of the health, safety and economic interests of its customers. Therefore it would not be in the public interest for the company to recover from ratepayers any costs resulting from the February 15, 2000 outage at the Indian Point 2 Nuclear Facility.

§ 2. With respect to the February 15, 2000 outage at the Indian Point 2 Nuclear Facility, the New York state public service commission shall prohibit the Consolidated Edison Company from recovering from its ratepayers any costs associated with replacing the power from such facility. Such prohibition shall apply to any such costs incurred until the conclusion of such outage, or incurred at any time until all defective steam generation equipment at the facility has been replaced, whichever occurs later. Such prohibition shall apply to automatic adjustment mechanisms as well as base rates or any other rate recovery mechanism. The commission shall order the company to refund any such costs which have been recovered from ratepayers.

I can't say anything beyond that, since I'm not an expert on bills of attainder, and unfortunately don't have the time right now to get up to speed on the subject.

Jonathan F.:
My first reaction on hearing this plan, too, was that it would probably be a bill of attainder. I'll be curious to hear what comes of this.
3.17.2009 6:31pm
J. Aldridge:
A bill of attainder is a legislative act which inflicts punishment without a judicial trial. If the punishment be less than death the act is termed a bill of pains and penalties. Within the meaning of the constitution bills of attainder include bills of pains and penalties. They are generally directed against individuals by name, but may be directed against a class, and may inflict punishment absolutely or conditionally.

Annotated Constitution of the United State, 1891
3.17.2009 6:31pm
Crimso:
From my readings on the Wars of the Roses, I gather that historically attainder was not at all about justice but rather revenge against your enemies and rewards for your allies (who would be given the holdings confiscated from your enemies). Perhaps not an entirely apt analogy, but close enough I suspect.
3.17.2009 6:33pm
ShelbyC:
I don't understand all the anger at AIG. It's their money, they can do what they want with it. Maybe the politicians don't understand what "giving away money" means.
3.17.2009 6:37pm
J. Aldridge:
P.S. I think it is more of a ex post facto law that bill of attainder.
3.17.2009 6:38pm
jim47:
An act of congress aimed at taking money from a pretty specific, readily-identifiable group of people surely seems to be anything but an issuance of the "law of the land."

If you think that the Federal Due Process clause has any sort of meaning informed by the "law of the land" clauses in state constitutions, then this isn't a deprivation of property by due process, it's a takings, and thus subject to all the restrictions on takings.

The constitution's prohibition on bills of attainder strikes me as merely an instance of (and possibly a synecdoche for) a more general natural law rule giving substantive content to the word 'law'.
3.17.2009 6:52pm
Thales (mail) (www):
A super-tax on the bonuses not literally a legislative act declaring that a person is guilty of a crime, but it's similar and the prohibition on bills of attainder may help give scope in construction of "due process of law[making]" with respect to the super-tax.
3.17.2009 7:01pm
adam Scales:
I think this conversation, which is quite interesting, would be better served by focusing on attainder challenges to Congress' taxing power.

Congress writes "rifle shot" tax provisions all the time - provisions that could not possibly apply to more than one or two individuals. Perhaps it's relevant that these generally confer benefits, in the form of tax breaks, but I'm not sure.

Further light may be found in the question of retroactivity. I have seen retroactive tax penalty legislation in draft form, but I have no idea if there is any serious constitutional limitation (due process, one supposes) on such legislation.

I'd welcome hearing from anyone with expertise along these lines.
3.17.2009 7:01pm
PoohPoohBear:
Shelby:
"I don't understand all the anger at AIG. It's their money, they can do what they want with it. Maybe the politicians don't understand what "giving away money" means."
In rereading this, I get the sarcasm of it. At least, I hope it was meant that way....
3.17.2009 7:26pm
DiversityHire:
The 163 million in AIG bonuses is insignificant. The frenzied response is strong evidence that the leaders of the federal government don't understand what they've done (e.g., the bonuses were explicitly protected by an amendment to the stimulus bill), what we're experiencing, or what can be done to ameliorate the situation. They're scared and spouting-off any thoughts that float into their heads—from suicide to revenge taxation.
3.17.2009 7:36pm
TRE:
PPB: I don't think he was being sarcastic at all. The government gave away taxpayer money with no strings attached. They bought in total 80% of AIG in the form of non-voting shares.

AIG has contracts with certain employees, in these contracts they are obligated to pay the employees a salary, and bonuses under certain conditions. These contracts were negotiated between the employees and AIG. The specific provisions of the contract were no doubt negotiated. It has nothing to do with the government bailout of AIG.

What exactly is your argument that the government legally can tell AIG and the employees that these contracts are no longer valid? AIG could face punitive damages if they breached.

All this ridiculousness is a direct result of the stupid bailout. What did you expect would happen? That these companies will take orders from political officials on how to conduct their business?
3.17.2009 7:37pm
ShelbyC:
@PoohPoohBear..
My point is, blame the politicians, don't blame AIG.
3.17.2009 7:38pm
CDR D (mail):
I don't understand the anger, either.

I don't defend the bonuses, but I thought we of the "chattering class" weren't supposed to care about these "...little, tiny, yes, porky..." things.

Where's the outrage over the thousands of earmarks in the Messiah's budget?

http://althouse.blogspot.com/2009/02/schumer
3.17.2009 7:40pm
Oren:

Perhaps it's relevant that these generally confer benefits, in the form of tax breaks, but I'm not sure.

Yup, because no one has standing to sue and therefore the matter cannot heard in any Art III court.

I've long wanted a departure from the cramped notion of standing we have now, but that's a different kettle of snakes.
3.17.2009 7:42pm
ShelbyC:
Whoops, TRE said it way better than I could.

And another thing: Do folks just not understand anything at all? Look at the statute in the post:


the New York state public service commission shall prohibit the Consolidated Edison Company from recovering from its ratepayers any costs associated with replacing the power from such facility. Such prohibition shall apply to any such costs incurred until the conclusion of such outage, or incurred at any time until all defective steam generation equipment at the facility has been replaced, whichever occurs later. Such prohibition shall apply to automatic adjustment mechanisms as well as base rates or any other rate recovery mechanism. The commission shall order the company to refund any such costs which have been recovered from ratepayers.




Ratepayers aren't supposed to pay any of the cost? Where the heck are the costs supposed to come from?
3.17.2009 7:43pm
Rock On:
Can we please stop lowering the discourse with petty crap like calling Obama "the Messiah." I resisted the urge to call Bush "Captain Dumbass" for eight years, although the Lord knows it was hard to do.
3.17.2009 7:45pm
PC:
DiversityHire: They're scared and spouting-off any thoughts that float into their heads—from suicide to revenge taxation.

Soon it may be torches and pitchforks so some people should be scared.

TRE: What exactly is your argument that the government legally can tell AIG and the employees that these contracts are no longer valid? AIG could face punitive damages if they breached.

