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Tuesday, December 16, 2008

The Church (or Mosque?) of AIG

The Thomas More Law Center has filed a complaint on behalf of a Michigan resident against Treasury Secretary Paulsen and the Board of Governors of the Fed. It alleges that the bailout of AIG violates the Establishment Clause.

Now, I have had many misgivings about the ongoing orgy of bailouts. But, I have to admit, that's one that did not occur to me. I've worried that bailouts distort the market, reward incompetence, create moral hazard and, in the case of AIG, foot the bill for "team building" junkets. But I hadn't thought that it established a religion. What gives?

It turns out that AIG has a business unit that offers Shariah compliant financial products. In particular, it offers Takaful lines of insurance which, according to the complaint, invest in no businesses that are haram(or unIslamic). The Shariah compliant business units also pay the zakat, a religious tax that supports only Islamic charities.

Let's get two things out of the way. There are certain cases that you just know are going nowhere. This is one of them. Second, the complaint is chock full of assertions about the nature of Islam and the role of Shariah compliant financial products in funding terrorism that have nothing to do with whatever legal arguments might be made in favor of the plaintiff's position.

But even if the case is going nowhere, can we at least discern a semi-plausible argument on its behalf. Let me try so you don't have to.

The idea, I suppose, is that, by taking an ownership position in AIG, the government somehow endorses everything that the company does or converts AIG's activities into state action. This is distinct from, say, pension fund investments because the state operates here as an active rather than a passive investor.

I'm not sure that the facts here support such an argument, but let's assume that we can get this far because it's no fun if we can't. Imagine the government bought AIG lock, stock and barrel.

Could the government - as AIG - promote and sell Shariah compliant products? Does doing so constitute an endorsement of Islam or violate the Lemon test?

One approach might be to say that this is like the private vouchers upheld in Zelman. Just as the state of Ohio offerered funds that could be directed to religious uses by private choice, the government as AIG offers a religiously themed product that will either be purchased or not according to the preferences of its customers.

The problem, however, is that the government is actually structuring the religious alternatives. It is making the choice to offer products that are Shariah compliant or, if we expand the hypothetical, that are consistent with Catholic social teaching. 

Imagine that government decided to charter religious schools as a way to compete with privately run Catholic and Lutheran and Islamic schools. Wouldn't that raise establishment clause concerns?

Again, it doesn't seem that the facts of the AIG bailout support such an argument and I think that the Thomas More Center is doing those who seek a largely secular public by arguing for, as they must in this case, for a wildly aggressive definition of establishment. 

Cross posted at Marquette University Faculty Blog.

Posted by Richard Esenberg on December 16, 2008 at 10:53 AM | Permalink


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