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"every legal avenue"

By Jack M. Balkin

The New York Times reports that President Barack Obama has called on the Secretary of the Treasury to "pursue every legal avenue" to prevent the payment of bonuses by AIG to the architects of the world financial crisis we are now in. This suggests that lawyers will be asked to pore over existing legal materials and statutes to find out if they can be prevented (or if the Merrill Lynch bonuses can be recaptured).

But why isn't the "legal avenue" broad enough to drive a Mack truck through? Congress could pass an act literally in the next week stating that a) no contracts between banks or other financial entities receiving any federal bailout money and their employees relating to bonuses be implemented; and b) that all bonuses received by employees of banks and other financial entities receiving any federal bailout money since, say, Dec. 1, 2008 (this would apply to Merrill Lynch just fine) at the rate of 100%. If a state did the former, there would be a Contract Clause problem. But the Contract Clause prohibiting the "impairment" of contracts applies, textually, only to state governments, not to the national government.

I have run these suggestions by the "conlawprof" list, and no one (yet) has registered a constitutional objection. So why isn't President Obama or a relevant Senator or Representative taking the lead on such populist (and popular) legislation that would deprive the pigs of their ill-gotten (though not at the time illegal) gains? Why should we believe for a New York minute that the federal government has its hands tied with regard to the bonuses? Perhaps it would be bad policy (though I'm not sure why), but that has nothing at all to do with its constitutionality.

UPDATE: Anyone interested in this issue should log onto Glenn Greenwald's discussion, which certainly blows the whistle on the Administration's claims, led by Larry Summers, that adherence to contracts is sacred within the US. Why is President Obama allowing his Administration to appear like a Gulliver tied up by the Lilliputians? Are we really a paper tiger when faced with the pigs at the trough at the late Merrill Lynch and the all too alive AIG? If he can't stand up to them.....

Full post as published by Balkinization on March 16, 2009 (boomark / email).