Contracts of all types seem to be malleable. Passing a law is overreach, but I bet there are some smart lawyers out there that could poke all sorts of holes in these "retention" payments. If 11 employees that received > $1 million in "retention" payments left the firm, what good were those payments at retaining them?
3.17.2009 7:47pm
CDR D (mail):
>Can we please stop lowering the discourse with petty crap like calling Obama "the Messiah." I resisted the urge to call Bush "Captain Dumbass" for eight years, although the Lord knows it was hard to do.


<

"Captain Dumbass"?

Hadn't heard that one before. I did hear "The Chimp" for eight years.

"Messiah" ain't so bad. Sounds kind of respectful.
3.17.2009 7:52pm
ShelbyC:

but I bet there are some smart lawyers out there that could poke all sorts of holes in these "retention" payments.


But it'd cost more than the payments.


If 11 employees that received > $1 million in "retention" payments left the firm, what good were those payments at retaining them


Uh, the bonuses only retain them before they are paid out. That's the whole point of being contractually obliged to pay them. The 11 left after their bonused probably because they wern't likely to see additional bonuses.
3.17.2009 7:54pm
David McCourt (mail):
But, Rock On (or in keeping with Professor Volokh's latest post, Mr. On) the one name confers a benefit, and the other is the infliction of pain and penalties. From what I've learned from this discussion, I would say you have no standing to complain about the former.
3.17.2009 7:57pm
Bill Kilgore:
All this ridiculousness is a direct result of the stupid bailout. What did you expect would happen? That these companies will take orders from political officials on how to conduct their business?

It's almost as if nobody recognized that re-animating AIG and using it as a conduit to funnel money to banks around the world wouldn't put "the taxpayer" in the position of honoring said conduit's other obligations. Maybe someday we will have a President who will be better able to wrestle with these difficult areas of the law.
3.17.2009 7:59pm
DiversityHire:
PC, most of the money is out the door so why bother? The amount of money to be recovered is insignificant to AIG or the government. Chalk-it-up to bad plans compounding other bad plans and move on. AIG's few "lottery winners" aren't going to be the last, most egregious, or least deserving winners in the bailout-stimulus-budget sweepstakes we've embarked upon, so why get worked-up and further compound the mistake by litigation or legislation?
3.17.2009 8:03pm
ShelbyC:

AIG's few "lottery winners" aren't going to be the last, most egregious, or least deserving winners in the bailout-stimulus-budget sweepstakes we've embarked upon, so why get worked-up and further compound the mistake by litigation or legislation?



Duh, to distract from the more egregious ones
3.17.2009 8:07pm
Rock On:
Since nobody actually believes Barack Obama is the physical incarnation of God, I think it's safe to say "Messiah" does not have a positive connotation.
3.17.2009 8:08pm
DiversityHire:
Rock On + messiah = Mr. Hetfield's Opus
3.17.2009 8:13pm
http://volokh.com/?exclude=davidb :

AIG could face punitive damages if they breached.

Cite? And what jury, so instructed, would ever award them?
3.17.2009 8:24pm
CDR D (mail):
>Since nobody actually believes Barack Obama is the physical incarnation of God...


<

I hope you're right, but I'm not so sure about "nobody".



I would never refer to our President as a "Chimp", nor would I refer to him as "Captain Dumbass".

Maybe "Colonel Bogey"... because, so far, his performance is significantly below par.

http://www.youtube.com/watch?v=bo_93HWTyrk

Please refrain from trying to make something scandalous out of the name of the band.

Thank you.
3.17.2009 8:33pm
Wilpert Archibald Gobsmacked (mail):
I'm much more concerned AIG has been forced manipulated into paying out grotesque amounts of $$ to multiple entities on the same single property. Many, many times.

Like totaling out my car and paying it off in full to every resident in my neighborhood. Now THAT's a business model that's gonna fail big time. Talk about a law needing to be writ. But we would rather be distracted by bonuses. I'm with DiversityHire on this.
3.17.2009 8:35pm
Bill Poser (mail) (www):
With all this talk of the inviolability of the contracts, I still have yet to see a description of them. What are their terms? My understanding is that bonuses are supposed to be tied to the company's performance. Since AIG did very badly, presumably its executives would not be entitled to this sort of bonus. So what are the terms that entitle them to bonuses in the present situation? Are they unconditional, really just salary disguised as a bonus? Or are they conditioned on individual employee performance reviews?
3.17.2009 8:39pm
David McCourt (mail):
I too found it hard to believe, but the WashPo claims that lawyers for the (then) Tim G's Federal Reserve Bank of NY so concluded many months ago, and that their conclusion was seconded by Obama's White House counsel. Here is a "cite" (I realize it's not to the official reporter): http://www.washingtonpost.com/wp-dyn/content/ article/2009/03/16/AR2009031602961.html

Live by the blue state bad faith tortious breach of contract law, die by the blue state bad faith tortious breach of contract law.

On another scandal front, I understand that AIG is actually paying out on claims by insureds. Don't they know that's taxpayer money? These insurance policies are just contracts that can be abrogated at will, right? Or perhaps we can just tax the insurance settlements at 100%, right Senator Schumer? Senator Schumer?
3.17.2009 8:41pm
Charlie (Colorado) (mail):
What are their terms? My understanding is that bonuses are supposed to be tied to the company's performance.

Well, and that's your problem. These aren't performance bonuses, they're retention bonuses, a kind of deferred compensation paid after a fixed interval so long as the recipient hasn't left the employ of the firm.
3.17.2009 8:52pm
TRE:
IIED of course! The case for punitive damages against AIG is weak as you point out, but the employees could sue somebody for tortious interference.
3.17.2009 8:55pm
TRE:
I was thinking of something like bad faith tortious breach but hadn't been able to drum up a cite. Thanks!
3.17.2009 8:57pm
mls (www):
"AIG's few "lottery winners" aren't going to be the last, most egregious, or least deserving winners in the bailout-stimulus-budget sweepstakes we've embarked upon, so why get worked-up and further compound the mistake by litigation or legislation?"

"Duh to distract from the more egregious ones"

Damn, wish I had said that.

On the bright side, think of how much fun it will be when people start proposing 100% taxes on the salaries of Members of Congress who voted for the bailout.
3.17.2009 9:28pm
Jason F:
The ex post facto clause only applies to criminal law, not civil law. Calder v. Bull, 3 U.S. 386 (1798). I had always believed the prohibition on bills of attainder likewise applied only to criminal penalties, though I confess I'm unfamiliar with the case law on that issue.
3.17.2009 9:34pm
Oren:

Cite? And what jury, so instructed, would ever award them?

It's fairly black-letter law that transferring ownership of a firm does not touch the validity of the contracts. No reasonable jury could fail to award the AIG employees whatever they were due by contract plus interest and fees. The worst the jury could do is set punitive at $1.
3.17.2009 9:40pm
ReaderY:
It seems to me Congress could pass a facially neutral bill taxing wages over a certain threshold in companies receiving certain federal subsidies in a way that does not declare anyone guilty of anything or imply the tax represents any sort of punishment. There might be some limits -- the tax likely could be so high as to be confiscatory, retroactive application might be a problem, and other matters -- but Congress could easily word the bill so that the subsidies involved cover only AIG. It writes facially neutrally-worded tax bills that have the effect of giving certain specific companies tax breaks all the times; a bill that has the effect of increasing taxes in certain cases would be no different.

