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Two-Edged Corruption

I have been rough on President Obama's clumsy and unethical job performance since he took office, and I have - quite reasonably - excoriated the Democrats on their unconscionable behavior since they seized power in 2006. Some people have taken heart from these scandals, though, believing that the American people will punish the Democrats for their corruption and re-install the Republicans into the House majority in 2010 and the White House in 2012. Unfortunately, that belief fails on two points. First, emotions of the moment do not necessarily carry over to political consequences, which is why politicians are reluctant to apologize or watch their steps in the early days after they are elected. But second, change is not automatically an improvement, something Republicans tried to warn voters in 2008 but which in this situation should warn us of a need for some serious housecleaning in both parties. An unfortunate example of the corruption prevailing across the aisles is Senator John Cornyn of Texas.

I got an email from Cornyn, basically asking for money but trying to play on Americans' outrage over the AIG bonuses. It starts as follows:

"Those two words are what we've seen over the past few days as we learn more about the $165 million in bonuses offered to AIG executives.

Help me get that money back by signing the NRSC's "Take Back The Bonuses" petition. And then support the NRSC with a secure online donation of just $5 or more.

My constituents in Texas have been calling my office all week asking "what's going on up there?"

The answer is two other words: liberal Democrats.

They're the ones who are in charge and approved the money for the AIG bailout. And a couple of weeks ago when conservatives and moderates began asking questions, we were told - in not so many words - to mind our own business.
Well, the taxpayer's money is our business.

Frankly, it's unthinkable to me that a company American taxpayers bailed out would hand out bonuses to their executives. Where I come from - and pretty much everywhere except Washington, D.C. - you pay people to succeed - not to fail."

Cornyn's right that the bailout bill was largely a Democrat plan, and yes Americans - myself included - are appalled at the way top executives at AIG have acted. Cornyn's dishonesty, however, comes from the fact that the bonuses were included in contracts signed long before AIG got into trouble. And while AIG should have tied bonuses to the company's actual health and financial performance, and while the individual executives should have shown the moral fiber to turn down the bonuses, the fact remains that the bonuses were completely legal and in fact binding upon AIG; the company had little choice about paying out the bonuses. The contracts were legal, binding, and inflexible.

And by the way, that money does not belong to Senator Cornyn, you, me, or anyone else. If every person at AIG chose to return their bonus money, it would not be a case of "us" 'getting our money back' - it would just go to the government to be used on some other pork-heavy project blessed by the political mandarins of the Potomac.

So, we're left with two possible judgments on Senator John Cornyn of Texas, Republican and purported conservative. Either he's too stupid to understand what bill of attainder and ex post facto mean, and why such laws are unconstitutional (not to mention the devastating effect they would have on business, if it were to become the practice of government to abrogate contracts in order to coerce behavior to its whim no matter what is contractually stated), and too lazy to learn about the issue before declaring what he means to do about it; or John Cornyn is as corrupt as the Democrats, willing to ignore the Constitution in order to score a few cheap political points, to penalize a legal if inept business with taxes just to hurt them for obeying their contractual obligations, and to abandon the principles of conservatism and free enterprise in order to fit in with people who are America's enemies. Lazy moron or America-hating crook, he's one or the other.

Over eighty Republicans supported the attempt to break the Constitution in order to punish a company for a lawful act. So it's not as if Senator Cornyn is an outlier here. He's just a bad liar.


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Comments (24)

Good post, DJ. It's infuri... (Below threshold)

Good post, DJ. It's infuriating to see Republicans try to spin liberal populism with their own set of half-truths just in order to pick up a few points in opinion polls.

Another point about AIG (from a good Instapundit link) is that much of its current executive staff are "newbies" so to speak, at AIG. The executives and managers who signed off on those horrid credit-default swaps are already out the door.

So Congress is in fact largely punishing those who were hired by AIG post-meltdown in order to clean house and get the company back on its feet. Isn't that partly what the AIG bailout money was for in the first place? Like any other business, AIG uses perks and bonuses in order to attract top talent. If Congress forces banks and financial institutions who took TARP money to take bonuses and other perks off the table when hiring new managers and executives, then they will not be able to recruit top talent, because other companies who can offer perks and bonuses will be a much more attractive employment option.

Those left behind to clean up the mess, the majority of whom never lost a dime for AIG, now feel they have been sold out by their Congress and their president.

"They've chosen to throw us under the bus," said a Financial Products executive, one of several who spoke on condition of anonymity, fearing reprisals. "They have vilified us." . . .

