Questions About Preemption and TARP
I’ve been working on something about federal law, state law and preemption, but I would be remiss if I didn’t point out the preemption problems raised by federal bailouts and federal ownership.
Except for federally chartered banks, corporations, LLC, and other business entities are created under state law. Those state laws and charters direct how business is conducted: meetings, notifications, voting, etc.
However, under Article VI, laws made pursuant to the Constitution are the supreme law of the land. If the TARP law is constitutional, does it preempt state corporation law once the federal government buys the corporation? Generally, when a state or local government entity operates a proprietary business (a parking garage, for example) it must operate by the same rules as any other business – no sovereign immunity, for example.
It is problematic when the federal government purchases on on-going business. Is the government entity now immune from local taxes? Is the corporate charter void, preempted? Are the by-laws valid? If the federal government owns the shares, who votes? If the federal congress delegated unrestricted authority to the US Treasurer, is he empowered to change the corporate by-laws that do not conform to his objectives? Why does this not put state chartered competitors at a disadvantage?