Friday, March 27, 2009

AIG Outrage: Appropriate or Misguided?

American International Group (AIG) has been front and center over their contractual obligation to pay executive bonuses. President Obama questioned the merits of AIG paying executives a bonus due to questionable lending practices of AIG and the TARP funds accepted. President Obama was not alone in calling in question the payment of AIG executive bonuses. CEO Edward Liddy was brought before a Congressional hearing this past week to explain the bonuses paid to AIG executives and asked for the executive names. To CEO Liddy’s credit he refused to give names out of fear of the safety of the executives and their families. Since CEO Liddy’s appearance several executives have agreed to pay back their bonuses. Executive vice president at AIG’s financial products division saw Jake DeSantis resign and profess that he will donate $742,000 of after tax bonus money will be donated to charity in an Op-Ed column in the New York Times.

DeSantis and others executives at AIG were not obligated to pay back the bonus they contractually agreed to. The fact that many executives at AIG are “willingly giving” back the bonus money at the point of public outrage begs the question where was Congress oversight. Sen. Dodd had originally added a provision to the “Stimulus” Bill that would have prevented, proactively, the issuance of bonuses for companies taking bailout assistance. Sen. Dodd removed the language and why/who asked for the provision to be removed is still an unanswered question.

Why is the outrage not directed at Congress who passed a “Stimulus” Bill without holding a single committee hearing or taking the time to read the bill?

The House of Representative passed, 328 to 93, a measure that would levy a 90% tax on the bonuses for any company receiving more than $5B from TARP. Many contractual questions, ethical, moral, and common sense questions are raised by AIG actions. A bigger question looms.

Does the United States Government posses the ability to pass legislation of this nature?

According to Article 1, Section 9 of the United States Constitution prohibits Congress from enacting bill of attainder and ex post facto laws. A bill of attainder is any legislative act that singles out an individual or group for punishment without a trail per www.techlawjournal.com. Encarta.msn.com defines Ex Post Facto law as a law enacted or decreed after an act has been committed that may be illegal as a result of the new law but was not illegal at the time it was committed.

The measure passed by the House of Representatives, mentioned above, is a bill of attainder. Where is the outcry against the 328 House members that failed to live up their oath to uphold the US Constitution?