If they did walk out the door, who would volunteer to work at the Chernobyl of the financial world? And what would become of the mammoth portfolio that remains?

"It would become the biggest naked position on Wall Street," one longtime Financial Products executive said, "and everybody would exploit it."

Well put. We need to... (Below threshold)
plainslow:

Well put.
We need to vote for anybody except who's already there in 2010.

Either he's too stupid t... (Below threshold)
Brian:

Either he's too stupid to understand what bill of attainder and ex post facto mean, and why such laws are unconstitutional

I'm sure he does understand. But he also understands that those legal concepts don't apply here. Congress has been passing retroactive tax laws since 1913, and the SCOTUS has unanimously upheld them... twice. Don't you read Wizbang these days?

So Brian, if an unconstitut... (Below threshold)
DJ Drummond:

So Brian, if an unconstitutional act gets SCOTUS blessing, you're saying that we should just ignore what is actually written in the Constitution?

It's no news flash that even SCOTUS screws the pooch at times - Dred Scott for example, or the Kelo decision. But it's passing absurd to argue that a bad decision invalidates the Constitution itself.

Excellent point! What scare... (Below threshold)

Excellent point! What scares me is that if they can do this to AIG then they can do this to anyone.

http://franklinslocke.blogspot.com/

I've sent several different... (Below threshold)
GarandFan:

I've sent several different letters to the RNC stating that the Dem's can shoot themselves in the foot on a daily basis for all I care. The RNC isn't getting a dime of my money until they clean up their own act.

I agree with you (surprise)... (Below threshold)

I agree with you (surprise) on your points about Cornyn. But you're off with "And while AIG should have tied bonuses to the company's actual health and financial performance, and while the individual executives should have shown the moral fiber to turn down the bonuses". These bonuses were NOT performance based bonuses, they were retention payments promised to employees (some newly hired, some who were around earlier) in order to get them to accept the job and/or keep them from jumping to greener pastures. These employees did what they have been hired to do (stick around, do their best to minimize the damage) so why should they have turned down the payment?

Steve, read my post again. ... (Below threshold)
DJ Drummond:

Steve, read my post again. I said AIG "should" have tied the bonuses to performance; the complaint is that the money was not 'earned'.

DJ: these 'bonuses' WERE ti... (Below threshold)

DJ: these 'bonuses' WERE tied to performance, with performance in this case defined as (1) satisfactory job performance (which in itself could be defined as not being fired for incompetence) and (2) the employee performing satisfactorily for a designated period of time. Granted they weren't traditional Wall Street bonuses which are tied to the profitability of the business unit, but they were still bonuses (defined as payments beyond the bi-weekly paycheck) that were earned by the employee's performance.

You have to remember that "... (Below threshold)
cirby:

You have to remember that "bonus" (when used in this context) isn't what most people think of when they hear the word. If most people receive a bonus, it's something they get on top of their regular wages because they did a great job.

In this case, the "bonus" is really a "retention payment" that was paid out in order to convince the recipient to stay on the job and not run off to safer employment.

Another thing to remember is that a lot of these people had nothing to do with the original screwups that led to the crisis, and were brought in to try and fix things. Once this finishes up and their groups are closed down (and you know they will be), they're going to be out of work for a while - and most decent companies won't want to hire anyone who's been anywhere near this fiasco.

The message is already sinking in: if a company gets into trouble, bail out fast. Don't try to fix things, don't stick around for the extra money, just run.

And, most specifically, don't cooperate with the government.

Again Steve, here's what I ... (Below threshold)
DJ Drummond:

Again Steve, here's what I wrote:

"while AIG should have tied bonuses to the company's actual health and financial performance, and while the individual executives should have shown the moral fiber to turn down the bonuses, the fact remains that the bonuses were completely legal and in fact binding upon AIG"

There are two general problems here. One is the culture of Wall Street, which sees itself as immune to normal business conditions. The other is Congress, which sees itself as exempt from all reality it does not like.

So Brian, if an unconsti... (Below threshold)
Brian:

So Brian, if an unconstitutional act gets SCOTUS blessing, you're saying that we should just ignore what is actually written in the Constitution?

I'm saying that if you start confidently declaring the opposite of almost 100 years of case law and Constitutional interpretation with no new arguments to put forth, you have a lot bigger problems than what Cornyn thinks.

these 'bonuses' WERE tie... (Below threshold)
Brian:

these 'bonuses' WERE tied to performance, with performance in this case defined as (1) satisfactory job performance (which in itself could be defined as not being fired for incompetence)

And it could also be defined as not making decisions that result in the destruction of the company.