No doubt Congress could word things in a way that makes the tax susceptible to being characterized as a bill of attainder, but it could easily achieve the same effective result without doing so.
3.17.2009 9:41pm
Splunge:
Christ, I feel like I like in Iran, with the Great Satan of the Week thrown up for his Two Minute Hate, in the hopes of distracting the hoi polloi from the continuing slow-motion recreation of the Buchanan Administration going on.

Look! Shiny things! We're repudiating the phrase 'enemy combatant'! Rush Limbaugh is a meanie! AIG paid freaking bonuses!

Are we really expected to be that brainlessly inattentive? Or is the Administration just extrapolating from its supporters and/or Cabinet Secretaries? Feh.
3.17.2009 10:33pm
TRE:
well the DB hater has a point because normally punitive damages are not available for breach of contract actions according to contracts textbooks, but there are all kinds of other circumstances they could be available.

From concurring opinions.

"AIG has been advised by outside counsel that a breach of the retention plan would subject it to claims for not only the contractually owed payments, but also penalties and fees under the Connecticut Wage Act.2 The Wage Act provides for the recovery of double damages and attorneys’ fees when wages are improperly withheld and the employer’s refusal to pay wages lacks a good faith basis. (Conn. Gen. Stat. §31-72.)3 In addition, individual managers who decide to withhold wages that are due are individually liable for violation of the Wage Act.4"


3.17.2009 10:40pm
Allan L. (mail):
AIG's "outside counsel" sounds like someone who, until recently, was in real estate appraisal, or possibly on the Madoff auditing team.

Notwithstanding that, isn't it clear that the bonus payments are stimulative? These bonus recipients will be hiring bodyguards, isntalling alarm systems and up-armoring their limos.

Besides, what did people expect AIG to do with bailout funds if not continue to run its business and meet its obligations? Buy T-bills?
3.17.2009 10:52pm
zippypinhead:
What exactly is your argument that the government legally can tell AIG and the employees that these contracts are no longer valid?
No idea, but given some of the rather extortionate terms of the auto industry's Federal "bailout," I suspect there are some GM and Chrysler UAW locals that might also be interested in the answer...
3.17.2009 10:54pm
Matt P (mail):
This thread is a great example of what can go wrong with VC comments. I was actually interested in hearing/learning about Bill of Attainder and half the thread is people complaining about the bailout. The parent post assumes the bail-out, so for crying out loud quit arguing about it!
3.17.2009 11:16pm
Steve2:

Well, and that's your problem. These aren't performance bonuses, they're retention bonuses, a kind of deferred compensation paid after a fixed interval so long as the recipient hasn't left the employ of the firm.


Ugh. I don't know whether or not anything can or will be done to the AIG executives and similarly situated individuals (and though I hate to admit it, much as I think their incompetence should have been a capital crime, they probably should get to keep their ill-gotten gains just because retroactive laws are terrible, terrible things that ought to have been more explicitly and completely banned in the Constitutional text), please tell me there aren't going to be any retention bonuses in the future. There's 435 Representatives for the time being. Surely one of them's introduced some sort of publicity-seeking-but-worthy-of-passage ban on them. Right?
3.17.2009 11:20pm
Kent G. Budge (www):

"Messiah" ain't so bad. Sounds kind of respectful.


I'm leaning towards B.O. myself.
3.17.2009 11:32pm
Siskiyou (mail):
How can this much discussion be based on such a scanty statement of facts? Are the payments or proposed payments bonuses or wages? My untutored impression is that wages are agreed to in advance and that bonuses are either subject to the occurrence of facts (that may be specified in advance in an agreement) that are not certain to occur even though the employee strives mightily, or are matters of grace. How mistaken (not for the first time) am I?

Has anyone noticed the quoted comment in Monday's (I think) WSJ, to the effect that the employees in question could be told (my quoting is inexact, but close enough) "You may take the bonus, or you may keep your job."?

On the matter of retention, we ought to be asking "Why?", not "How will AIG [ital] ever [un-ital] survive the loss of these irreplaceables." And yes, I do, or did once, know a bit about employment contracts and employment law.

It is disingenuous to ignore the fact that all of AIG's employees are considered by many members of the public to be, in effect, on welfare already. Using food stamps at Whole Foods, and that sort of thing. Certainly the gov't is also at fault for, it its rush to do [ital] something [un-ital], failing to review the obligations of its various rescuees in advance of its commitment to disburse money, but that doesn't alter the proposition that some lawful corrective ought to be available. Again, what are the facts--details, you know?

I am a little embarassed by the rantish tone above, but what the heck, honest outrage is nothing to be ashamed of, ladies and guys.
3.17.2009 11:40pm
Oren:

please tell me there aren't going to be any retention bonuses in the future

Perhaps that's why AIG lost so many executives ...
3.17.2009 11:41pm
Siskiyou (mail):
Sorry, Matt.
3.17.2009 11:42pm
Siskiyou (mail):
Sorry, Matt.

Also, "...in its rush...."
3.17.2009 11:46pm
David McCourt (mail):
"...honest outrage is nothing to be ashamed of, ladies and guys."

Yes, and the simulated outrage of the Administration and Congress, who drafted and passed the giant "stimulus" bill -- it's too urgent to read it, just vote -- that expressly provides for these payments? That's nothing to be proud of.
3.17.2009 11:54pm
http://volokh.com/?exclude=davidb :

well the DB hater has a point

Watch those assumptions. I'm no DB hater. My handle is an invitation to those who complain about him.
3.18.2009 12:02am
resh (mail):
Aren't contracts obliged to have some kind of good faith basis? Sorry if that's asking the obvious. But, if so, one wonders how much good faith (aka, legitimate representation)was administered or extended by either of the parties (payer/payee) in terms of satisfying the "meta-bonus" threshold.

Said otherwise, isn't a particular bonus of a numerical nature subsumed and tacitly underscored by the rudiments of the company's financial solvency, itself? I mean, if I sign a contract with TeamX tomorrow of the nascent PA Football League that would pay me a one million dollar bonus if I score 20 touchdowns in the season, isn't there an implied notion that the bonus (money) is only as good as the survival of the team and THE LEAGUE, in addition to the touchdown test?

I can't believe these AIG carpetbaggers didnt get or pay the bonuses, run home, look covertly in the mirror like some sort of Kafkaesque crook, and start howling.
3.18.2009 12:08am
Anon21:
I'm no DB hater. My handle is an invitation to those who complain about him.

An invitation I was happy to avail myself of when I saw it in your name field, and it certainly improves my site experience at VC. So thank you.

