CNN: House OKs bill taxing bailed-out firms' bonuses.- Page 3

[javero]

Posted: 3/21/09 at 9:46pm

I was referring to AIG, domestic automakers, domestic passenger airlines and former independent investment banks like Bear Sterns.

I just hate to see the insurance, investment banking and automobile industries go the way of Amtrak which many historians claim was the lesser of two evils. The other being a collapse of the entire railroad industry.

This just in--

"Connecticut and New York were the first states to request A.I.G.’s accounting of its bonuses, and now 19 states and their attorneys general have formed a coalition also seeking information from A.I.G."

The state AG's are on the march!


CT AG peeping at AIG bonuses

Updated On: 3/21/09 at 09:46 PM

[YouWantitWhen????]

Posted: 3/21/09 at 9:57pm

The state regulated parts or AIG were and are fine. The unit that got it into trouble was not part of the traditional insurance business.

Traditional, state regulated insurance products were not and are not part of the problem.

The really sad thing about all of this is that those parts of AIG that were subject to regulation were generally OK.

But, if AIG goes into bankruptcy, or there is a run on the cash value of their UL products or surrender of their annuity products, it could put great pressure on various state guarantee funds.

You have a point that in the last few years especially, consolidation of business has created not only less competition, but the risk of being "too big to fail" that we see right now.

I have a feeling that eventually, many of the rules that were unwound during the past 10 years will be re-instituted to try and prevent this from happening again. (Which, if some of those rules had not been relaxed or rescinded in the first place, may have been prevented).

[javero]

Posted: 3/21/09 at 10:24pm

I'm no attorney but it seems clear to me the difference between one of AIG's bad acting divisions and a wholly-owned Wachovia subsidiary covered by a national charter referenced in the Watter vs Wachovia case cited by yawper. It's sad that some hard working and honest folks in AIG's other divisions could potentially have to pay for the handiwork of the FPD.

Some southern Libertarian attorney friends of mine suggest that both the National Banking Act and the Federal Reserve Act should be repealed with power returned the states to regulate all banking business within their realm. And they hate the Federal Reserve. I suppose they want their own currency still as well. I can't go down that line with them though.

It does appear that Wall Street, the Treasury and the Federal Reserve seem to have an incestuous love triangle going on.

[YouWantitWhen????]

Posted: 3/21/09 at 11:21pm

It is funny, or ironic, that for insurance, we are begging for federal regulation, because state regulation is so inconsistent and inefficient.

I think that the problem has been the thought that better angels would somehow dictate business practices, which has been demonstrated is not the rule but the exception.

If you return regulation of banks to the states, I can see shenanigans as well.

Federal regulation can work, and it has in the past. From a business perspective, it is very difficult to adapt to 50 state regulations.

I would be all for federal rules that are enforced by the states. But, trying to get economies of scale (which not only benefits the companies, but the consumers as prices are reduced) are very difficult to pursue if there is state variation of regulation.

[Yawper]

Posted: 3/21/09 at 11:40pm

Relatively few state chartered banks (which number far more than nationally chartered ones) have failed during this whole mortgage mess because they are almost all overseen by the FDIC and various state agencies. Had the states been able to reign in the rampant national mortgage writers like they tried to this wouldn't be the mess it is.

National banks are overseen by the OCC - a Presidential appointment position i.e. politics - that's part of why all this crap occurred.

There should be no economy of scale involved in the banking sector. It's not required for cost purposes (banks work on a percentage of their transactions) and it allows too few people to be involved making more fraudulent manipulation possible.

[YouWantitWhen????]

Posted: 3/21/09 at 11:47pm

Yawper, I was talking specifically about insurance, and the products that are sold. Insurance is regulated on a state-by-state basis, and there is a literal maze of state-specific laws to comply with. The variations effect everything from product features that can be offered, licensing requirements, and e-signature laws.

[Yawper]

Posted: 3/22/09 at 8:28am

Federal regulation of insurance would be as much a nightmare and it has been with banking. Universal health care should not be run as an insurance model.

[YouWantitWhen????]

Posted: 3/22/09 at 10:28am

I was suggesting Federal Regulation with State Enforcement.

