Demagoguing the Bailout

My distaste for the AIG bonuses is related to my bigger distaste for the whole economic bailout, but it is unseemly for Congress to become a pitchfork-wielding mob. Confiscating compensation and overturning contracts–that the congressional bailout bill specifically permitted!–will have all kinds of unintended consequences, including companies not participating in the efforts to get them solvent again. That may turn out to be a good thing, but it certainly thwarts the intention of our government. Charles Krauthammer points to some bigger principles involved:

And there is such a thing as law. The way to break a contract legally is Chapter 11. Short of that, a contract is a contract. The AIG bonuses were agreed to before the government takeover and are perfectly legal. Is the rule now that when public anger is kindled, Congress will summarily cancel contracts?

Even worse are the clever schemes being cooked up in Congress to retrieve the money by means of some retroactive confiscatory tax. The common law is pretty clear about the impermissibility of ex post facto legislation and bills of attainder. They also happen to be specifically prohibited by the Constitution.

Use this space to vent about letting these executives have these multi-million dollar bonuses and the whole economic and governmental mess that we have on our hands. But let’s not break the law.