On topic: Laurence Tribe disagrees with the perspective EV links to in this post. Not having any particular knowledge of bill of attainder law myself, I can't really say who has the better of this argument, but Tribe's explanation strikes me as plausible.
3.18.2009 12:09am
cognitis:
bankers' hubris or pride has generated--pursuant to Natural Law or ius naturale--citizens' nemesis or rage, which rage could only be extinguished by the blood of bankers; so the State must not only administer the law as in stabile times but instead use the law to punish the bankers. The State must confirm citizens' faith in this State's institutions, both of government and of the financial system, by sacrificing principal bank officers.

Bankers corrupted regulators and government officials in order to depredate state treasuries; bankers used OTC derivatives to evade market regulations and taxes; bankers abused accounting rules, thereby defrauding shareholders and bank officers, in order to generate bank profits and individual income.

Although the State should not justify bankers' abuse of rules by abusing itself laws in punishing bankers, it should recognize bankers' fraud and abuse in electing the course of pursuit and in electing the genus of punishment. Bankers accepted Treasury's funds and recklessly transferred these funds to friends and other favored employees in same mode as Ponzi scheme fraudsters who accept funds from investors and transfer those funds to friends and other preferred investors; so remember Milken's racketeering conviction and punish the bankers under RICO statute, or creatively interpret fraudulent conveyance in order to "clawback" individuals' incomes going back many years. The course and punishment elected now determines the integrity of the State in the future.
3.18.2009 12:34am
TruePath (mail) (www):
First of all does anyone here actually think the notion of retention bonuses is inherently suspect? If not then why would you single out the retention bonuses for outrage rather than all the rest of the salary that AIG is paying out??

Moreover, if you want to take heads at least make sure you are taking heads from people who did wrong. Not everyone at AIG performed incompetantly, not even everyone in the financial services division. Some of these employees dutifully did their jobs and either lacked the authority or simply weren't involved with the problematic deciscions.

I mean if you name specific people on a case by case basis I might be more sympathetic but as far as I an tell no more thought is going into this than AIG financial products=BAD!
3.18.2009 12:35am
TruePath (mail) (www):
Ohh, and I think there was a much stronger case for abrogating these bonuses when the government made the initial bailout. However, the government shouldn't be triking people into continuing to provide their labor under one contract only to use it's sovereign power to undo the contract.

I mean if there was ever a situation where conservatives should be getting upset about the rule of law it's trying to undo these bonuses after we let these employees work for AIG after the bailout for several months under these contracts.
3.18.2009 12:39am
Siskiyou (mail):
TruePath,

Perhaps so. But still, what are the terms of these so called bonus obligations? Facts, facts, facts. Please.
3.18.2009 12:48am
PlugInMonster:
TruePath - let's not pretend you give a whit about free market capitalism.
3.18.2009 12:56am
ReaderY:
These "bonuses" do appear to be wages agreed to in advance. When ages are divided into a portion provided at regular pay periods and a second portion provided annually, the annual portion is often denominated a "bonus", but it's really simply a portion of the agreed-on wages.

It's like characterizing a hotel's 18% required service charge as a "gratuity". You can call it a gratuity, but that doesn't actually make it voluntary or gratuitious in the sense that the customer has an option of not paying it. It's not a gift. Calling it a "tip" doesn't make it one.

Same with pre-agreed "bonuses."
3.18.2009 1:04am
Siskiyou (mail):
If ReaderY is correct, it is more appropriate to be troubled about the gov'munt than about AIG. The initial question would become a hypothetical one.
3.18.2009 1:14am
Nick056:
David McCourt,

And yet ... the on the stimulus facts are more complicated. The stimulus bill does not "expressly provide" for these payments. The Dodd amendment was described by FoxBusiness.com as a "restriction" on executive compensation. It was received as such by many on Capitol Hill. Jim Inhofe asked why Dodd wanted to tell these companies how to compensate their people and run their businesses. The amendment reads in part ...


[...] prohibition on such TARP recipient paying or accruing any bonus, retention award, or incentive compensation during the period that the obligation is outstanding [...] to at least the 25 most highly-compensated employees, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient."



But wait! There's more. The final version, after the House-Senate committee, added among other restrictions, the following:


The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary [of the Treasury] or the designee of the Secretary.


This amendment protected executive pay for contractually bound categories, but even those exceptions appear to be subject to Treasury approval. So do you read the above amendment and clause, which prohibits many retention bonuses but allows for a few exceptions -- per Treasury's judgment -- as an "express provision" for these bonuses?

It's true that this addition wasn't the best idea, but it still gave the government power to rework particularly egregious bonuses -- like a $450 million retention payout to the 400 or so guys who sunk AIG. The problem might be, Treasury didn't effectively prevent that. According to Rep. Brad Sherman of CA, Treasury "missed its chance." Sherman, a Democrat, voted against the stimulus in its final form because he felt Treasury wouldn't act appropriately with its discretionary powers.

So there's some merit to what you said, but you paint Congress as a cabal of hypocrites too dumb to understand what's even going on. The overall picture is hardly that simple, and belies any notion of "express provision." That sounds rather like there was a $450 million line item for AIGFP retention bonuses.
3.18.2009 2:40am
David McCourt (mail):
Nick056,

I read the language you cite as leaving untouched any bonus required to be paid by a contract made before 2/11/09. I don't see that the Treasury Sec. has to "approve" the bonus, just determine that the employment contract is in fact a valid contract. BTW, I don't see how anything written in this bill, and undisclosed to the employees, could alter their contractual rights.

But my point was that our governors -- at least the ones doing the bill writing, like Dodd, whose constituents include most of the Americans getting theses bonuses -- knew long ago that such bonuses would be paid, and that their "outrage" is largely a phony one, designed to put them at the head of torches and pitchfork mob, now that they see it has gathered, rather than up in the castle with the Frankenstein they created. President Obama is reported to have known the specific details of these payments for a few days, but didn't register any "outrage" until the lines started heating up.

As far as "too dumb to understand what's even going on": you needn't take my word for it; just watch any session of the House Financial Services Committee, or even the Senate Banking Committee, and you will see enough sheer dimness displayed by our elected representatives to make you despair.

But part of the politicians' obliviousness is understandable, as the bills our governors vote for are crammed with all sorts of extraneous things -- repeal welfare reform here, renege on trade deals with Mexico there -- that nobody discusses, or debates, let alone votes on. Little nuggets that were passed into law with next to no one knowing it will continue to be unearthed for the rest of the year.
3.18.2009 5:30am
Richard Aubrey (mail):
First get a mob upset with a certain group.
Then take the side of the mob by doing something to the group. Righteous justice.
Hell, that worked so well we can do it again. Who's the next group we can get the mob to hate?
IANAL, but I figure there's a reason for laws.
3.18.2009 8:38am
ShelbyC:
The tribe article seems to say that if congress were to lie and say the tax wasn't a bill of attainder, judges might buy it.
3.18.2009 9:28am
David M. Nieporent (www):
Shelby: my thought exactly on reading that piece. Unicorns exist, if we rename puppies as unicorns.

If we pretend if isn't punitive, and pretend it isn't aimed solely at AIG, maybe the courts will agree to pretend to believe us.

