Why We Must Let the AIG Guys Keep Their Frigging Bonuses

In September of 1787, the Constitutional Convention was debating the possibility of adding a bill of rights. It wasn't going well. The list of those things that the proposed Federal Congress would be forbidden to do was whittled away to practically nothing. Why bother when most of the delegates agreed that no one would DARE pass laws to abridge the likes of Freedom of Speech, Assembly and the Press? However, a few things were held to be so egregious and dangerous that they were retained in the original constitution.

Among these were: No Bill of Attainder or ex post facto Law shall be passed.
Now what kind of laws might these be? Okay, let's take an example: Let's say that a corporation nobody likes, AIG, has given a bunch of people nobody likes, their executives in charge of toxic assets, bonuses that seem to be waaaaaaaaay too much in light that the company was driven into the ground and is in government receivership.

Now let's say the checks were legal and that they were already paid.

Got it? Good.

Now let's say that Congress, in it's righteous anger, decides to get the money back. How do they do it? Well they pass a law taking it from them. Just that. "We don't like you or what you did, so you're going to be punished."

It was legal at the time. Thus any "tax" on income that wasn't in effect at the time the checks were paid out is ex post facto after the fact. The constitution is very clear on this: If it's legal now, then it's legal now. You cannot say if Congress later bans it then it's not legal now. Now is now and the law now is the law now. It sounds redundant, but the AIG "tax" bill passed by the House (and supported by President Obama) is retroactive. It taxes income at a special rate retroactively. Taking property without due process of law.

Another thing the bill does is criminalizing a specific class of people. The aforesaid executives, and punishes them because of who or what they are. They are attained guilty by Congress and are being punished for it. Not because they broke a law but because the law broke them.

Now you may not like these people, and may think that the law is just and AIG is run by a bunch of scumbags. However, the reason why the Conventioneers put this in the constitution was that they didn't trust future legislatures.

Congress can't ban cell phones retroactively and then throw everyone in jail for having one under the constitution. They cannot pass a law saying Guys from Alexandria Virginia are all evil and should pay a million dollar fine each and spend a year in the clink.

Yet, this is exactly what the House of Representatives just did. This is what the president, who took the oath of office just two months ago, endorsed.

If we can do that, then Congress might as well throw Rush Limbaugh and Sean Hannity in jail for being jerks and get it over with. Then confiscate Rupert Murdoch's business holdings and take away his television. Then they could take away YOUR television and give it to the poor!

Some things you have to just let go. The AIG bonuses were scuzzy as hell, but we have to live with them. Freedom is too precious to throw away even for this.

Comments

[JadeRain]

Finally! A voice of reason and constitutional sanity!

[rf-hawaii]

http://www.youtube.com/watch?v=mn4daYJzyls

[helpontheway]

off-topic but i think that all recipients of bail-out ca$h should be subjected to the same draconian
p i s s-tests that an ordinary citizen has to take to work at home depot, maybe that would help change our ridiculous drug laws if the wealthy and privileged actually had abide by them

[hw majordrag]

Nobody likes the idea of rich honchos getting richer, but the fact of the matter is that taxing back these bonuses would be unconstitutional. It was perfectly legal for AIG to give out the bonuses, especially since it was included in their business plan. If anybody is to blame it's Congress, who wasn't paying attention to how the money was being spent, and now that they've realized their mistake, they are trying to fix it with a retroactive bill. Apparently, two wrongs make a right in their minds.
Article 1 of the Constitution states that Congress shall pass no ex post facto laws, and clearly, taxing a payout when no such tax existed at the time of that payout is retroactive. As hard as it is to accept, Lurio is right that we must let this go. Protecting the Constitution is more important than putting the scummy executives in their place.

[frantaylor]

When people are indicted for a violent crime because there is probable cause, they can take away your weapons and put you in the clink until your trial. So here we have a case where there is PLENTY of probable cause: Where the heck is the missing money? So why don't we lock these people away and take away their money, before they strike again? We make this argument about violent criminals and I see no reason why it does not apply here.

[KillTheMessenger]

Nobody committed a crime, fran. Nobody is even being accused of committing a crime. Your logic goes nowhere.

[frantaylor]

Like research says, there is missing money. This means that fraud has been committed. We don't know just whom yet. You don't need to prove that someone is guilty before you indict them and lock them up for the protection of society. We can start with the people whose fingerprints are on the money, just like we can start with the people whose fingerprints are on the weapons.

[dilgrim]

OK, but how about the public humiliation of wooden stocks? Would it be illegal? Would pelting with tomatoes and rotten eggs be illegal?

[frantaylor]

I think the stocks are a great idea. "Your punishment is to spend a whole weekend in the stocks." After two days of people gawking and laughing at you, for sure you will not want a repeat performance.
I'd show up with a tape recording of that guy from the Simpsons going 'ha-ha' and play it about 5000 times.

[KillTheMessenger]

Yes, it would all be illegal.

[frantaylor]

I wonder about the great minds who think that waterboarding is not torture, but the stocks are.

