Is Superfund a 'Bill of Attainder'?

Rep. Carolyn Maloney is circulating a bill that would try to claw back bonuses taken by employees of firms that had to be bought by Uncle Sam. I'd quibble with the terms of her proposal, and, although I've suggested something like it myself, I'm not sure this is a road we want to start down.

I am sure, though, that this idea — levying a special tax on people who were paid very large sums of money in recent years by firms that have been expensively rescued by the Treasury — deserves to be a part of the mainstream debate. Let it be thoroughly vetted, then enacted or rejected after careful consideration.

Conor Clarke suggests that such a bill would be unconstitutional on its face. I think he's wrong about that. He cites the following line from the US Constitution:

No Bill of Attainder or ex post facto Law shall be passed.

I am not a lawyer, but I don't think this prohibition would much apply, as long as the tax is civil and remedial in nature, rather than criminal and punitive. Consider the so-called "Superfund" law, which made polluters liable for cleaning up environmental messes, even though that liability may not have been written into law at the time when the polluting was done. The current banking crisis strikes me as quite analogous to the Superfund situation: A large class of private actors have caused harms that must be remedied. While the state has no choice but to pick up some of the tab, it also identifies the responsible party and holds them partially liable for the mess they have made. We even use the same words: It's all about "toxic waste".

Thanks to Google books, I can quote Daniel E. Troy, of all people, the former chief counsel of George W. Bush's FDA. (There's something fitting and ironic about that. Look him up.) In Troy's book Retroactive Legislation (1998), he writes:

Carefully assessed, the argument that CERCLA [Superfund] is unconstitutional is in tension, at least, with the Supreme Court's current interpretation of the ex post facto and bill of attainder clauses. It may also be at odds with the original understanding of those clauses.

A Bill of Attainder? The contention that CERCLA violates the bill of attainder clause may be dispensed with easily. Under the Supreme Court's current case law, the class "responsible parties" is almost certainly not sufficiently small to warrant treatment as a bill of attainder. The Court, which has not struck down a law under the bill of attainder clause in thirty years, is not likely to consider CERCLA a "legislative punsihment . . . of specifically designated persons or groups." Moreover, as we have seen, the bill of attainder clause was originally understood to prohibit laws that affected life and liberty only.

An Ex Post Facto Law? Because the ex post facto clauses do not apply to civil laws, Superfund therefore would have to be characterized as punitive in nature to be classified as an ex post facto law. The current Court, though, has suggested that unless a law is exclusively punitive, it will not come within the scope of the ex post facto clauses. Although CERCLA certainly has a punitive element, it is hard to contend, under the relevant Supreme Court test, that it "may not be fairly characterized as remedial, but only as a deterrent or retribution." [emphasis original]

Speaking personally, I might prefer that Clarke's naive interpretation of the Constitution were binding. Again, I don't like the taxback approach, it puts us on a slippery slope to a lot of things I'd find disagreeable. But then I also dislike it when idealistic protections apply to the wealthy and well-connected while ordinary people have their vehicles forfeited 'cuz the cop said he smelled pot. And the scale of the injustice to be remedied here viz the financial system is immense. I think we should carefully consider all our options, and hire very good lawyers. We certainly oughtn't take the CEO of AIG's word for it that nothing can be done.

I would point out that effectively ex post changes to civil law are quite common. Greg Mankiw is teasing Larry Summers today for supporting ex post changes in contracts with respect to so-called mortgage cramdowns. But the 2005 bankruptcy law also amounted to an ex post change in the terms of nearly all debt contracts, as did the original prohibition of cramdowns on a principal residence, which had fallen within the ordinary powers of a bankruptcy judge until the late 1970s.

The law may be the law, but it is also a battlefield upon which people play to win and hypocrisy is everywhere. I'd like to be idealistic, but if that means a kind of "unilateral disarmament" under which the least idealistic run roughshod, we'd better try a different strategy.

Update: Marc Ambinder (ht Clusterstock) reports on a tax clawback proposal by Rep. Gary Peters.

A suggestion for Congress: Tax clawback proposals should be written to apply to a rational and preferably large class of people — singling out AIG bonus recipients won't fly. I'd suggest setting specific support criteria for firms (e.g. firms to which at least $2B of Treasury funds were provided or $10B of assets guaranteed, with support not returned or relinquished prior to September 20, 2009), income floors for individuals (e.g. applies only to income over $1M in any year between 2004 and 2009), a high but not outrageous tax rate (maybe 50% of earnings above $1M, not 100%), and a generous repayment schedule (payment of taxes under the act due can be spread over a five-year period). All in all, a proposal should be a reasonable means of identifying agents who benefited extensively from activities that induced a government bailout and asking them to contribute alongside taxpayers to a remediation effort.