I stand by my argument: if it's constitutional to take the salaries of private citizens, it's obviously constitutional to take the salaries of government employees. So instead of retro-taxing AIG employees, let's retro-tax the salaries of all members of Congress who voted for TARP in the first place. If the latter will agree to forfeit 100% of their salaries for the last year, then AIG employees ought not to complain about having to do the same.
3.18.2009 9:45am
Houston Lawyer:
If I were a high revenue producer (used to being paid in excess of $500,000 per year) at one of the firms receiving bailout money, I'd be bailing on that firm to go to work for someone who wasn't subject to such crap. Who's going to run companies like AIG when all the heavy hitters bail? I guess government policy now is that receipt of bailout money is to be a death sentence for the recipient. So much for recovering any of the bailout money.
3.18.2009 9:52am
rick.felt:
Since nobody actually believes Barack Obama is the physical incarnation of God, I think it's safe to say "Messiah" does not have a positive connotation.

As far as I know, the Messiah anticipated by the Jews does not have to be the physical incarnation of God. The early Christians had some pretty big fights over exactly who Jesus was, and it took until at least Nicea to get it settled.

I'm leaning towards B.O. myself.

I've seen plenty of Obama supporters use "B.O." If he was my guy I'd shy away from such an abbreviation. They're kind of stuck, though: they want to abbreviate Obama's name, but they can't go with "B.H.O." because Obama is "He Who Must Not Be Middle-Named."
3.18.2009 10:01am
http://volokh.com/?exclude=davidb :

An invitation I was happy to avail myself of when I saw it in your name field, and it certainly improves my site experience at VC. So thank you.

You are more than welcome. I'm all about everybody being happy. And once we get those DB detractors out of the comment threads, I can concentrate on reading DB's thoughts on the DC real estate market, which are routinely fascinating.
3.18.2009 10:05am
rick.felt:
First get a mob upset with a certain group.
Then take the side of the mob by doing something to the group. Righteous justice.


The government outrage at AIG is manufactured to deflect criticism and wrath that belongs on Congress. The government could have ordered AIG to renegotiate its bonuses as a condition of the bailout cash. That's what it did with the Big 3. It wouldn't have been hard. AIG could have said to its bonus babies: "You've got a choice: you take 10% of your bonus, or we go out of business and you get nothing."

Congress didn't take this very simple step. Obama can read his teleprompter as angrily as he wants, but this was his own fault.
3.18.2009 10:07am
Calderon:
Houston Lawyer said


If I were a high revenue producer (used to being paid in excess of $500,000 per year) at one of the firms receiving bailout money, I'd be bailing on that firm to go to work for someone who wasn't subject to such crap. Who's going to run companies like AIG when all the heavy hitters bail? I guess government policy now is that receipt of bailout money is to be a death sentence for the recipient. So much for recovering any of the bailout money.


Those are exactly my thoughts. Arguably it's good over the medium run because the financial talent will be spread over more firms and we'll have less likelihood of creating more firms that are "too big to fail." In the long-run, I assume we'll get more large financial services corporations as some of the smaller business prove more successful than others, but possibly not.

In the short run, though, there seems a good likelihood that the large banks that needs bailouts and are receiving heightened scrutiny will lose their best people, decreasing the chances they'll successfully restructure.
3.18.2009 10:08am
cognitis:
The ignorance and credulity of many here cause me to suspect their employment. Congress doesn't inject $2 trillions of taxpayer money for cause of some contract law contention. Congress injected such an unfathomable sum into institutions only for cause of confirming a system totally destroyed by bank principals. No one could dispute principals' culpa; the matters for dispute include the criminal nature and also the punishment. For those who are defective in any cognizance of this State's financial institutions, follows is an announcement by former Goldman CEO and current NJ governor Corzine:

March 17 (Bloomberg) -- New Jersey sued top executives and board members of Lehman Brothers Holdings Inc., saying that misrepresentations led to the state’s pension funds losing $118 million on investments in the now-bankrupt banking firm.

The suit, filed in state Superior Court in Trenton today, charges company officers including former Chief Executive Richard Fuld with violations of state and federal securities laws, negligent misrepresentation, breach of fiduciary duty, fraud and aiding and abetting. It seeks unspecified compensatory and punitive damages.

“With this suit, we intend to hold Lehman executives and directors accountable for the fraud and misrepresentation that caused more than $100 million in losses to New Jersey’s pension funds,” Governor Jon Corzine, a former chairman of Goldman, Sachs &Co., said in a statement.
Evidently, Corzine isn't pursuing Lehman for cause of terminated employees' back pay.
3.18.2009 10:31am
David McCourt (mail):
One consequence of the "abrogate the contract"/"tax the bonus at 100%" ideas: the government will find that its key plan to sell toxic assets out of the banks to private investors will meet with less interest than it otherwise would.

What investor is going to want to take the risk on these dicey assets if the government can come back in a year or two and say wait a minute, we sold the assets too cheaply, or, seeing that the assets have now rebounded so much, we will tax the buyer's "windfall profit" at 100%.

The government seems to have forgotten that it's not only AIG that can acquire a reputation.
3.18.2009 10:44am
Barbara Skolaut (mail):
Splunge wrote: "Are we really expected to be that brainlessly inattentive? Or is the Administration just extrapolating from its supporters and/or Cabinet Secretaries?"

No reason it can't be both.
3.18.2009 10:56am
Smooth, Like a Rhapsody (mail):
Forgive me if this has already been said, but the most unsettling thing to me in all this is the part of the story (there may be audio of Obama saying this--even more chilling) where, in spite of every lawyer telling him that the bonuses were legally paid, he nevertheless "ordered" his staff to "find a way" to recoup the money.

I also find the aesthetic objection to the bonuses to be deficient. If a player on the Detroit Lions (0-16, last year) had a contract in which he was entitled to a roster bonus of $2 million on December 1, 2008, who in his right mind would say that the Lions should not pay that bonus, given the horrible performance of the team?
3.18.2009 11:26am
David Drake:
Back to the Bill of Attainder argument (please): The language discussed in the post attacks bonuses paid by any company 79% owned by the government. That's pretty clearly a bill of attainder.

A bill of attainder was essentially a bill passed by the English Parliament that made it illegal to be some particular person or a member of a particular group of people; they were used to execute people who had not committed any particular crime worthy of the death penalty.

Here, this legislation is aimed at a particular class of persons: those who received bonuses from AIG following the bailout. It is patently unconstitutional, even more if (as I have read and heard) the bonuses were authorized by the Act of Congress that approved the bailout.

The most frightening thing is the level of discourse about this on the part of politicians and press: they must thing we are a bunch of fools.
3.18.2009 11:34am
Snaphappy:
Here is a bill of attainder:

Be it resolved that Edward Liddy shall die.

Compare with the following:

There shall be imposed upon all income received as a lump some payment in the calendar year 2009 by any employee of an entity of which the United States owns 75% or more of its stock, a tax in the amount of 99% of such income, provided that the lump-sum payment exceeds $100,000. The tax described in this paragraph shall not apply if the employee within 14 days of receiving a payment subject to this paragraph returns the payment to the company and disclaims any interest in the payment. The tax described in this paragraph shall be due within 21 days of receipt of a payment subject to this paragraph. Any person convicted of evading the tax described herein shall be guilty of a felony, and shall be sentenced to a minimum of 10 years in prison and fined a minimum of ten million dollars.

