Should Obama Administration Have 20 Billion from BP to Manage?

Posted on June 17, 2010

It’s difficult to conceive of a President hauling in the CEO of a Global company to demand money for reparations to its citizens for ANY reason.  [HT to Frugal Cafe] But as Professor William Jacobson has pointed out at

I am hard pressed to come up with a constitutionally more chilling presidential comment than the following statement made by Barack Obama Tuesday night (emphasis mine):

Tomorrow, I will meet with the chairman of BP and inform him that he is to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company’s recklessness.

Since when is a President’s wish our command? Under what legal authority did the “rule of law” President make the decision as to how much a private entity would pay and then “inform” the private party that it must obey or face the harsh retribution of the federal government?

This is similar to what happened to the bond holders in GM and Chrysler, whose private property rights were trampled in the name of Obama’s politics.

According to reports, BP also will pay compensation to people who lose their jobs not because of BP’s conduct, but because of the Obama administration’s policy decision to implement a drilling moratorium. We now have the specter of a private company being forced to pay for policy decisions.

Respect for the Due Process Clause of the Fifth Amendment is what separates us from North Korea or Venezuela…

Jacobson gets at the heart of what really went down with Obama and the CEO of BP and his lawyers: it was an end run around tort and other legal options that would have put the company on the ropes for much more.  This is a save.  This is beltway back room dealing at its best according to Jacobson and he’s right.  The cronyism between Obama and big business is really back alley.  Obama the Chicago wheeler dealer – pushing around GM and BP and getting everyone something out of it in the end.  And he draws this parallel with what happened with big tobacco:

Investigations, and threatened criminal proceedings, combined with the mass tort lawsuits, led big tobacco to the conclusion that its survival as an industry depended upon co-opting government through a slush fund. In the case of big tobacco, it was hundreds of billions of dollars, but it was a price worth paying because it ended the legal war and made government a partner, not an enemy.

Jacobson sadly notes:

No appeals, no second chances, not only for BP, but for individuals. The price of submitting to an arbitrary claims process is the loss of access to the judiciary and the legal process. That may be fine for many people, but it is a high price to pay as a nation supposedly of laws.

Coming right after concerns about due process willl be the on-going concern about the fund that will be established with the BP billions and how it will be administered.  Where are the guidelines?  Is it kosher or even legal for one of Obama’s Czars referred to as “the Pay Czar” to oversee such a fund? None of Obama’s so-called Czars has to undergo Congressional confirmation. Where is the accountability? Furthermore, is the executive branch the proper location for this activity?

The independent fund will be led by lawyer Kenneth Feinberg, who oversaw payments to families of victims of the Sept. 11, 2001, terrorist attacks. In his current role, Feinberg is known as Obama’s “pay czar,” setting salary limits for companies getting the most aid from a $700 billion government bailout fund.”

Feinberg has been the President’s pit bull on matters such as the AIG bonuses, salary caps for Wall Street executives including mid-level workers, executive pay caps at bailed out banks, and bankruptcy lawyer compensation. [Patterico’s Pontifications]

The Presidential power to demand payments from private companies with duties to shareholders and the Administration’s right to oversee such vast compensation funds is questionable at the very least.

“Criminal prosecution kills cooperation,” laments University of Chicago law professor Richard Epstein. “How do you give information to someone who will use it to indict you?” You don’t. But the president seems to think catering to populist outrage is more important right now.

Members of his party also demand that the oil company stiff its shareholders by canceling its dividend, while turning over billions to the feds to distribute as they please. Not many Democrats seem to worry about BP’s obligations to its investors—which, in an economy based on property rights, take priority over the whims of politicians. But that assumes we still respect property rights.[emphasis mine]


Even if the escrow fund were justified, turning it over to the administration isn’t. [emphasis mine]  Instead of trying to limit payouts to the truly deserving, the people in charge would have every incentive to err on the side of generosity to anyone who claims to have been hurt. []