As a nation, we have lost our sense of what the rule of law means. Above all, it means that no one is above the law. That includes the President, and the executive branch more generally. Unfortunately, the executive branch has rarely seen it this way and invariably sought to increase its power by legal and extralegal means. Although President Obama may not share the Bush administration fascination with illegal torture or illegal domestic war propaganda, he does have the instinctual presidential reaction to expand his power. As with too many presidencies, the Obama administration is expanding its power by breaking the law. Simply put, the Obama administration is laundering money to avoid legal restrictions on executive compensation for corporations receiving bailout money corporate welfare checks.
From the Washington Post:
The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.
Although some experts are questioning the legality of this strategy, the officials said it gives them latitude to determine whether firms should be subject to the congressional restrictions, which would require recipients to turn over ownership stakes to the government, as well as curb executive pay.
Let's deconstruct this:
- "the government has set up special entities that act as middlemen"
When I read this I thought it was a rather polite way of saying that the government set up shell companies to launder the money. But what do I know? I'm just a blogger, whose greatest journalistic accomplishment to date is a recommended diary logically explaining the apparently not so obvious fact that the law applies to former Vice President Cheney.
Luckily, page two of the Post article has a real expert in legal sanity who agrees:
"They are basically trying to launder the money to avoid complying with the plain language of the law," said David Zaring, a former Justice Department attorney who defended the government from lawsuits involving related legal issues. "They are trying to create a loophole to ignore Congress, and I think the courts will think that it's ridiculous."
The Obama administration is laundering money! It is illegal. Period. If you would also like to illegally launder money through shell corporations like your government, it's apparently extremely easy to do right here in the United States. But I digress (and am in no way implying that Barack Obama should be seen as a role model for young children in this regard. Although, if you read The Economist article it can be done with an internet connection and google my tech savvy children).
Back to the rule of law and the Post's explanation of the administration's money laundering activities. Why does one launder money? Ordinarily, the money has been obtained illegally and the purpose of "laundering" it is to make appear "clean" or legally legitimate. It is also commonly used to avoid paying taxes. Fortunately for the rule of law (but not for the American taxpayer), the money the Obama administration is laundering is clean money, legally obtained. So why are they laundering it?:
- "officials said it gives them latitude to determine whether firms should be subject to the congressional restrictions"
Again, with the polite phrases. Congressional restrictions is another word for the law. So, let's replace the polite words with the truth and try this again:
Officials said it gives them latitude to determine whether firms should be subject to the law.
Well, there you have it. Like anyone who has their money laundered, they want to break the law in some other respect. In this particular example, they are trying to avoid legal restrictions placed on the compensation of executives at corporations which have officially received corporate welfare checks.
As an aside note I think the obsession with executive compensation is almost as annoying as John McCain's fixation on earmarks. It is symbolic. However, it represents a minute portion of the bailout funds. It lets Congress avoid responsibility for writing a $350 billion blank check to the Bush administration (the first part of the TARP money did not have the restrictions which the Obama administration is violating). It gets people enraged about a small symbolic issue rather than focus on the broader structural issues. We have privatized profit and socialized losses in a way that threatens both democracy and capitalism. Yes, the federal government needed to act. It needed to act to inject capital into the financial markets. Car makers need banks, but banks don't need car makers as the truism goes (although I would love to see a financial CEO bike to work). However, the major financial institutions which are receiving bailout money are by and large insolvent. Which is a fancy way of saying that they are bankrupt. The government should temporarily nationalize these banks, recapitalize them, and sell them back to the private sector for a profit (or at least less of a loss than the current plan). More broadly, if you think that CEOs make too much money you should focus on health care, the Employee Free Choice Act and raising taxes on rich people (not just the ones who get rich off bankrupt companies that we won't admit are bankrupt). Please stop focusing on symbolic issues at the expense of changes which will fundamentally alter the balance of power in our society.
Aside aside, our opinions on the bailout policy are irrelevant to the rule of law. No matter how weak-willed and stupid I think the Congressional Democrats were about the bailout, they did eventually pass a law regarding how the money could be spent. That law restricts bonuses for the upper level management of corporations receiving a welfare check. It is the law. No money laundering scheme changes that.
As a nation, we have lost our sense of self-respect as a constitutional democracy based on the rule of law. To the extent that the media discusses the Bush administration's war crimes, they talk about it in terms of political gotcha games. There is pretty damn good evidence that the Bush administration committed crimes. The government has a legal obligation to investigate and prosecute them. If we are to call out our opponents, however, we must also call out our friends. It is clear that the Obama administration is breaking the law. Too often, we rationalize and make excuses for politicians we support, rather than demand that they engage us in honest debate. I was on board with the Obama campaign from day one. I worked hard to win both the primaries and then the general election. I support most of his legislative agenda. So I ask: President Obama, are you aware that your administration is laundering money in order to break the law?