And, I was more specifically talking about life insurance as opposed to health insurance. Though both suffer from the same issues when you have different rules for different states on things as basic as product features you can offer, reserving requirements, replacement rules, whether a document has to be countersigned, what kind of license is required, and what is a valid e-signature. Insurance, especially term insurance has become a commodity, and as companies have been able to reduce overhead and costs, market pressures have force premiums down. (At least in the term insurance arena). Hell, from my perspective it would be better if all of the states followed the most restrictive view, because at least there would be a single benchmark to follow.

But you have your opinions, so that is fine.

For the record though, I have no idea what "universal health care should not be run as an insurance model" means."

[Yawper]

Posted: 3/22/09 at 10:34am

"I was suggesting Federal Regulation with State Enforcement."

I think you need to learn more about government.

[YouWantitWhen????]

Posted: 3/22/09 at 11:08am

No I don't.

It would deviate from current practice, but it is being discussed. One proposal would be something called the optional federal charter. It is controversial, but it is being considered.

Right now, there is federal regulation and state implementation of certain laws and regulation.

In other instances, there is federal regulation of certain areas, that only comes into play if states do not adopt specific rules and regulations (ESIGN's pre-emption provisions only come into play if sates have not adopted a relatively standard version of UETA).

What I am suggesting has been discussed but not been implemented. And yes, there are political and territorial issues with having federal regulation and state implementation.

For the record, I don't work for State Farm, but it was one of the first links that came up.



Optional Federal Charter

[papalovesmambo]

Posted: 3/22/09 at 12:24pm

i think he's gonna get crucified for it - and i'm sure his motivations are less than pure - but john kyl seems to be the adult in the room.
just wait a f****** minute here

[YouWantitWhen????]

Posted: 3/22/09 at 1:26pm

Papa, guess what, I agree with you.

Everyone needs to take a breath and take a look at exactly what his being proposed.

I usually oppose most of what Kyl says and does, but I agree with him on this.

I am hoping someone from the Democrats joins him to make everyone take a breath and just stop for a moment.

Hah. This made me laugh!

Hey Paul Krugman! Updated On: 3/22/09 at 01:26 PM

[papalovesmambo]

Posted: 3/22/09 at 8:06pm

eh, ywiw, ya make me wanna smash things on a regular basis, but you do have more sense than many of the folks around here so despite my coarse ways, i need to stay reasonably on your good side if for no other reason than to have someone with a few wits about them to argue with.

don't kid yerself though, they're doing this to try to drag the democrats across the coals and it's going to turn into "the gop wants to preserve the fat cats' bonuses and the democrats want to take back those millions for the little guy!"

[madbrian]

Posted: 3/22/09 at 8:18pm

I think politicians on both sides of the aisle are totally misreading public opinion on this. I think the outrage is overstated because those folks are picketing and sending e-mails and calling radio programs. However, this has become a popular water cooler issue, and it's hard to find anyone with much common sense who thinks it's a good idea. This hype has been created by the politicians, and the media is riding it for all it's worth.

[papalovesmambo]

Posted: 3/22/09 at 8:28pm

mb, i really believe that a lot of the democrats see this as a means to get at the rest of the bonuses too. i'm telling ya, if it passes the next step will be the gov't deciding what bonuses are and taxing everyone's bonuses. because this will have worked out so well.

[YouWantitWhen????]

Posted: 3/22/09 at 9:02pm

Well, my limited wits says thank, I think.

The House screwed this up for the Republicans. It really is a populist mess.

The Obama Administration has not come out in support of this proposal, so I am hoping that someone with sense stops this train before it gets any further.

I think the Dems see this as a way to cover up the fact that they screwed up on the bill and did not catch this. Some of those screaming the loudest are trying to deflect so they are not seen as responsible.

And, that message will only play to the base - there are plenty of moderate dems who don't like this. But then, Reid and Pelosi have been so effective in their leadership roles to begin with ...

If the Republicans were a wee bit more moderate on social issues, well, things would get very interesting. I honestly think a third party of traditional Republicans - social liberals and fiscal conservatives (aka the Goldwater way) would do quite well right now.

[YouWantitWhen????]