These two are in different worlds.
3.18.2009 12:00pm
ShelbyC:
@SnapHappy:

These two are in different worlds.


What's so different? The following all seem pretty similar, unless you're objecting to the penalty:

Be it resolved that Edward Liddy shall die.

Be it resolved that all persons bearing a last name ending in ddy, with aformentioned ddy preceeded by an i preceeded by an L, and bearing the first name Edward, shall die.


Be it reloved that all persons receiving bonuses from AIG shall have their bonus money siezed by the government

And, the text of the law you propose.

Are some of these bills of attainder and not others?
3.18.2009 12:11pm
cognitis:
Drake evidently doesn't read his writing, as he contradicts himself in two paragraphs. He describes Congress' bill as "attacks [sic] bonuses"; in very next paragraph, he then defines bills of attainder as "they are used to execute people." Congress is an authority that can raise taxes on groups such as gasoline consumers, so raising taxes on a group is not an "attack" by Congress on the group.
3.18.2009 12:28pm
cognitis:
Shelby defines bill of attainder as follows:
Be it reloved that all persons receiving bonuses from AIG shall have their bonus money siezed [sic] by the government
So Shelby defines money paid by persons to the IRS for taxes as "seized"; according to Shelby, then, IRS' demand for a 1040 is a bill of attainder.
3.18.2009 12:42pm
ShelbyC:
@cognitis, I don't think you read his writing either.
3.18.2009 12:46pm
PC:
If a player on the Detroit Lions (0-16, last year) had a contract in which he was entitled to a roster bonus of $2 million on December 1, 2008, who in his right mind would say that the Lions should not pay that bonus, given the horrible performance of the team?

Would the team still be required to pay the bonus if that player shot every other team member in the knee caps causing the team to go 0-16?
3.18.2009 12:47pm
PC:
btw, I ask that question about the Detroit Lions player in the sense that the player accidentally shot everyone else in the knee caps. He was just incredibly careless. He waved a gun around the locker room, pulled the trigger, reloaded, then did it again. The comparison is apt to AIG considering the people at the financial services division wrote $2.7 trillion in credit default swaps against $100 billion in assets.
3.18.2009 1:05pm
ShelbyC:

Would the team still be required to pay the bonus if that player shot every other team member in the knee caps causing the team to go 0-16?



Do you have evidence that someone at AIG shot anyone in the kneecaps.

All we know is that AIG employees were told, do X and we'll pay you a bonus. Now, even if X ruins the economy, that's not justification for not paying the bonus.
3.18.2009 1:11pm
Snaphappy:
Don't confuse whether (1) the employees are contractually entitled to a bonus and (2) whether they deserve one. The reason I like the excise tax proposal so much is that it does not question (1), but nevertheless reaches a result consistent with the answer to question (2).
3.18.2009 1:18pm
Billw (mail):
The bonuses were disclosed in AIG's 10K filing on Nov 10, 2008 at the time of the first treasury investment. The Treasury had to have known or they don't read like congress people before passing legislation.
See www.sec.gov for American International Corporation 10K filing on Nov 10, 2008.

Employees

The decline in AIG’s common stock price and the announcement of proposed asset dispositions may prevent AIG from retaining key personnel.

AIG relies upon the knowledge and talent of its employees to successfully conduct business. The decline in AIG’s common stock price has dramatically reduced the value of equity awards previously granted to its key employees. In addition, the announcement of proposed asset dispositions may result in competitors seeking to hire AIG’s key employees. AIG has implemented retention programs to seek to keep its key employees, but there can be no assurance that the programs will be effective. A loss of key personnel could reduce the value of AIG’s businesses and impair its ability to effect a successful asset disposition plan.
3.18.2009 1:34pm
PC:
Do you have evidence that someone at AIG shot anyone in the kneecaps.

As I said, "the people at the financial services division wrote $2.7 trillion in credit default swaps against $100 billion in assets." Unless we get access to AIG's internal documents we won't know if that fraud/kneecapping was done on purpose or if it was accidental.
3.18.2009 1:35pm
Snaphappy:
Perhaps what this post was seeking:

"A bill of attainder is 'a law that legislatively determines guilt and inflicts punishment upon an identifiable individual without provision of the protections of a judicial trial.'" Selective Service v. Minnesota Pub. Interest Research Group, 486 U.S. 841. In order to be a bill of attainder, the statute must:

1) single out an identifiable individual or group;
2) determine guilt;
3) inflict punishment without a trial

Id. It is arguable whether a law that defines a set of circumstances that are only met (at least for now) by the AIG bonus babys singles out an identifiable group. Given the number of bailouts during the current crisis, there could well be another set of individuals subject to the law. The law could also be seen as an effort to prevent payments like AIG in the future.

Even if the first restriction were met, it's not clear that the others would be. The only relevant "conduct" here is receiving a given amount of money, and the only "punishment" is a special income tax. As the Supreme Court said, "That burdens are placed on citizens by federal authority does not make those burdens punishment." Id. We do not ordinarily think of income taxes as punishment (even if they feel that way). Although a small group of people would be affected by this tax, you could say the same about, for instance, a 100% estate tax on the value of an estate over $10 billion. That might affect very very few people, but that doesn't make it punishment on those few people.

Whether a burden is "punishment" depends on "(1) whether the challenged statute falls within the historical meaning of legislative punishment; (2) whether the statute, "viewed in terms of the type and severity of burdens imposed, reasonably can be said to further nonpunitive legislative purposes"; and (3) whether the legislative record "evinces a congressional intent to punish." Nixon v. Administrator of General Services, 433 U.S., at 473, 475-76. The "the punitive confiscation of property" is one of the historical legislative punishments, so condition (1) would be met, but this statute could reasonably be sid to further nonpunitive legislative purposes. As noted, the law would apply to future bonused by similarly situated bailout companies, so it could reasonably be said to further the legitimate purpose of preventing such bonuses. And while people are surely angry at the recipients of the bonuses, the real rage is at AIG for paying the bonuses. The aim is not to punish people for receiving the bonuses, but to prevent them from receiving them in the first place.

Reasonable minds could differ, but I doubt that they would in this case.
3.18.2009 1:38pm
Dan Weber (www):
No idea, but given some of the rather extortionate terms of the auto industry's Federal "bailout," I suspect there are some GM and Chrysler UAW locals that might also be interested in the answer...

At any of the various stages of investment by the various branches of government (the NY Fed engineered the first last year), the bailout should have been contingent upon opening the books and demanding various things. The employees would have been totally free to refuse to renegotiate and the government would have been totally free to refuse to invest.

(And, honestly, if I was the one looking over AIG's debts last year and saw a line item of less than a half-billion dollars for promised bonuses, I probably wouldn't have cared, given the huge scale of other debts that AIG had. But I've never been good at predicting mobs.)