Brian, I am not aware that ... (Below threshold)
DJ Drummond:

Brian, I am not aware that SCOTUS has redefined 'ex post facto'. What is your primary statutory source or legal precedent for contending that penalizing these AIG bonuses is constitutional, in light of the contracts predating the bailout, and the Dodd clause specifically protecting the bonuses from exclusion?

Being from Texas Cornyn, un... (Below threshold)
Deke:

Being from Texas Cornyn, unfort., is one of my Senators. He's the main reason why I re-registered as an independent, still conservative, but I REFUSE to support the Republican party anymore. When he was up for re-election in the last cycle his campaign, to sum up, was basically, "I'm John Cornyn, I defended Bush, wear a cowboy hat, have no core principals and am better than the Democratic alternative who will tax you to death" The whole campaign was full of commercials and talking heads with the basic premise of " He's better than the alternative"

Well for myself I'm SICK and TIRED of this being the Republicans only campaign slogan, better me than the Democrat just doesn't cut it anymore. Wake up America, quit being sheep!

A couple of small quibbles,... (Below threshold)
Bruce Henry:

A couple of small quibbles, Mr Drummond, if I may.

"Since they seized power in 2006." Wha? That seizure was called an election.

And, correct me if I'm wrong, I very well could be, but weren't the auto workers of Detroit told they'd have to renegotiate their legally-arrived-at contract if the industry was gonna get bailed out? Who was squawking about ex post facto then?

By the way, I agree with the conservatives here that this whole bonus brouhaha is pretty silly. It's a relative drop in the bucket,and politicians are pandering up and down both sides of the aisle. Sickening.

Good afternoon Bruce. I ad... (Below threshold)
DJ Drummond:

Good afternoon Bruce. I admit 'seized power' is a bit strong, but then again every one of the Democrats' major campaign promises turned out to be empty and false, so it's a stretch calling it an election, at least as elections were meant to be done. I won't go into it now, but leading Democrats admitted later that they made false and misleading statements in order to win, and that still sticks in my craw.

As to the unions, I opposed the 'bailout' from day one, not least because it was not feasible to fix the automakers' problems with the plan that was proposed. Then as now, of course, the weasels in Congress from both parties were looking to buff up their PR rather than actually solve the problem --- that's too close to doing real work. So they punched up a plan which gouged taxpayers, ignored the people in deepest need, and waddaya know, didn't fix the problem.

Finally, as much as I respect President Bush, he pretty much did a Davey Crockett his last few months - Crockett told the public "you can go to hell, I'm going to Texas" and it looks like W took the same tack. Not that Congress was trying to work with him on any count, but all the same I wish the President had shown some backbone there.

Just saw on Fox News some L... (Below threshold)
Stan50:

Just saw on Fox News some Liberal constitutional lawyer saying that the AIG bonus take away did not in anyway come under the bill of attainer or ex post facto clauses. To that I call bullshit. This asinine bill does so come under these two clauses.

I am waiting for someone to appeal this bill to the Supreme Court and kick Barney, San Fran Nan and all of the other idiots that voted for this madness with a size 12 steel toed boot right in the keister.

bh - "And, correct me i... (Below threshold)
marc:

bh - "And, correct me if I'm wrong, I very well could be, but weren't the auto workers of Detroit told they'd have to renegotiate their legally-arrived-at contract if the industry was gonna get bailed out? Who was squawking about ex post facto then?"

While basically true, they haven't done any renegotiating. Both GM and Chrysler have received funds and are operating under the UAW contracts that were in place prior to getting cash from the taxpayers.

Ford, who declined the funds, is the only company to rework existing UAW contracts.

Reportedly Ford's contract will be a model for both GM and Chrysler but I wouldn't hold out much hope.

The UAW negotiating teams that work with those two companies have traditionally been more militant than those working Fords contracts.

If tradition holds the UAW will screw both GM and Chrysler.

If tradition holds the U... (Below threshold)
hyperbolist:

If tradition holds the UAW will screw both GM and Chrysler.

But no harder than the Informed American Consumer already is, and ought to be. Seriously, screw those companies. It's the 21st century, and they do not belong here.

The AIG bonuses certainly are a red herring in the broader context of the whole financial fiasco, at 1/10th of one percent of the overall pool of monies from which they were drawn; couldn't one say the same thing about the earmarks in the stimulus bill, which amounted to one percent of the total?