[Alterion]

I'm sad to say I support this tax. I don't LIKE it, but I think these wall street people pushed it too far. They've skirted the sentiment of the law, gamed and cheated the system, commited every legal version of dishonorable actions imaginable - well, back at ya. Now you're getting taxed at 90%, which is absurd, but they deserve it, they pushed it too far.

The public gave them free money and didn't want them giving out bonuses. So did they cancel bonuses? No, they changed the name to 'retention payments', hoping we wouldn't notice. The list goes on for their dishonorable deeds.

Here's how I would have handled it: Youre NOT getting the bailout money if you pay the bonuses.

AIG: But... but... if we fail it will doom us all!!!

You figure it out AIG. Don't pay the bonuses, fire employees who demand them, and let them sue. I mean you've put people out of work, out of their homes, taken away their jobs, livelihoods, and healthcare, now you're gonna be squeamish about breaking a contract or two?

[frantaylor]

In England it's 95%. One for you, nineteen for me 'cuz I'm the tax man!

[KillTheMessenger]

So you do not support the constitution that gives you the right to free speech?

[frantaylor]

The common thread to all these "ex post facto" exceptions is that they ARE exceptions. Who is to say that there are not more exceptions? How do we find out? Really the only way is to write a law like this and let the case against it get appealed to the Supreme Court. They will decide. If you think this is cut and dried in either direction, hold on to your money. Who can say with certainty how they will decide?

[KillTheMessenger]

"Who can say with certainty how they will decide?"

Everybody who has actually read the constitution.

[frantaylor]

What about that case last year involving price fixing? The Supreme Court took a long standing doctrine that made a lot of sense and had a lot of popular and political support, and they just threw it right out the window. Everyone was surprised and we are still sorting through the consequenses. So much for stare diresis. Face it, we have an activist court and they will make decisions that make sense only to them.

[frantaylor]

And you can also look at Bush v Gore as yet another Supreme Court decision that really establishes the precedent that the Supreme Court will do and say whatever the heck it wants to, regardless of what the Constitution says.

[deepintheheartoftejas]

You never know how our wacky right-wing supreme court overlords will rule, but ex post facto law is very clearly delimited and well-settled in legal precedent, going back to the founders:

http://en.wikipedia.org/wiki/Calder_v._Bull

Professor Tribe of Harvard, on the specific matter of retroactive tax changes:

"The Ex Post Facto Clause applies exclusively to criminal punishment and poses no difficulty here. And the fact that the measure contemplated would operate retroactively as well as prospectively doesn’t distinguish it from any number of tax and other financial measures that the Supreme Court has upheld over the claim that fundamental fairness precludes retroactively undoing contractual obligation­s."

Exceptions to ex post facto are clearly laid out: civil cases, and criminal cases where punishment is reduced. The "money" quote from the supreme court, c.1798:

"Every law that changes the punishment, and inflicts a greater punishment, than the law annexed to the crime, when committed. Every law that alters legal rules of evidence, and receives less, or different, testimony, than the law required at the time of the commission of the offence, in order to convict the offender. All these, and similar laws, are manifestly unjust and oppressive. In my opinion, the true distinction is between ex post facto laws, and retrospective laws. Every ex post facto law must necessarily be retrospective; but every retrospective law is not an ex post facto law: The former, only, are prohibited­."

It's retrospective, not ex post facto.

[research]

We can charge them with Fraud and take every penny they have, plus throw them in jail.

Conspiracy to take peoples money by deception and trickery is Fraud.

You don't have to break any other laws or regulated to be guilty of Fraud.

[frantaylor]

I love fraud. It's such an all-encompassing law. We are probably all guilty of it all the time.

[research]

Yes, but fortunately juries will tend to convict only the worst Fraud, like what's happening now.

[Joethepauper]

I'm not. I don't ask for other people's money, and wouldn't do dishonest things with it if I had it. I'm not religious, but I often ask religious people about what made Jesus the most angry. They usually say something like "Jesus was kind and forgiving, not angry". They have apparently forgotten what he did in the Temple with the money changers. If there is one thing in the Bible to pay attention to, it would be what got Jesus mad enough to go on a rampage. When I loan someone money, I don't charge interest. The Bible, Torah, and the Koran all say plenty about usury, but only one of those religions practices what their "Holy" book teaches. If we are going to be religious fundamentalists, shouldn't we read and practice what we so fanatically claim to believe? Shouldn't the bible thumpers at least be able to list more than three commandments if they are going to try to control public discourse when it comes to stem cells, etc.?

[frantaylor]

The entire concept of "ex post facto" is just shot full of holes. Supposedly it is in the Constitution but there are more exceptions to it than you can shake a stick at, and they have all been upheld by the Supreme Court. We can start with eminent domain and move on to drug forfeiture laws. You can draw a line in the sand but it is just a line in the sand and the Supreme Court can just move it around, just like it moves around the meaning of "reasonable" in the copyright laws.

[Principaldad]

Please explain why forfeiture laws are "ex post facto". You keep bringing them up over and over, but you never explain how they even remotely apply. Yes, they are often used unfairly and are often abused.

But, how are they "after the fact"?

[frantaylor]

They are not "after the fact". They are "without due process".

[frantaylor]

"After the fact" refers to the presumption of guilt. You are punished before you get your due process. My point is that it happens all the time.