Comments

[NYNapoleon:]

The proposed bill is not a Bill of Attainder because, among other things, it contains no proposed criminal penalty. Instead, the proposed law is a retroactive one which is disfavored. However, Congress clearly has the Constitutional authority to ebact legislation having a retroactive effect. The Supreme Court has spoken to this issue over a decade ago on the Landgraf decision.

Conor Clarke's curriculum vitae states that he is a Marshall Scholar. His ability to make a foolish comment in complete ignorance of controlling facts could have qualified him for a job in the Bush Administration. Now, however, it just calls into question the methods used to select Marshall Scholars.

Mar 17 09:02 AM

[petyaczar:]

This proposal by the politicians is certainly Unconstitutionalm abd its outside the scope of their authority.

How about we institute a new LAW that makes each and every politician responsible for meeting and fullfilling their campaign promises ro the voters. Afterall this is the basis upon which each politician was elected.

Under the new law, failure to meet campaign promises would result un impeachment of the polutician, disbarment, a Claw Back of all compensation earned by the disgraced politician and reduction of all benefite (retirement, healthcare, etc) to ZERO.

O/m confident Rep. Carolyn Baloney wouls be the first in line to qualify for such treatment.

I am outraged by the compensation and benefits these political jerks carve out for themselves.

IMO

Mar 17 09:18 AM

[Alan Young:]

If we are going to enact legislation with retroactive effects, great!
All unregulated derivatives could simply be voided by retroactive legislation. POOF! No more toxic assets!
I could think of a lot of great tricks to play this way. All it takes is "political will."

Mar 17 10:30 AM

[Buckoux:]

petyaczar: "How about we institute a new LAW that makes each and every politician responsible for meeting and fulfilling their campaign promises to the voters".

Such a "LAW" already exists, "petyaczar", and it is called an election. That the body politic is too ignorant, too incompetent or to distracted to vote bums like Barney Frank, Maxine Waters and Chris Dodd out of office will not be remedied by any new "LAW". The people get the government they deserve.

Mar 17 11:12 AM

[robert.b.fe...:]

These politicians are stepping way past their authority regarding contracts. They can't cry about their poor performance in writing the bail out legislation with no safe gaurds in place. Most of them didn't even bother to read it before they voted it in to law. If they didn't want the bonuses they weren't forced to bail these clowns out. Bankruptcy would have done the trick in voiding the contracts. I hope that all of the financial firms that were coerced in to taking TARP money to help hide the insolvent banks from us give the money back. Then we can all see who is swiming with no clothes on.

Mar 17 11:19 AM

[SDD:]

Imagine this scenario. I buy bonds of XYZ Bank at 5% interest promised. At the end of the term, the Bank says "No 5% interest, in view of our financial situation at present, take 1% interest and take it or leave it."
Would you justify this as ex post facto alteration of a contract or would you use some other fancy term? would such a term as 'Contract' have any meaning? could I alter my contract with my bank on my home loan using such spurious arguments?

Mar 17 01:29 PM

[petyaczar:]

DEar buckoux,

Let's "Clawback" the election, and force all candidates who won office thru fraudulent means to be driven from office, stripped of all salaries,benefits, including healthcare and pensions.

The politicians caused this socalled crisis thru their D/A legislation including but not limited to Sarbanes Oaxley, Mark to Market Fasb 157 elimination of the uptick rule and Glass Steagall Act.

Lets throw the bums out!!!!!!!!

Lets make lieing to get elected a guaranteed loser strategy as you will be unelected thru action of law.

IMO


On Mar 17 11:12 AM Buckoux wrote:

> petyaczar: "How about we institute a new LAW that makes each and
> every politician responsible for meeting and fulfilling their campaign
> promises to the voters".
>
> Such a "LAW" already exists, "petyaczar", and it is called an election.
> That the body politic is too ignorant, too incompetent or to distracted
> to vote bums like Barney Frank, Maxine Waters and Chris Dodd out
> of office will not be remedied by any new "LAW". The people get the
> government they deserve.

Mar 17 02:15 PM