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  1. #1
    Babylon Candle Venom's Avatar
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    Default Why is everyone so upset about AIG bonuses being contractually fufilled?

    I get that people are upset that the executives now getting bonuses, but are people really willing to allow the government to break contracts and retroactively tax a select few at 90%, just to appease mob rule? What happens when the government decides that a certain other group is "making too much money"? Is no one else concerned that Bawney Fwank said, "The time has come, for us to take over the company!" Are we really heading down this road of having the government step in whenever people are upset about "making too much money?"

    And just as an aside, if congress had written in something into their original bill about curtailing bonuses (before AIG accepted the $), that would be a completely different story IMO.




    Would an AIG-Bonus Tax Pass Constitutional Muster? (A Tribe Calls ‘Yes!’) - Law Blog - WSJ


    The most current proposal: tax the bejeezus out of the recipients. Senate Majority Leader Harry Reid and other congressional Democrats have proposed a 91 percent tax. There are problems with this, too. The NYT writes that some of the AIG employees are thought to be foreigners based in offices abroad and not liable for U.S. taxes.

    But could such a tax also run into Constitutional problems? Some pundits (for example, here and here) have suggested yes. The most commonly mentioned difficulties include the prohibitions on so-called Bills of Attainder and retroactive laws (laws passed Ex Post Facto) mentioned in Article I, Section 9 of the Constitution. Other possible problems brought to our attention deal with the Contract Clause of the Article I, Section 10; the Due Process Clause of the Fifth Amendment; and the Takings Clause of the Fifth Amendment.

    For a little help with this, we turned to Harvard’s Laurence Tribe, he of the canonized treatise “American Constitutional Law.” In an email exchange, we asked Tribe to address each of the five possible constitutional problems and he determined none of them likely poses a problem.


    lifted from the "comments" is a pretty good response to the harvardite cited in the article.

    are 1) the whole point of this law would be *not* to “pass[] a . . . broad law” but one that “target[ed] a closed class.” Just because the executives aren’t named, if the legislation in practice served only to strip a couple hundred execs of their bonuses, it seems that it could be vulnerable to a Bill of Attainder challenge. 2) even though a tax is generally not a taking, when you are taxing at a rate approaching 100% it seems that the courts similarly would have to consider looking through the nominal character of the act to its practical effect. Otherwise, the next time it needed to build a road through my house, my state could decide that it was necessary to levy a 95% “tax” on my house and use that as leverage to take my house without providing just compensation.

    I think Tribe is looking at this from too abstracted a viewpoint: If Congress passes a law that, in effect, simply yanks these bonuses, there are serious questions about that act’s legitimacy.

  2. #2

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    Quote Originally Posted by Babylon Candle View Post
    I get that people are upset that the executives now getting bonuses, but are people really willing to allow the government to break contracts and retroactively tax a select few at 90%, just to appease mob rule? What happens when the government decides that a certain other group is "making too much money"? Is no one else concerned that Bawney Fwank said, "The time has come, for us to take over the company!" Are we really heading down this road of having the government step in whenever people are upset about "making too much money?"

    And just as an aside, if congress had written in something into their original bill about curtailing bonuses (before AIG accepted the $), that would be a completely different story IMO.
    I think you're missing the point. This is a company that through utter incompetence and profligacy put itself in a position that would have resulted in bankruptcy were it not so important to the world economy that it stay afloat. So the government handed it a giant chunk of cash to stay solvent, and it hasn't altered one of the practices that led to its demise in the first place (i.e., rewarding people who ruined the company with lavish bonuses.)

    I understand that these bonuses are contractual, but...

    1. The company would have been unable to pay the bonuses had the government not stepped in, so the contract would have been broken anyway.

    2. When you get bailed out, your benefactor gets to tell you how to do business. If you took out a business loan for a failing car dealership, you think the lender doesn't have a right to tell you to stop selling BMWs for ten dollars? It's the exact same thing.
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  3. #3
    ish red no longer *sad* nightning's Avatar
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    People are upset over a matter of principles. A bonus ought to be given for a job well done. If you performed so poorly that you've bankrupted the company... do you deserve any sort of bonus? Not to mention the bonus is coming out of pockets of the general tax payers.

    If you can't outright demand the bonus to be returned... about the only thing you can do is tax it heavily to get it back. People are okay with this because it's illegitimate gains in their opinion. If that's the most effective fix to the problem, why not?
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    The politicians who made this mess in the first place can't take their vote back, just like the government can't take back the provision that allows AIG to fulfill their contracts and give bonuses, which by the way they do because Clinton went and passed a law to limit executive pay (through taxes I believe), so AIG had to go around it and give them payments through bonuses at the end of the year. But I guess this wont stop the government from creating more tax code in order to tax just one company, after they allowed them to fulfill their contracts. This is ridiculous on government and AIG's side, to the point where from day one I could not trust that the outrage expressed by congress was genuine or well placed, and now I am especially sure. Political showboating and misleading the public to direct their anger at something that on the whole is not nearly as ridiculous as everything else that is going on. This is child's play compared to how they pushed banks into taking bailout money, and then pay billions to AIG only for OVER HALF of it to go to foreign banks. Let me show you what I mean.