Posted: 3/23/09 at 3:26pm

Tribe has looked more closely at the proposal, and is now questioning with it is constitutional. This should give the Adults the room to veto this and everyone a chance to take a breath:

"Tribe had previously said that he thought the measure ? which would slap a 90% tax on bonuses for executives whose family incomes exceed $250,000 ? would pass constitutional muster. But now, after taking a closer look, he?s not so sure.

Tribe says the problem with the bill is that the Constitution forbids Congress from enacting a ?bill of attainder,? which would essentially ?legislate punishment of an identifiable class,? as he put it. Tribe noted that the Supreme Court had used that clause to slap down other laws.

Tribe says the main problem is that it?s hard to make the case that the law isn?t ?punitive.?

?Its punitive intent is increasingly transparent,? Tribe says. ?when you have Chuck Grassley calling on [executives] to commit suicide, and people responding to pitch fork sentiment, it?s hard to argue that this isn?t an attempt to punish an identifiable set of individuals who are the subject of understandable outrage.?

The whole point of opposing bills of attainder, Tribe says, is to prevent what some have called ?trial by legislature.? Tribe concludes: ?That?s the primary vulnerability.?

Tribe Says No Deal

[papalovesmambo]

Posted: 3/23/09 at 3:47pm

now, now, now, ywiw, didn't we already have a bww legal expert 'splain to us that the logic being used here by tribe is wrong, wrong, wrong? who are you going to believe: tribe or our resident bww legal expert?

[YouWantitWhen????]

Posted: 3/23/09 at 3:58pm

Well, if I am betting, I am going with the guy who wrote my conlaw text book.

Tribe did say that there could be a construct that might be constitutional, but when he looked at the provisions of the bill, he felt it may not pass constitutional challenge.

But then again, all he did was write the text book, so what does he know.

Updated On: 3/23/09 at 03:58 PM

[papalovesmambo]

Posted: 3/23/09 at 4:28pm

conlaw sounds like prison law to me and you know them cons will try to sneak anything they can past the guards.

[YouWantitWhen????]

Posted: 3/23/09 at 4:38pm

Then what does crim law sound like?

We did share a shiv with crib notes on it during study sessions if that counts for anything.

[papalovesmambo]

Posted: 3/23/09 at 4:41pm

i promised myself that if this line went any further i would restrain myself from making a hide the shiv joke. but you seem to have handled that for me.

crim law sounds like some sort of garment district specialty practice.

[YouWantitWhen????]

Posted: 3/23/09 at 6:47pm

Actually papa, during my last year of law school, we had Cardozarama - which was our version of a talent show.

We had our on version of a fashion show. Someone did a little skit with:

The civil suit,
The class action suit,
the slip and fall suit...

It ended with a non suit.

*legal rimshots*

[Yawper]

Posted: 3/23/09 at 9:10pm

"Tribe says the problem with the bill is that the Constitution forbids Congress from enacting a ?bill of attainder,? which would essentially ?legislate punishment of an identifiable class,? as he put it."

This is a tax, not a punishment.

Unless, of course, you want to start arguing about graduated tax rates and excise/luxury taxes. Updated On: 3/23/09 at 09:10 PM

[YouWantitWhen????]

Posted: 3/23/09 at 9:29pm

Yawper - I think there is evidence to support the motive behind the bill is to punish - especially if you look at the legislative history and commentary associated with its passage in the house. I understand his concern. It is a tax being used to punish certain specific behavior, i.e., bonuses being paid to those who work for firms who received federal assistance. That can be distinguished from the graduated tax rate which applies to everyone in the specific tax bracket, regardless of circumstances, as well as excise and luxury taxes, which do not look to the circumstances of the purchaser when being assessed. It is behavioral neutral. This proposal is not.

But, I honestly have no idea what will happen. I merely provided a clarification because Tribe seemed to step back from his first assessment upon a closer reading of the bill.

I am not a ConLaw scholar. I only got a B (or a B+ I am not sure anymore) in it in law school - and most of that can be credited to an essay questions on the commerce clause and the first amendment. My current practice has nothing to do with this specific issue. Updated On: 3/23/09 at 09:29 PM