Aren't contracts obliged to have some kind of good faith basis?

These folks made cosmic shitloads of money for AIG (while exposing them to a lot of risk, of course). AIG got consideration.
3.18.2009 1:39pm
ShelbyC:
Cognitis:

Shelby defines bill of attainder as follows:


Jeez, do you bother reading anything anyone writes before you unload? I don't think I purported to "define" bill of attainder. Talk about your strawmen.
3.18.2009 1:56pm
PC:
These folks made cosmic shitloads of money for AIG (while exposing them to a lot of risk, of course).

Profit = revenue - cost

It seems like AIG is big on the cost issue, not so much on the revenue. TPM has a couple interesting posts about AIGFP here and here. The guy running AIGFP came from Michael Milken's firm? el oh el.
3.18.2009 1:58pm
Steve2:
Snaphappy, thank-you. Whether or not Professor Volokh finds that helpful, it solidifies something I'd been thinking.
3.18.2009 1:59pm
Cousin Dave (mail):
Thinking about this 100% tax business targeted at AIG execs. Looking over the three criteria that Snaphappy posted:

Whether a burden is "punishment" depends on "(1) whether the challenged statute falls within the historical meaning of legislative punishment;

As Snaphappy says, confiscation of property does fall within this definition. I could readily make an argument that this "tax" is but a fine masquerading as something else. So this condition is met.

(2) whether the statute, "viewed in terms of the type and severity of burdens imposed, reasonably can be said to further nonpunitive legislative purposes";

Given that a 100% income tax rate on legally obtained income is unprecedented in American history, I don't see how anyone could make an argument that this serves a legitimate legislative purpose. After all, in all of the crises faced by previous Congresses, ranging from the Whiskey Rebellion to the Civil War to WWII and more, no previous Congress has found it necessary to do this.


and (3) whether the legislative record "evinces a congressional intent to punish."

The on-record statements of the legislators involved make it absolutely clear that the intent is in fact to punish. This is indisputible.

Conclusion: All of the tests are met; it is in fact a bill of attainder. It's also a violation of the soverignity of contract. Plus one could drag the Sixth and Fourteenth Amendments in if one were so inclined.

The only way I can see around this is to tax all wage income over a certain threshold at 100%. That would be legal. Also extraordinarly stupid. Which means this Congress just might try it.
3.18.2009 2:28pm
Joseph Slater (mail):
I know little about what constitutes a Bill of Attainder. But as a long-time Detroit Lions fan, I gotta say it's depressing to see how often political, economic, and legal debates analogize to the Lions whenever the debater wants to make a point about some disasterous failure or other.
3.18.2009 3:49pm
Nick056:
David McCourt,

I do think that there is considerable evidence to suggest that Treasury could have looked at these contracts in light of public policy and the expenditure of public funds if it had chosen. I'd repeat that at least one Congressperson, a CPA, voted against the stimulus bill knowing Treasury was vested with discretionary powers but doubtful that Geithner would use them properly. The representative was perhaps right, and for that there's some blame. And now we are treated to the spectacle of Congress villifying Liddy for honoring a contract that could have been potentially declared invalid in any case as a condition of continued receipt of TARP funds.

So there's ample blame for the short-sighedness and the populist response. But for myself, I wouldn't call it false populism: these people are now the most notorious welfare queens in history. They screwed up theircompany and received retention bonuses on the logic that only they could unwind the screw-up. This is business? If Liddy defended them too much, I'd say he ha Stockholm Syndrome. There is also a possibility that some of these AIGFP employees committed actual fraud, as opposed to CDO stupidity.

When it comes to Dodd, well, you're free to theorize that he wanted these people to get bonuses because they are constituents (and yet, AIGFP is a London office -- are these people mostly Conneticut voters working abroad?). That the amendment he wrote was intended and received as a limit on executive pay -- perhaps insufficiently stringent -- doesn't support your theory. It also doesn't help that he didn't write the section recommending protection for pre-2/11 contracts.
3.18.2009 4:00pm
Nick056:
It appears that one of AIGFPs "largest offices" is based in Conneticut. But if this fiasco is Dodd's idea of constituent service, it hasn't turned out very well. It's just as likely that he wants to distance himself from AIGFP so as not to anger most of his other constituents, and that this was always his intention. After all, he might always reasonably see the AIGFP office as a liability since the beginning of this mess. By your reasoning, David, he wanted to serve those particular constituents -- wealthy, but numbered in the low hundreds -- in the stimulus, but now his back is against the wall and he's throwing them overboard.

Again, you're free to this theorize along those lines, but that would require him anticipating and guiding this bonus payout, without specifically protecting it, and also not realizing that it would be a particularly contentious issue. That is a shaky chain of events.
3.18.2009 4:18pm
Snaphappy:

I don't see how anyone could make an argument that this serves a legitimate legislative purpose

The on-record statements of the legislators involved make it absolutely clear that the intent is in fact to punish. This is indisputible.


Oh, okay. I'm convinced now. Cousin Dave says its indisputable and absolutely clear. That settles it.

Argument by assertion usually falls flat and this is no exception. It's not "indisputable" because you say it is. And just because something is unprecedented does not mean it does not serve a legitimate legislative purpose, otherwise Congress could never do anything new.

The best indicator of Congress's intent is the text it uses in the statute, not what some random legislator says on or off the record. So if Congress says the intent is to encourage fiscal discipline in entities that it has bailed out, who are you to say that a couple of random Members' statements mean Congress as an entity is lying?
3.18.2009 5:30pm
cognitis:
Jim Cramer is a whore for hedge funds and a failed trader, but even he just recommended RICO investigation of AIG. View my above post for my consent. Dave defrauds as Shelby: income tax is neither "punishment" nor "confiscation"; US once taxed top bracket at %80.
3.18.2009 6:35pm
David McCourt (mail):
Nick 056,

Events have outpaced your own speculation about what Dodd did, or intended to do: see Dodd's statement (6:30 ET).
3.18.2009 7:17pm
ReaderY:
A tax simply raises revenue. So long as it doesn't claim to be a fine or punishment or imply any sort of guilt, I don't see how there could be an attainder issue. Truly confiscatory tax rates might raise due process issues, but not attainder issues.

Special tax bills use facially neutral wording to give special tax breaks all the time. One could use such techniques in reverse to impose a tax with targeted applicability.
3.19.2009 12:52am
Nick056:
David,

It's an interesting development. I'd assumed the language came from the House-Senate committee, and wanted to know why I couldn't find out which House members pushed for the new clause.

Now we know why.

The refusal to be totally forthcoming at first does make me wonder why he framed it at as a change in the committee, when it was added at the behest of the White House.

But I don't know how that substantively alters his role or constitutes the "reversal" suggested by some news outlets (and the Republicans). He did not originally include the language but consented to it in a compromise. This much we knew. We just didn't know it was Treasury seeking the compromise, we thought it was some group in the House. Yes, know we know he added it, but he didn't exactly have much leverage in doing so. And I think if he'd known about the FP bonuses at the time, which he claims he did not, he might have used that as leverage in bargaining with Treasury. They wanted to avoid lawsuits. Instead, they got this sad sideshow. But it's impossible to say whether he knew about these bonuses when he inserted the language.