    [youtube="k4tK0h5QZs0"]1 AIG bailouts[/youtube]
    [youtube="ZPlDffneO94"]2 Where the AIG money goes[/youtube]

    Whenever the government speaks on an issue, I find they are completely untrustworthy in the perspective they are trying to push. I don't like that they are evading constitutionality in trying to target one company and tax them in order to punish them. It's ridiculous. They made these contracts before this economic crisis began, and have had this same sort of bonus setup FOR YEARS because of Clinton policies. This political grandstanding is just diverting people's attention and anger from where it should be, and woe to those who fall for it. Everything these people are doing (government, companies, and banks alike) is seeped in bull shit.

  5. #5
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    Quote Originally Posted by Babylon Candle View Post
    I get that people are upset that the executives now getting bonuses, but are people really willing to allow the government to break contracts and retroactively tax a select few at 90%, just to appease mob rule?
    Why should we want to protect crooks who thought that they can continue their pillage with impunity? Their sense of entitlement was so strong that they didn't even care to hide their activities. They're lucky they didn't get prosecuted.

  6. #6
    Senior Member lowtech redneck's Avatar
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    Quote Originally Posted by Not_Me View Post
    Why should we want to protect crooks who thought that they can continue their pillage with impunity?
    To protect ourselves through the rule of law, thereby limiting government capacity to abuse their power. Sooner or later, the mob WILL turn against you (in the form of something important to you if not directly), often at the instigation of a democratic government unrestrained by classical liberal safeguards on their powers, seeking an excuse to appropriate even more power for themselves while simultaneously expanding their power base.

  7. #7
    Senior Member lowtech redneck's Avatar
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    Quote Originally Posted by Risen View Post
    Whenever the government speaks on an issue, I find they are completely untrustworthy in the perspective they are trying to push.
    I wonder if this is going to lead to another alternative-minimum tax type fiasco in the future....

  8. #8
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    Quote Originally Posted by Babylon Candle View Post
    And just as an aside, if congress had written in something into their original bill about curtailing bonuses (before AIG accepted the $), that would be a completely different story IMO.
    One of the drafters admitted he left in a loop hole for bonuses to be given.

    This is OUTRAGEOUS! Greed and corruption are rampant and if someone threatened you and took $10 from you, they'd go to jail. But, since this is done through legal means, when someone takes $1000 from you, it's "okay".

    This is white collar crime to me.

    There is absolutely no sense of propriety, proportion, or RESPONSBILITY.

    Bail-out money is a critical last-ditch effort meant to be used RESPONSIBLY and WISELY with good faith that a corporation will attend to their MOST PRESSING needs and their fundamental structure and issues.

    WTH does a bonus have to do with that??? OMG, so someone can buy another Lexus or a get a timeshare? How is that going to save the company? Save the economy?

    Bonuses are absolutely NOT what the majority of tax payers or the signers of the bill intended for this money to be used for.

    People are outraged because they feel duped And most people are not so daft that they are going to blindly give all this money over and assume that whatever way is spent is the "best" use of that money.

    CEOs can make decisions based on THEIR bonuses and tank a company and get fired but still get millions as part of their severance while all the other workers and their dependents and customers and their dependents - we're talking potentially hundreds of millions of people and the quality of their lives - is negatively affected just so one person at the top can gloat and have ungodly amounts of disposable income.

    The idea of bonuses is that you EARN them as a reward. It is a BONUS because it's a perk, an extra. If companies are in the black and choose to do this with THEIR surplus cash that they earned for conducting a successful business, that's one thing - but how dare they use my tax dollars as corporate welfare for EXTRANEOUS, unecessary excessive stuff when the economy is tanking and a lot of people are having trouble finding work and everyone else has to buckle down???

    And I hate paying taxes! Most people do! As tight fisted as we are with our own money, yes, it's going to really piss people off to see others get a "free ride"

    This is the ire people feel about taxes in general and with the idea of "welfare", however in this case, I can't even see any argument about how executive bonsues are in any way critical or necessary for the betterment of either the economy or society. There are SO MANY other ways that money could be put to better use.
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  9. #9
    Don't pet me. JAVO's Avatar
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    Because...

    When I go to McDonald's to get a cheeseburger, I want a smart, business-savy former CEO handling the transaction, not some snot-nosed high school kid like I used to have to deal with. This country has new standards in customer service!

  10. #10
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    Personally, I think if AIG wants to get all sticky about following the letter of its contracts, we should also allow lending institutions to enforce the letter of their mortgage agreements, which of course are also contracts.

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