Monday, April 6, 2009

Congressional Action on AIG: The Unconstitutional Gift that Keeps on Taking

Below is my latest article for the Sewanee Purple. I know the subject matter is a few weeks dated; spring break messed up the timing. Still the message is a good one--we must obey our Constitution. As always my arguement is limited by page length.


During spring break while a number of Sewanee students were having that fun thing I hear so much about, I was engaging in my usual activity—watching and lamenting as Congress continued to destroy our Constitution.

One of the major events that warrants discussion involves 165 million dollars in bonuses given out by insurance giant AIG to a number of its executives. This was of course seen as appalling by conservative and liberal alike as AIG had just received $85 billion in September as part of the massive unconstitutional government bailout scheme. Liberals (Republican and Democrat alike) held that the company was “too big to fail”—a claim many in the government are now seeing as false—while conservatives held that the action was unconstitutional and should not be carried out in a free society. However, the government had its way, and AIG got its money. What I find surprising is not that AIG misused the funds given to them in the form of bonuses. What I find surprising is that people are surprised.

The problems at AIG came about because of the “sub-prime” mortgage debacle encouraged by our own government who strong-armed banks into lending to risky candidates, who were unlikely to be able to pay back their loans. The banks then decided to take a number of these risky loans, bundle them together as an investment, and sell them to larger institutions—an act know as “the securitization of mortgages.” AIG’s “brilliant” plan was to take advantage of the times and insure these risky “investments.” Of course, when the jig was up, AIG was left in financial shambles and the American taxpayer was left with the bill. Our Constitution was violated in order to give money to those at AIG who brought the problem upon themselves.

Of course, I was opposed to the bailout, not only because it was unconstitutional, but because it would not solve the problem. And I was not surprised when the scandal occurred. I knew AIG was not “too big to fail,” and I knew the government was unauthorized and too incompetent to act. So I saw through the hypocrisy as people who supported the bailout were upset when money was given to executives who were responsible for the company's failures. This sounded a lot like the bailout to me, which was nothing more than misused money (unconstitutional appropriation) being misused by the great misuser (the Federal Government). When the bonuses were exposed and Congress was doing everything it could to appear tough on the problem they created, that is when I became worried. I heard on March 17 that legislation was being proposed that would target the executives receiving the bonuses. Immediately I saw this as a violation of the Constitution’s protection against “bills of attainder.” The next day I learned that these bonuses were contractually protected and approved in the bailout plan itself, though Congress still sought a violation of the Constitution’s “right of contract.” Surely, there was something to be said of this overt constitutional violation by our very Congress. It was not until the 19th that I began to hear the issue getting its proper due—sadly to the diversion of attention away from the FED’s injecting $1 trillion of unbacked, unaccounted for, and unconstitutional money into the monetary system, further weakening the dying dollar. What I heard in the debate was what was truly shocking.

I feel that I must first state that I am in no way defending AIG. They should never have received taxpayer money, and they should not have been giving huge bonuses considering the circumstances, but we cannot resort to unconstitutional measures to solve the problems we created. Two wrongs never make a right.

During the debate, I saw the very elected officials who swear to “protect and defend the Constitution” calling for a bill of attainder to pass and a private, constitutionally-protected contract to be violated by the federal government. The most shocking sight was to see a Democratic congresswoman acknowledge that the action was unconstitutional but claiming it must still be done because the “people” wanted it. Ladies and gentlemen, that is not rule of law; that is anarchy, it is mob rule, and it is not liberal republicanism. I saw outcry by the very ones who allowed the problem to happen, calling for direct constitutional violating with no qualms. I saw mob rule in action, and sadly I could not see my country anywhere in the majority of voices echoing among the tyranny.

So what must be done over this insignificant sum of money ($165 million out of $85 billion) which has caused so much uproar? Well…the solution is what has already been going on with societal outrage, letting AIG see the negative market influence. Because of this much of the money has already been returned without the unconstitutional help of Congress. Public outcry does not have to equal mob rule that triumphs over rule of law. We can act within our system to affect change. There is no need for our elected officials to act as outlaws. More government action is not the answer. That is the very action that has caused and exacerbated the problem. What is needed is for the public to be alert and for our Constitution to be followed and defended.

In Defense of the Constitution,

Daryl Luna

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