Co-contributor Francis Cianfrocca did an excellent job this morning noting many of the more surprising and odious aspects of the hastily (and emotionally) hashed-together “clawback” legislation that recently breezed through the House.
Those aspects are bad enough – and they represent an ugly and dangerous turn in “policy.”
But there’s an even more important issue.
Is this “clawback” provision blatantly unconstitutional?
More below the fold….
To my simple reading of things, the answer to that question is an easy “Yes, it is.”
The key provision is a clause in the Constitution prohibiting the passing into law of what is known as a “Bill of Attainder“:
Definition: A legislative act that singles out an individual or group for punishment without a trial.
The Constitution of the United States, Article I, Section 9, paragraph 3 provides that: “No Bill of Attainder or ex post facto Law will be passed.”
This indeed seems to be the situation we have here.
The reason for this provision in the Constitution was spelled out very clearly by James Madison in the Federalist Papers:
“Bills of attainder, ex post facto laws, and laws impairing the obligations of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation. … The sober people of America are weary of the fluctuating policy which has directed the public councils. They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less-informed part of the community.” James Madison, Federalist Number 44, 1788.
A more recent comment on this provision comes from the late Chief Justice of the Supreme Court, William Rehnquist:
A bill of attainder was a legislative act that singled out one or more persons and imposed punishment on them, without benefit of trial. Such actions were regarded as odious by the framers of the Constitution because it was the traditional role of a court, judging an individual case, to impose punishment.” William H. Rehnquist, The Supreme Court, page 166.
Based on the wording of the provision in the Constitution and the comments of these two distinguished jurists, it would seem that the “clawback” provision is unconstitutional.
Now, admittedly I’m not an attorney (though I work with them all the time), and I realize that there is a long amount of case law on this topic – regarding in particular differences in application of the “attainder” determination to monetary (rather than criminal) punishments.
But the Constitution is meant to be read and understood by non-attorneys. Right?
Moe Lane
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Daniel Horowitz
We should ask Okinawa Jack about it
E Pluribus Unum (Diary) Monday, March 23rd at 2:32PM EST (link)Since he carries a copy of the Constitution in his pocket, one would expect that he gets it out and reads it on occasion.
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Well, we have congresscritters openly admitting that it's unconstitutional...
Raven (Diary) Monday, March 23rd at 2:49PM EST (link)Or am I the only one who caught what’s her name saying that she’d be more than happy to fight it out in the courts rather than in the legislature?
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Depends on your definition of "punishment"
mallcopsaysno Monday, March 23rd at 2:59PM EST (link)No bonus = punishment?
Proper punishment would probably be to let AIG sink or swim as the free market would allow. I won’t hold my breath waiting for that one.
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Eisenhower was right.Bonus Definition
Skanderbeg (Diary) Monday, March 23rd at 3:36PM EST (link)Please go over to Francis’ diary (link at the start of this one) and read the comments – where various unintended (?) consequences to “households” are discussed…. and in particular see the description of what a “bonus” is on Wall Street (it’s really not a “bonus” as the conventional interpretation assumes, but basically the “variable” part of the salary plan)….
We can hope
franklinslocke Monday, March 23rd at 3:29PM EST (link)Hopefully, they find these unconstitutional. The problem here is that a court could find that since these companies took the bailouts willingly that the government may be permitted to do what they wish. This should be a lesson to businesses not to do business the mob…oops..I mean the government.
http://franklinslocke.blogspot.com/
Wells-Fargo
Skanderbeg (Diary) Monday, March 23rd at 3:34PM EST (link)For what it’s worth, a number of financial institutions (Wells-Fargo leaps immediately to mind) tried to refuse TARP funds but were told that they couldn’t refuse.
So they have basically been forced to now suffer the consequences of “clawback” even though they didn’t want into the bailout program in the first place….
and too many Republicans failed to be principled yet again...
JLenardDetroit (Diary) Monday, March 23rd at 3:29PM EST (link)… setting back the arguments that there is a difference and that Republicans “got the message” of their past losses…. maybe not! Much ground convincing people that we need to swing the control of the country back to Republicans has been lost, with Republicans acting as bad as Democrats again.
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If this law were to apply on future bonuses, then it is legal and constitutional...
