Views » March 20, 2009 » Web Only

A Government of Men, Not Laws

By David Sirota

United Steelworkers President Leo Gerard likes to say that Washington policymakers “treat the people who take a shower after work much differently than they treat the people who shower before they go to work.” In the 21st century Gilded Age, the blue-collar shower-after-work crowd is given the tough, while the white-collar shower-before-work gang gets the love, and never before this week was that doctrine made so clear.

Following news that government-owned American International Group (AIG) devoted $165 million of its $170 billion taxpayer bailout to employee bonuses, the White House insisted nothing could be done to halt the robbery. On ABC’s Sunday chat show, Obama adviser Larry Summers couched his passive-aggressive defense of AIG’s thieves in the saccharine argot of jurisprudence. “We are a country of law — there are contracts (and) the government cannot just abrogate contracts,” he said.

The rhetoric echoed John Adams’ two-century-old fairy tale about an impartial “government of laws, and not of men.” Only now, the reassuring platitudes can’t hide the uncomfortable truth.

Last month, the same government that says it “cannot just abrogate” executives’ bonus contracts used its leverage to cancel unions’ wage contracts. As the Wall Street Journal reported, federal loans to GM and Chrysler were made contingent on those manufacturers shredding their existing labor pacts and “extract(ing) financial concessions from workers.” In other words, our government asks us to believe that it possesses total authority to adjust contracts at car companies it lends to, and yet has zero power to modify contracts at financial firms it owns. This, even though the latter set of covenants might be easily abolished.

According to New York Attorney General Andrew Cuomo, these allegedly inviolate AIG agreements promised bonus money the company didn’t have and were crafted by executives who knew the firm was collapsing, meaning there is a decent chance these pacts could be invalidated under “fraudulent conveyance” statutes. They also might be cancelled via “force majeure” clauses allowing one party to rescind a pact in the event of extraordinary circumstances — like, perhaps, the collapse of the world economy. (Note: BusinessWeek reports that corporations are already citing the recession as reason to invoke such clauses and nix their business-to-business contracts.)

But, then, those legal cases require a government that treats AIG’s shower-before-work employees with the same firmness that it treats the auto industry’s shower-after-work employees, not the government we currently have — the one that believes “the supreme sanctity of employment contracts applies only to some types of employees but not others,” as Salon.com’s Glenn Greenwald says.

Mind you, this double standard works the other way, too.

Congressional Republicans have long supported the laws letting bankruptcy courts annul mortgage contracts for vacation homes. Those statutes help the shower-before-work clique at least retain their beachside villas, no matter how many of their speculative Ponzi schemes go bad. But for those who shower after work, it’s Adams-esque bromides against “absolving borrowers of their personal responsibility,” as the GOP announced it will oppose legislation permitting bankruptcy judges to revise mortgage contracts for primary residences.

Certainly, for all the connotations of fairness inherent in American politics’ “country of law” catchphrases, most of us know that the selective application of legal principles is as old as the Republic. However, lots of us are only now discovering that inequality is so pronounced that the time of day we bathe determines the enforcement and reliability (or lack thereof) of even the most basic contracts.

We are just realizing that for all the parroting of America’s second president, we are ruled by a government of men, and not of laws.

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• Reader Comments

  (I had already posted this with the question of the week, but it fits here as well.)

  AIG, even though a disgusting situation, is just a diversion from the real issue — the stupidity or complicity of Congress in the largest ever financial scam in history.

  The individuals in the money center banks, the rating agencies and oversight committees are getting off scot-free. Dodd, Franks, Paulson, Greenspan, Geithner… the list seems endless.

  The U.S. Congress needs to be 90% impeached! These contracts were allowed to pass unchallenged, some in legislation which those who voted on it had no time to even read beforehand.

  The “correction” now being proposed is clearingly unconstitutional to anyone who can read: Article One, Section 9 — “No Bill of Attinder or ex post facto Law shall be passed.”
  These members are clearly grandstanding and the insults to the American Public is only surpassed by the embarassment they are causing us before the rest of the world!

  In a just society they would be laughed out of office, or better still, riden out on a rail.

  These retiainment contracts were made between individuals and AIG (same for the other companies) NOT with the US taxpayer.

  AIG made contracts with those who they insured also. None of these could be honored and would therefore become void if not for the government offering each of them $billions.

  Withdraw all gov. funds, let the retaining bonuses expire — then address the insolvency as the toxic assets come due rather than all at once. These documents were instituted over a period of years and are not all in default at present.

  This is largely a manufactured “crisis of political opportunity”.

  Posted by whattheheck on Mar 20, 2009 at 5:58 PM

  Addendum to prior comments:

  While we are cancelling contracts we need to renegotiate the contract with members of Congress. They just got a pay raise. They have benefits and pay far exceeding their worth to the American people.

  If they work for us (well, that’s another debate issue) they should not be allowed to set their own pay packages.

  Posted by whattheheck on Mar 20, 2009 at 6:04 PM

  Everyone MUST SUBSTITUTE the word government for the word taxpayer in order to find the truth in every single republican canard spoken since July 1980

  Posted by bigbrass1s on Mar 22, 2009 at 6:15 AM

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