[messy]

"provided their retroactive application was "supported by a legitimate legislative purpose furthered by rational means"—ahh­hh...there­'s the rub. This is neither.

This is persecution of at most 75 people.

[frantaylor]

In the 1994 opinion United States v. Carlton, the U.S. Supreme Court unanimously held that retroactive tax laws did not violate the constitutional prohibition on ex post facto legislation, provided their retroactive application was "supported by a legitimate legislative purpose furthered by rational means".

- Wikipedia

[Principaldad]

This is why wikipedia is a terrible source for legal information. That short statement takes the judgement out of context. The primary reason that the finding was made in this situation was that the law was not abritrary and was, in fact, to clarify an error in the application of the actual law and was done for revenue purposes. That is the "legitimate legislative purpose" that is referenced.

In addition, the addition to the wiki that you cited was added TODAY. For all anybody knows, it could have been you that added it.

[frantaylor]

You cannot dispute the fact that the government ignores the entire "ex post facto" concept at its whim. We know from the many asset forfeiture laws that this is clearly the case. We could charge this tax and if it were declared unconsitutional, all of those other things would be, also.

[research]

Then go to the link that every Wiki article has and prove it wrong.,

Wiki beats Britannica on accuracy according to a peer review paper in Nature.

The collective mind beats the meritocracy.

Here, I'll do this one for you:

http://www.law.cornell.edu/supct/html/92-1941.ZS.html

Wiki is correct.

[JimR]

Excellent column, and I agree. Yes, the bonuses were distasteful, and disgusting and outrageous. But our collective anger is better used by putting pressure on the government not to allow something like again, until the bailout money is paid back in full.

[SolarPowerGuy]

You're unfortunately correct about the law. This is one of the situations that simply cries out for retroactive measures -- and, legally, we can't.

But now, let's look at how Geithner and people like him are defending the bonuses -- NOT on Constitutional grounds, but on the grounds that we need Wall Street to remain "in partnership" with the government, in order to untangle the credit crisis.

Well, heck, that's a license for Wall Street to ask for anything. And, since there are still ongoing negotiations between government and Wall Street, they WILL demand something sneaky and unconscionable once again.

If the maximum outrage is not expressed NOW, how will we avoid the next round of, "Whoops, the cows got out again. Close the barn door!"

[KillTheMessenger]

"This is one of the situations that simply cries out for retroactive measures"

"It" does not call out for that at all. You may call out, or the street mob may, but "it" does not.

It does not matter what Geithner does or says. You are deflecting from the fact that there are plenty of people who want to see someone hang by saying that there are some who do not. What does that prove? Only that not everybody has lost their minds.

"Well, heck, that's a license for Wall Street to ask for anything."

Only for those things which are lawful. Not everything is lawful.

"And, since there are still ongoing negotiatio­ns..."

Now you are projecting a future that you know nothing about. Are we supposed to be impressed by the clarity of your tea leaves?

"If the maximum outrage is not expressed NOW, how will we avoid the next round of, "Whoops, the cows got out again. Close the barn door!""

Expressing rage is not nearly as important as applying the law all the time, independently of what the public thinks. If you do otherwise, you have anarchy. Which, if you look at the French Revolution, leads from "Down with the heads of the bourgeois!" to "Down with the head of my neighbor because he has one cow and ten more chickens than I do."

[SolarPowerGuy]

"Only for those things which are lawful. Not everything is lawful."

Oh come now. Don't you know the old joke? A lawyer is brought into a room and asked by a potential client, "how much is two plus two?" The lawyer looks around furtively -- shuts the door and the drapes -- leans conspiratorially over the client's desk, and whispers, "How much do you WANT it to be?"

We wish it were not so -- but 50% of the law is negotiation.

"Expressing rage is not nearly as important as applying the law all the time, independently of what the public thinks. If you do otherwise, you have anarchy."

Don't misunderstand me, I understand we're stuck here. What is morally just is legally impossible -- and I came down on the side of the law.

Now, how shall we write FUTURE versions of laws like TARP? You think I'm reading tea leaves? The Federal Reserve just announced a $1 trillion move this week. Meanwhile, Geithner is making commitments to write what amount to credit default swaps to get toxic assets traded and moving again. Has the public's displeasure have any impact on these measures? I'm not holding my breath.

Meanwhile: your French Revolution argument is a classic slippery-slope fallacy.

[peterg76]

The retroactive tax is for show - Congress knows perfectly well that the first court challenge would be a hands-down win for whoever received the bonus. They're just counting on the public not caring by the time that happens. Though legal quesions aside, people will probably pay the tax voluntarily just for the public relations value.

[KillTheMessenger]

Congress will see the Senate water down the bill first to the point where a legal challenge will be harder. Then somebody will bring a legal challenge just for the heck if it.

What the Senate will not water down, though, is the lose-lose for Obama. He can either lose the PR campaign or break his promise to uphold the constitution. I wish the Democrats in Congress would have been this creative to cut down Bush at the knee as they are in cutting down Obama.

Loser politics. The Republicans seem to have it right... the Democrats know exactly how to turn victory into horse manure.