Cheetah772 (Diary) Monday, March 23rd at 3:29PM EST (link)Though to be sure, like you I’m no attorney. If this law doesn’t specify which group would be punished for giving out bonuses and isn’t retroactive in its nature, then yes, it is probably legal and constitutional. However, it is a bad law, a grave mistake, the one that will cost us dearly in the terms of gaining economic footing, which is desperately needed right now.
Other than that, I do agree with you that this “clawback” law is unconstitutional, and ought to be challenged all way to Supreme Court.
Daniel 2:20 And he [God] changeth the times and seasons: he removeth kings, and setteth up kings: he giveth wisdom unto the wise, and knowledge to them that know understanding.
It's "shall be passed" not "will be passed" nt
ColdWarrior (Diary) Monday, March 23rd at 3:31PM EST (link)nt
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First Welfare Moms, Now AIG Dads
wesley Monday, March 23rd at 3:34PM EST (link)I agree. The law if blatantly unconstitutional. CongressCritters take an oath to uphold the constitution and then they deliberately break it to satisfy public opinion. Instead we should withhold further AIG bailout money until the bonuses are returned to the taxpayers. If hard working blue collar autoworkers should have to renegotiate their contracts, than rich AIG execs need to as well.
Applies to all employees
Skanderbeg (Diary) Monday, March 23rd at 3:42PM EST (link)Just keep in mind that this “clawback” applies to ALL employees and is triggered by HOUSEHOLD income.
If you are a two-income household, one of whom is at an “affected” financial institution (subject to the “clawback”) but is just a plain old employee who got a small bonus…. and your household income is over $250k…. your little bonus gets taken away from you.
And this is really not about “rich execs” – go see Francis’ diary and the comments about the “bonus” (sic) system for rank-and-file trader employees at WS firms.
This basically ends up amounting to objecting to salaries on the grounds that they’re just too high – nothing more than that….
Taxation as Punishment
Derek Tuesday, March 24th at 8:17AM EST (link)I suspect that the law is unconstitutional but not because of the bill of attainder or ex post facto laws – which both deal with criminal penalties. The clawback is technically punishment but it’s not a criminal punishment.
My take is that it COULD be ruled unconstitutional because it is a use of the taxing power as a form of punishment rather than as an inherently revenue raising scheme. This is a stretch because most taxes that raise revenue are per se constitutional. Really the bill is simply Congress imposing a condition on spending that is related to the purpose for which the funds were spent, namely keep the company afloat in order to restore credit markets. Still, I suspect that the taxation clause argument is the best grounds to use to attack the constitutionality of the clawback.
The contract clause doesn’t work because that only prohibits a state’s substantial impairment of existing contract obligations. It does not limit Congress’ power to circumvent contracts in interest of preventing serious public harm.
While it has generally been interpreted in the criminal context
The_Gadfly (Diary) Tuesday, March 24th at 2:20PM EST (link)the language in the constitution is not limited to the criminal code. It simply says:
“No bill of attainder or ex post facto Law shall be passed.”
Since the section is laying out the powers of the legislative branch, if it were limited to only criminal law, it ought to explicitly say so.
Now I think you are correct on the issue of bills of attainder, which it is my understanding were essentially bills that threw families into jail in Europe regardless of whether or not individual members of the family committed a criminal offense or not.
But “ex pos facto” simply means ‘after the fact’ and while it’s primary usage was on the criminal side, I don’t see that as self-evidently limiting. Passing the tax change after the bonuses have been awarded (leaving aside for the moment the issue of whether bonus in this context really means “variable pay’) is clearly after the fact, and therefore ought to be unconstitutional.
it should say it, but it doesn't
Derek Thursday, March 26th at 8:21AM EST (link)You’re right, it should say it. That would make it much easier.
But it doesn’t.
The fact that it’s normally applied in the criminal context doesn’t make it self-evidently impossible to succeed. It simply makes it much less likely that a constitutional challenge based on the ex post facto clause would succeed. I doubt that many courts would be interested in overturning its ex post facto and retroactivity jurisprudence on this issue, though it’s certainly possible.
Incidentally, I think Obama’s comments on 60 Minutes suggest that he agrees with us both even if he’s not willing to say it. He said that generally we don’t want to punish behavior in the past or use the tax code to punish. Not that Obama’s opinion is gospel around here, just that it suggests he agrees that there are constitutional problems with this legislation.