Obama Administration mangles the U.S. Constitution!

BULLSHIT!!! The Obama Administration is wrong!

Yes, the “sovereign” can stop AIG from paying bonuses on contracts!…

As stated below:

“the law is clear that the United States has the authority to impose significant restrictions on the administration of both public and private contracts to ensure that the expenditure of federal funds is consistent with the public interest.”

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The Obama administration's assertion that the federal government had no power to stop A.I.G. from awarding $165 million in bonuses to the derivatives traders in its financial products unit, whose reckless decisions both destroyed the company and exacerbated the collapse of the international banking and insurance industries, rests on a faulty interpretation of the US Constitution. Speaking on ABC's "This Week," Lawrence H. Summers, director of the National Economic Council, explained that the United States could not block payment of the bonuses, despite A.I.G.'s receipt of more than $170 billion in federal TARP funds, because "We are a country of law. There are contracts. The government cannot just abrogate contracts."

Although, it is true that the "government cannot just abrogate contracts" for no good reason, the law is clear that the United States has the authority to impose significant restrictions on the administration of both public and private contracts to ensure that the expenditure of federal funds is consistent with the public interest. Although, it is too late to void the A.I.G. bonuses, the administration's narrow reading of the law should not deter Congress from amending the Emergency Economic Stabilization Act of October 2008, the legislation that created TARP, to authorize the president or the secretary of the treasury to modify executive compensation agreements that are contrary to the purposes of the Act.

Article I, Section 10 of the Constitution provides that "No State ... shall pass any ... Law impairing the Obligation of Contracts," but the Supreme Court has held that the contracts clause is limited to state actions and is inapplicable to the federal government. Actions by the United States that allegedly impair contracts are governed instead by the Fifth Amendment's directive that no person "shall be deprived of ... property without due process of law." The Supreme Court's cases interpreting the due process clause distinguish between federal laws that may impair private contracts and laws that allegedly abrogate contracts to which the United States itself is a party. Under both sets of cases, the United States could have prevented A.I.G.'s use of TARP funds to pay executive bonuses, despite A.I.G.'s compensation agreements with its derivatives traders.
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There are, in fact, myriad reasons for the United States to prohibit A.I.G. from awarding bonuses to the members of its financial products unit, and the Supreme Court's precedents would require the courts to defer to these regulatory judgments. As President Obama explained on Monday, these policies include ensuring that the TARP funds are spent to increase financial liquidity throughout the lending and insurance system, deterring future malfeasance by not rewarding bad business judgments and disastrous financial performance and preventing the loss of political support for the financial bailout and regulatory reform program - a risk that the administration is now struggling to contain.

If the administration's concern is that blocking the executive bonuses would violate the contracts by which the United States has awarded A.I.G. its $170 billion in TARP funds, a different constitutional standard would apply. The Supreme Court has held that the sovereign power of the United States is an "enduring presence that governs all contracts subject to the sovereign's jurisdiction and will remain intact unless surrendered in unmistakable terms. Therefore, contractual arrangements, including those to which a sovereign itself is a party, 'remain subject to subsequent legislation' by the sovereign."

Continue reading at:

http://www.truthout.org/031809A