Bailout pay caps – not unconstitutional

I have been dismayed by the assumptions inherent in the pay cap proposals, as well as the vast number of ways to apparently avoid the restrictions.

But this opinion page article in the WSJ, by a current Fox news legal correspondent and former state court judge, is more way more opinion¬† than article, more bald conclusion than sound deliberation. The author recounts several theories that apparently all create Constitutional-level problems with the bailout. But they’re almost all fraught with over-simplification and poor reasoning. Not a single case is cited, which might work for an article in a lesser paper, but the WSJ typically allows for a higher quality of argument, particularly from law folks. I’ve come to expect it.

Summary of the arguments:

  • TARP is for “private benefit,” not “general welfare”
  • violates equal protection by “saving some” and letting others expire
  • delegates too much spending power to Sec’y of the Treasury
  • “Salary caps are unconstitutional because they violate the well-grounded doctrine against unconstitutional conditions.”
  • Salary caps constitute a taking

Then, the author finally gets to the real argument, which is better grounded in economic theory — poor plan, reduces federalism “many experiments” analogy, central planning is un-American. Unfortunately, the author seems not to be convinced of his arguments, seeking instead to bolster the, to me, red herrings by raising the Constitutional flag.

Serious legal scholars care about the Constitution. Those arguments are not to be raised lightly or brushed aside for expedience. (Cf. the curious non-coverage of the Hilary Clinton as Sec’y of State problem — the Nixon-era arabesque seems to be what Democrats are counting on — who’d have thought a Democrat would cite Nixon as an example for ANYTHING? The political culture of Democrats during my entire life (1968-present) has been shaped, for better or worse, by the idea that all Republicans are Nixon and all governments not run by Democrats are Nixon’s government.)

But the article’s arguments are weak and unsupported. For example, there is no question that voluntary acceptance of a government perk or handout may require limitations on otherwise Constitutional activity. A person may take a government job that requires them not to take certain medications; teachers may not express religious views in the classroom; welfare recipients may have to consent to searches of their residences as a condition of receiving benefits (for details, see this background piece (PDF); Supreme Court denied cert.). TARP is not mandatory; if a bank chose not to abide by the restrictions, it need not take TARP funds. Indeed, it appears from recent articles that at least some banks are taking that route and forgoing TARP in favor of their own plans.

A taking? How? If a company chooses to comply, it presumably has to sort out any current employment contract with its executives. Now, if TARP contains provisions that make certain existing contract terms illegal, such as making it illegal to pay out contractual severance to an executive, that might be a better argument — it’s not the one made here.

You might as well argue that the Dept of Defense is unconstitutional because they approve some weapons and not others, they require soldiers not to commit adultery or commit other crimes/acts that we allow (or encourage) for the general public.

Shouting “unconstitutional” in a crowded courthouse is crying wolf: it demeans the better arguments made by scholars everywhere, both on the left and the right.