Balkinization  

Thursday, September 27, 2007

On Blackwater and the Bank of the United States

Sandy Levinson

What, you might ask, could possibly be the connection between the Bank(s) of the United States and Blackwater, the apparently lawless security force operating in Iraq? It is this: Both represent the defacto privatization of government and application to such private entities of all of the rhetorical (and legal) protections usually accorded the state.

I am currently reading a fascinating new book by Richard Ellis ,Aggressive Nationalism:
McCulloch v. Maryland and the Foundation of Federal Authority in the Young Republic (Oxford), that makes the point that the Bank of the United States was scarcely the unambiguous "federal instrumentality" as described by Marshall. Instead, it was a bank 80% of whose stock was owned by private investors, with the remainder owned by the US. (This was a point emphasized by Jackson in his bank veto message in 1832.) The bank was instrumentally useful to attaining the policy goals of the US insofar as it provided a de facto national currency and the like, but it was in no way comparable to such full-scale federal entities as, say, the Post Office or the military. The most telling paragraph in the book is a message from the Secretary of the Treasury to the newly elected President of the 2nd Bank saying that (of course) the president's loyalties were to the shareholders, not the public (or US) in general. Milton Friedman would have been proud!

McCulloch is indeed a stunningly "aggressive decision" inasmuch as it liberates well-off investors (and speculators) from having to pay, at least indirectly, even their fair share of state revenues. (Another thing that Ellis argues is that Maryland, unlike Ohio, was not trying to run the Bank out of the state and that its demand for $15,000 in taxes was a legitimate and fair revenue measure, given the economic ravages to Maryland (and Baltimore) of the War of 1812. Marshall also avoids any mention of this in his decision, however eloquent in may be in many respects.

Similarly, Blackwater is a private business that has even more of the appurtenances of sovereignty (such as avoiding legitimate taxation, as with the Bank) than the BUS. Blackwater can apparently kill at will, without having to suffer any potential legal consequences from either the decidedly non-sovereign Iraqi government or even the ostensibly sovereign US government.

Blackwater is presumably the beneficiary of a catch-22 feature of the state action doctrine: It is, like the Bank, fundamentally an instrumentality of the US with regard to immunity from prosecution (more immune, apparently, even than the military). On the other hand, we all know that ordinary constitutional limits don't apply to Blackwater because it is a "private" organization. (Query: Will the Bush Administration invoke a "state secret' privilege with regard to any private litigation filed against Blackwater, which will presumably claim full authority to do whatever they've done (save for attempting to set up some individual "rogues" as fall guys).

One presumes that we will see greater privatization of the military, not least because We the People can, though contract, pay the Blackwater employees high salaries, whereas We the Same People, however much we profess to love our heroes in the military, are unwilling in fact to pay them what they deserve, especially with regard to medical services down the pike. An altogether depressing picture. Jack and I have been writing of the rush toward a Surveillance State. Perhaps we should add to this the concomitant rush toward the "mercenary (or Hessian) state," which will have more and more entities with literal life-and-death power not subject in any serious sense to constitutional (or, as with Blackwater, any) legal constraints.

Comments:

Sandy: "Maryland, unlike Ohio, was not trying to run the Bank out of the state and that its demand for $15,000 in taxes was a legitimate and fair revenue measure."

Legitimate and fair in what respect? Relative to the taxes on other banks in the state? To other incorporated entities? Could Marshall have fairly relied on a theory that it was impermissible discrimination against the federally created instrumentality, wholly apart from any intent or prospect of "destroying" the bank?
 

Just to take Prof. Lederman's point a step further, would we really want the federal courts to be judging the fairness of state taxes imposed on federally created entitities? This seems like a never-ending task, since changes in economic conditions might affect equitable considerations. Plus, every state would have to have had its tax evaluated in the context of those of other states. It would have been a logistical nightmare for the federal courts.

Even if the tax had been fair (and I share Prof. Lederman's view, implicit in his questions, on that score), the tax seems structurally inconsistent with federalism because it permitted state infringement on a federal institution.
 

