Academic

Last week, I wondered what the response from Wall Street would be to the bank tax.  Yesterday, reports were circulating that a lobbying arm for the banks had hired Carter Phillips, the noted Supreme Court litigator, to examine whether the proposed tax would be unconstitutional.    (I hate it when people through out constitutional law into corporate issues -- it's like hitting the weak groundball right through a gaping hole in the outfield.)

The WSJ Blog asks law prof Jonathan Adler whether the tax would be unconstitutional as a bill of attainder.  Those are words I have never used in casual conversation, but I take it to mean that taxes that are focused on an individual or small group as a penalty are a no-no.  Prof. Adler says this tax probably isn't because the group isn't small enough and no firm is individually named.  (Here is a short Volokh Conspiracy post he also penned to the same effect.)  The NYT says that law prof Lawrence Tribe agrees, although they cite as his reasoning that "imposing a fee or requirement to return a sum of money cannot be construed as a punishment."  I'm not sure if the person asking the question reminded Prof. Tribe that the TARP money had been fully repaid months ago. 

I wish I knew enough about constitutional law to argue.  I think 35 firms is a small number, particularly when a handful of those firms will pay the bulk of the fee.  I also understand that the proposed tax doesn't name any of the firms, but I also think that at some point creating a category of financial firms with assets over $50 billion, but not hedge funds, Chrysler, GM, Fannie Mae or Freddie Mac gets pretty close to targeting some specific firms.  But it sounds like successful challenges to taxes on these grounds are fairly rare.  Maybe we'll have a tax that will be levied on all female corporate law professors who graduated from law school after 1992 who have blonde hair.  I hope Carter Phillips is available at that time.

And of course, this is all part of a negotiation strategy.  What does Wall Street fear worse?  The bank tax?  Executive compensation regulation?  I guess we'll see what shakes out.