People are far too easily distracted by the fundamental issue, and people all over the world should be very nervous about 1) Obama's willingness to dwell on tangents; 2) both parties playing politics when they should be deferring to economists who weren't totally blindsided by this fiasco; and 3) Tim Geithner's puzzling insistence on giving money to the same f*ck-ups who f*cked everything up in the first place.

Hey, don't worry everybody, Asia's hiring! $25,000/year with paid accommodations to live in Tokyo or Seoul. I paid off half of my student loans in twelve months. Sure beats the night shift at Wal-Mart.

"And by the way, that mo... (Below threshold)
Oyster:

"And by the way, that money does not belong to Senator Cornyn, you, me, or anyone else. If every person at AIG chose to return their bonus money, it would not be a case of "us" 'getting our money back' - it would just go to the government to be used on some other pork-heavy project blessed by the political mandarins of the Potomac."

I especially agree with that. While some of our "leaders" are using the language of "giving this money back to the taxpayers" I'm rolling on the floor laughing. They're not giving this money back to us. They'll just allocate it to some other project they deem needful. In the meantime we're supposed to stand behind the Cornyns and the Pelosis and what ever jackass uses language to play on our emotions and say, "Yeah! Give the money back to the guys that let you have it in the first place because they wouldn't read their own legislation!"

Somehow, that doesn't inspire me.

This whole charade - this entire debacle - is absolutely sickening. And it's embarrassing that some people actually fall for the games they're playing.

Even if people come to thei... (Below threshold)
Mac Lorry:

Even if people come to their senses and realize Liddy, Geithner, and Bernanke were right to pay the bonuses, it's too late to go back. The individuals who have the needed knowledge and skill to wind down the 1.6 trillion portfolio have been demonized, denigrated, and threatened with criminal prosecution by our lawmakers. Rumor is that most of them are giving the money back and resigning. Yes, Congress here's your 165 million back and BTW, here's this 1.6 trillion dollar monster that will eat the heart out of the economy if it's not skillfully kept in check on a daily basis. Good luck, you're going to need it. More here...

Brian, I am not aware th... (Below threshold)
Brian:

Brian, I am not aware that SCOTUS has redefined 'ex post facto'.

They haven't redefined anything. They've been defining it the same way, which is contrary to your understanding of the law, for about two centuries now.

What is your primary statutory source or legal precedent for contending that penalizing these AIG bonuses is constitutional

Since you apparently haven't read the multiple times I've already cited multiple sources in other threads, try this one:

In the early 1980s, Congress created a tax deduction to encourage people to sell stock in a company to that company's employee stock option plan (ESOP). ... Congress in 1986 repealed the tax deduction and applied the repeal retroactively, costing the estate more than $600,000. Justice Scalia's comment notwithstanding, the Supreme Court unanimously upheld the government's assessment of the tax.

In April 1976, E. M. Darusmont ... had to pay tax on only half that amount. Then, in October, President Gerald Ford signed the Tax Reform Act of 1976, which retroactively increased the minimum tax. The Darusmonts had to pay an additional $2,280, which, for a family like the Darusmonts, in 1976 dollars, was not an insubstantial sum. This outcome wholly undercut their planning, yet the Supreme Court upheld the government's assessment of the tax.
...
Congress has been adopting retroactive tax increases for a very long time, essentially since the 1930s. The 1913 Revenue Act was the first one with an effective date before the date of the actual enactment. Generally, the increased tax rate is applied retroactively to the year in which it is enacted. But in 1918 and 1926, each of the Revenue Acts was applied to the entire calendar year that had preceded enactment. As early as 1935, one commentator pronounced restrictions on retroactive taxation to be "dead."
...
Since the 1930s, the courts have tolerated such retroactive legislation. The Supreme Court has narrowly construed most of the traditional constitutional protections against retroactive laws. Many Americans mistakenly believe that retroactive legislation is barred by the ex post facto clauses, which apply to both Congress and state legislatures. Since at least the early part of the 1800s, though, the ex post facto clauses have been interpreted as applying to criminal laws only.

Brian, your response does n... (Below threshold)
DJ Drummond:

Brian, your response does not address the questions; simply quoting an opinion piece, and that done out of context, hardly stands as legal precedent. Further, you saying that the court has ignored Ex Post Facto and Attainder clauses does not mean it is at all the case. And as I pointed out already, a bad decision (or more) by even the high court does not alter what is actually written in the Constitution.

I've blown my nose in something stronger than your argument that this action is somehow constitutional, even if President Unicorn has given it his blessing.




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