

Andrew Napolitano: Executive Salary Caps are Unconstitutional - kyochan
http://online.wsj.com/article/SB123388405082355077.html

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aristus
"We can presume that the senior executives of the banks that have received
TARP funds who are paid more than $500,000 annually are worth at least that
much to their employers. Otherwise the employers would be violating their
fiduciary duties to their shareholders by paying those salaries."

We certainly can't presume that. These executives are their own employers, sit
on each other's boards and grant themselves billions of dollars in cash and
stock. That's part of the problem.

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eli
I mean, imagine if the private sector ran like this with VCs attaching
requirements to how their money is spent! It could never work!

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Tangurena
If they don't like the caps, then don't take the bailout money.

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kyochan
Your argument is the same as "if they have nothing to hide, then they have
nothing to worry about"

The point Napolitano is making that is unconstitutional for the government to
ask an entity to surrender his constitutional rights in exchange for funding.

Just like the government cannot abridge free speech of welfare recipients or
PBS.

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eli
I disagree on both counts. Free Speech is pretty clearly in the Constitution,
but which part of the Constitution protects my rights to get paid without
limit?

It seems not unlike a bank granting you a loan, but only if you use the money
for home repair.

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kyochan
Article I Sec. 10 No State shall ... pass any ... Law impairing the Obligation
of Contracts...

So the government cannot interfere with contracts already entered into and,
unless the government owns the company outright, cannot interfere with any
future contracts between the company and the executive.

Also, private parties such as between banks and clients can agree to whatever
terms they wish, but the Article I clearly states that the government cannot
do the same.

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eli
Err, they're not interfering with contracts -- they're _offering_ a contract.
I agree it would be wrong for Congress to alter a contract between two
parties, but that's not what's happening. They're offering a line of credit
and the terms for that credit include some stipulations on executive pay.

Likewise, if you agree to accept unemployment benefits, there are strings
attached to that too.

Surely you will concede that Congress has the right (obligation, really) to
stipulate how taxpayer money is spent? That, by itself, is not a violation of
anything.

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kyochan
The "contract" in TARP stipulates that Treasury purchase mortgage-back assets
from financial institution in exchange for non-voting shares of the
institution.

So not only salary are negotiated between company and management, two private
parties, Treasury still do not have the right to "condition benefits on the
nonassertion of rights".

Also, because the power to delegate TARP money was given to Treasury,
something Napolitano also considered unconstitutional, and that the plan to
cap executive salaries belongs to Obama, not Congress, Congress will have no
role in setting these conditions.

So not only Congress do not have the right to make these stipulations, they're
not even the ones doing the stipulating.

