Legal News

With High-Profile Hire, Banks Gear Up For Possible Tax-Plan Fight

By Ashby Jones

It’s not a role we’ve ever heard a Supreme Court litigator getting hired to do: to look into the possible constitutionality of a law before it’s passed.

But it looks like Wall Street — defined here as the Securities Industry and Financial Markets Association, or Sifma — is sending a preliminary shot across the bow in regard to President Obama’s plan to tax banks. The NYT reported over the weekend that Sifma had hired Sidley Austin’s Carter Phillips (pictured), one of the country’s most experienced Supreme Court litigators.

So what’s going on here? Does Phillips really need to get cranking on this now? Not necessarily, reports Bloomberg on Tuesday. The move, writes Bloomberg, “may be aimed more at swaying lawmakers than winning a lawsuit.”

D.C.-based appellate specialist Bruce Fein calls any move to challenge Obama’s plan in court “a fool’s errand.” That said, he told Bloomberg: “[T]hey might get Congress nervous, so maybe the levy wouldn't be as heavy."

So let’s play this out a bit. What might a challenge to the tax look like? Bloomberg writes that the banks could try to argue that a bank tax would be a so-called bill of attainder, or measure that singles out a certain person or group without due process, says Baker & Hostetler’s David Rivkin.

Others, like Case Western law professor Jonathan Alder, think that a bill-of-attainder would likely fail so long as it doesn't name individual companies or target a small group. "If you put that you want X dollars from a particular bank and mention it by name, that could pose a problem," Adler said.

Under Obama’s proposal, Bank of America, the biggest U.S. lender, would owe $1.53 billion a year, or 18 cents a share, while New York-based JPMorgan, the No. 2 U.S. bank, would owe $1.52 billion. The tax would amount to 22 percent of Bank of America's expected 2010 earnings per share and 12 percent of JPMorgan's, he wrote.

Photo: AP

Full post as published by Law Blog - WSJ.com on January 19, 2010 (boomark / email).