Professor Levinson:

Blackwater is presumably the beneficiary of a catch-22 feature of the state action doctrine: It is, like the Bank, fundamentally an instrumentality of the US with regard to immunity from prosecution (more immune, apparently, even than the military).

On what basis is Blackwater (nevertheless the military) immune from prosecution as a instrumentality of the state?

If Justice had the evidence to indict Blackwater personnel in Iraq for felony crimes, the Military Extraterritorial Jurisdiction Act of 2000 should provide federal courts jurisdiction for such prosecutions.

BTW, US military personnel can be and have been prosecuted for crimes in Iraq under the UCMJ.
 

You now have me intrigued on the process of writing the 2nd Bank Charter. I seem to recall that the First Bank was 50% private ownership and 50% public (I could be wrong). I had always assumed the 2nd Bank to be similarly structured. Obviously it was not. Further, the capitalization was far greater for the 2nd. Yet, despite the obvious political maneuvering, Madison, of all people, signed the enabling legislation. Hmmmm. As I understand it, many members of Congress were able to subscribe to the first bank. I presume they did to the second as well. This makes me wonder about the "rules" for the initial public offering.

Was the newly elected president of the 2nd Bank Nicholas Biddle?
 

The Post Office was once a full scale federal entity. Without competition, its rates were quite high. Lysander Spooner, a MA attorney, determined that under the Constitution the Post Office did not have exclusive rights and devised a system for he delivery of mail at much lower prices, which seemed to be having success. Spooner was challenged and eventually the federal authorities prevailed, shutting down Spooner's otherwise entreprenurial success. But, low and behold, shortly afterwards the Post Office significantly lowered postal rates. Did Spooner get a Presidential Medal? No. But sometimes "illegal" competition can benefit consumers by educating the government. (This occurred in the 1840-50 decade.)
 

If Justice had the evidence to indict Blackwater personnel in Iraq for felony crimes, the Military Extraterritorial Jurisdiction Act of 2000 should provide federal courts jurisdiction for such prosecutions.

The original act certainly didn't provide such jurisdiction. Even now, the definitions in 18 US 3267 are vague enough to support the position that the act is only applicable to contractors working for the Department of Defense, not those working for the Department of State.

That's not to say that they aren't covered in some other area of the code, but I don't think that this particular chapter describes the proper course for taking legal action against State's mercenaries at all.
 

This comment has been removed by the author.
 

I wrote an article on the private military industry awhile back and thought some my enjoy. Its a bit outdated but I hope still relevant.

http://tinyurl.com/y63n7s
 

PMS_Chicago said...

BD: If Justice had the evidence to indict Blackwater personnel in Iraq for felony crimes, the Military Extraterritorial Jurisdiction Act of 2000 should provide federal courts jurisdiction for such prosecutions.

The original act certainly didn't provide such jurisdiction. Even now, the definitions in 18 US 3267 are vague enough to support the position that the act is only applicable to contractors working for the Department of Defense, not those working for the Department of State.


The 2005 DOD authorization bill amended MEJA to apply to employees and contractors of "any provisional authority...to the extent such employment relates to supporting the mission of the Department of Defense."

I agree than an argument can be made that State is a separate entity from DoD. However, absent the private security contractors, the mission of defending State Department personnel would fall upon DoD. just as the Marines are tasked with defending State Department embassies.

Therefore, I suggest that Justice could make a very strong argument that the State Department is a "provisional authority" and the Blackwater personnel guarding State Department personnel are more than supporting the mission of DoD, they are directly assuming DoD duties.

Given the lack of other vehicles to provide a judicial remedy for allegations of homicide, I further suggest that most courts would buy off on this argument.
 

Given the lack of other vehicles to provide a judicial remedy for allegations of homicide, I further suggest that most courts would buy off on this argument.

I agree, but given the importance of the issue, this deserves a specific and clear statute setting forth what rules the contractors will be subject to.
 

Was the newly elected president of the 2nd Bank Nicholas Biddle?

Biddle was the second president of the second bank. He was chosen after the first president (whose name escapes me at the moment) proved a failure.
 

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