That, more than anything, leaves me upset with Treasury. Why are we hearing about this from Dodd nistead of Geithner? Why does is he not acting like a leader? Why is Treasury seeking non-trivial modifications to CEO compensation without directly claiming responsibility, waiting for Dodd to name them?

Hugely disappointing. Add to this that that Treasury was informed on Feb 28th about these bonuses and, making allowances for the enormous task before Treasury, why were they not out in front on this? Short-sightedness on the details won't help us. Geithner is deeply unimpressive.
3.19.2009 3:32am
David M. Nieporent (www):
A tax simply raises revenue. So long as it doesn't claim to be a fine or punishment or imply any sort of guilt, I don't see how there could be an attainder issue. Truly confiscatory tax rates might raise due process issues, but not attainder issues.
This "tax" would not be designed to raise revenue, but to be a fine or punishment and to imply guilt.
3.19.2009 5:02am
David McCourt (mail):
Nick056,

Dodd's reversal is simple: he first said he had nothing to do with the "savings" provision, and didn't know how it got there. Here he is on Tuesday:

CNN: “There’s the suggestion today being made that you received more money from AIG than any other senator. And that you were responsible for the February 11th, 2009 date. Again, I just want to get — you’re saying you had nothing to do with . . .”
Senator Dodd: “Absolutely not.”
CNN: “And there was nothing you were doing that was aimed at protecting AIG?”
Senator Dodd: “Not at all. Not in the slightest. . . . The point is when that language left the Senate I wrote, that was not included.”

Now he admits that he did put the language in (but at the behest of the administration). Watch it yourself: http://www.youtube.com/watch?v=1GoK0539Gl4

If this isn't a reversal, then I'll retire to bedlam.

On the larger issue, I'm amazed the the administration can claim they are suprised. Their appointee, Libby, is running AIG, their people are running the Treasury and the Congress, and the Treasury Sec has been intimately involved in the AIG rescue since he was head of the NY Fed.

All of this is a distraction from the bigger issues: as usual, 99% of the attention is directed to a fraction of 1% of the spending, and the rest slips by unnoticed.
3.19.2009 9:16am
David McCourt (mail):
Nick056,

Just to make the rubble bounce, here's Dodd's earlier claim that he didn't know how the bonus savings language got in the bill, he said on Tuesday:

“I can't point a finger at someone who was responsible for putting those dates in. I can tell you this much, when my language left the Senate, it did not include it. When it came back, it did.”
3.19.2009 9:37am
Not_in_my_contract:

Cite? And what jury, so instructed, would ever award them?


I would.
3.19.2009 5:32pm
DC:
Legislation motivated by emotional frenzy always ends up biting us in the rear in unanticipated ways.

How many times has tax law designed to "target" specific entities ended up sweeping up bystanders in a wider net?
3.19.2009 5:35pm
ReaderY:

This "tax" would not be designed to raise revenue, but to be a fine or punishment and to imply guilt.


But then simply take out any "designating" language from the final bill leaving only the bare tax. It simply doesn't matter what people in the legislature fee.

The fact that some people don't like alcohol or tobacco or gambling or pork or brocolli doesn't turn taxes on these things into fines or punishments. The fact that some people don't like bonuses paid by companies receiving bailout funds doesn't turn a tax a on that activity into a fine or punishment either. What people think inside their heads as they vote for a tax bill is simply irrelevant to whether or not the courts should regard it as a bill of attainder. What matters is what the tax statute says.
3.19.2009 7:30pm
RainerK:
Well, they passed the bill.
Words fail me. Legal or not, it is highly dishonest to unilaterally void legal contracts just because you can. What a display of unchecked raw power. Aside from the obvious issues of $1 Trillion + vs. 165 M or the issue how the bonuses got into the "stimulus" in the first place or how the president himself whipped up the public's emotions. We should all be afraid what our dishonest, highly incompetent lawmakers are going to do or fail to do next. What a sad spectacle. I hope it will cost the politicians dearly at the polls. Kick the rascals out!
3.19.2009 9:28pm
markm (mail):
A 100% tax on income does not raise revenue, because it no one will pay it. They'll simply stop earning that income.
And the court would also have to be wearing blinders and earplugs to not know that the intent was punitive.

So, my prediction: The SC will disgrace themselves by ignoring obvious facts again...
3.19.2009 10:13pm
ReaderY:
Given that the Supreme Court has held that New York's former differential tax between colored and uncolored margarine (colored margirine was taxed at a much higher rate than uncolored margarine) was simply a valid revenue-raising choice and its tendency to discourage coloring margarine didn't make it anything other than an ordinary tax, I don't see how this situation is any different.
3.19.2009 11:37pm
Nick056:
David,

I'd have to join you in Bedlam if that weren't called a reversal on the matter of whether he added the clause himself. But his opinion about the clause apparently remains the same. I felt that his political opponents wanted to make it seem as though he were dissembling on that issue.

But this is a sad mess. I'm deeply uneasy about Dodd's dishonesty, about Treasury's silence, about the tax bill, about the bonuses themselves, and about the focus on this diversion, which involves $450 million of the $182 billion lent to AIG.
3.19.2009 11:56pm
JJS:
you guys are so focused on the attainder issue, when the other part of that section in the constitution, the ex post facto clause, applies quite well here.

they are trying to pass a law on and tax an event that has already occurred. whats to stop them from retroactively taxing all of your 2008 income at 80%?
3.20.2009 12:09pm
Smooth, Like a Rhapsody (mail):
JJS
I believe that the ex post facto clause (Art 1 Sec 9 cl 3) has been specifically limited to retroactive adjustment of criminal punishments.
3.20.2009 4:23pm
markm (mail):
JJS: They amend the tax laws and regulations ex post facto every year. Your lucky to get the final version of the regulations by Dec. 31.
3.20.2009 8:18pm

Post as: [Register] [Log In]

Account:
Password:
Remember info?

If you have a comment about spelling, typos, or format errors, please e-mail the poster directly rather than posting a comment.

Comment Policy: We reserve the right to edit or delete comments, and in extreme cases to ban commenters, at our discretion. Comments must be relevant and civil (and, especially, free of name-calling). We think of comment threads like dinner parties at our homes. If you make the party unpleasant for us or for others, we'd rather you went elsewhere. We're happy to see a wide range of viewpoints, but we want all of them to be expressed as politely as possible.

We realize that such a comment policy can never be evenly enforced, because we can't possibly monitor every comment equally well. Hundreds of comments are posted every day here, and we don't read them all. Those we read, we read with different degrees of attention, and in different moods. We try to be fair, but we make no promises.

And remember, it's a big Internet. If you think we were mistaken in removing your post (or, in extreme cases, in removing you) -- or if you prefer a more free-for-all approach -- there are surely plenty of ways you can still get your views out.