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  • Latest Bailout Draft Makes Constitutional Questions Worse

    After Secretary Paulson released his first bailout draft, we enumerated some threshold constitutional issues that the proposed legislation failed to pass. The latest House bailout draft not only fails to address these concerns, it actually creates brand new ones.

    The most glaring problem with the original proposal was the lack of meaningful standards to limit the extremely broad grant of discretion to the Treasury Secretary. The latest House draft attempts but ultimately fails to fix this problem. The draft identifies a long list of “considerations” that the Secretary “shall” consult when exercising his authority under the act. Specifically the Secretary must consider if asset purchases would:

    provide[] stability or prevent[] disruption to the financial markets or banking system … help families to keep their homes and stabilize communities … ensure[] that as many financial institutions as possible participate in the program, without discrimination…based on their size, geographic operation.

    These vague, overlapping, and contradictory “considerations” does more to expand the Secretary’s power than limit. Though the new draft does reinstate judicial review, that review is meaningless unless courts are given firm standards that actually constrain the Secretary’s discretion. The above list contains no limiting principle a court could use to determine which acts or lawful and which are not. It is a blank check of legislative power turned over to the Treasury Secretary.

    Instead of doing the hard and necessary work of crafting language that could operatively limit Treasury’s power, the House draft punts that responsibility to a newly created “oversight panel” and questionably “independent” inspector general. This abdication of responsibility is a symptom of the separation of powers sloppiness of modern times. Too often Congress delegates vast new authority to the executive branch to “fix” the problem de jure and then tries to invent new ways to micromanage and nitpick the exercise of the authority. Such a power-sharing relationship is the exact opposite of the constitutional separation of powers perfected by the Framers of our Constitution.

    Members of Congress may think their new oversight provisions improve the bill, when in fact they move in the wrong direction. The latest House draft does not correct the old constitutional defects, and it raises new constitutional problems. These are not mere policy preferences that can be weighed against other policy preferences. These are iron-clad constitutional mandates. If they are not fixed, no Member can vote for the bill without violating his/her constitutional oath.

    Posted in Economics [slideshow_deploy]

    4 Responses to Latest Bailout Draft Makes Constitutional Questions Worse

    1. Jim Gibbons, Sun Cit says:

      Where is the ACORN (housing Authority) language re: sharing 20% of any "profit" on the buy/sell transactions?

    2. Jack- GA says:

      How in the world can you put the people who, either caused, or help cause the bailout problem, in charge of oversight of the bill? The Chairman of the Fed Res Sys, The Sec of Trea, the Director of Fed Home Fin Agency, The Chairman of the SEC, and the Secretary of Housing and Urban Dev.

    3. Carmen Quintana, San says:

      My group, La Herencia en Santa Fe (The Heritage in Santa Fe)is reclaiming land in NM which was lost to government since the Gadsden Treaty and the Treaty of Guadalupe Hidalgo were signed. We are immediately concerned about how the sub-prime mortgage is going to affect us. To this day, we have not been able to get local bankers to help and see many foreclosures on our land grants being foreclosed by foreign banks. We need clarification on sub-prime mortgages in the bailout.

    4. Lee Adams says:

      A bailout that makes sense!

      I'm in favor of giving $85,000,000,000 to

      America in a 'We Deserve It Dividend'. To make the

      math simple, let's assume there are 200,000,000 bona

      fide U.S.Citizens 18+.

      Our population is about 301,000,000 +/- counting every

      man,woman and child. So 200,000,000 might be a fair stab at

      adults 18 and up. So divide 200 million adults 18+ into $85

      billion that equals $425,000.00.My plan is to give $425,000

      to every person 18+ as a 'We Deserve ItDividend'.

      Of course, it would NOT be tax free. So let's assume a

      tax rate of 30%. Every individual 18+ has to pay$127,500.00

      in taxes.

      That sends $25,500,000,000 right back to Uncle Sam.But it

      means that every adult 18+ has $297,500.00 in their pocket.

      A husband and wife has $595,000.00. What would you do with

      $297,500.00 to $595,000.00 in your family?

      Pay off your mortgage – housing crisis solved.

      Repay college loans – what a great boost to new grads

      Put away money for college – it'll be there

      Save in a bank – create money to loan to entrepreneurs.

      Buy a new car – create jobsInvest in the market – capital

      drives growth

      Pay for your parent's medical insurance – health care

      improves

      Enable Deadbeat Dads to come clean – or else

      Remember this is for every adult U S Citizen 18+ including

      the folks who lost their jobs at Lehman Brothers and every

      other company that is cutting back. And of course, for

      those serving in our Armed Forces. If we're going to

      re-distribute wealth let's really do it… instead of

      trickling out a puny $1K ( 'vote buy' ) economic incentive.

      If we're going to bailout, let's bail out every Adult U S Citizen 18+!

      As for AIG – liquidate it. Sell off its parts. Let

      American General go back to being American General. Sell

      off the real estate. Let the private sector bargain hunters

      cut it up and clean it up.

      Here's my rationale. We deserve it and AIG didn't.

      But can you imagine the Coast-To-Coast Block Party! How do

      you spell Economic Boom? I trust my fellow Americans

      to know how to use the $85 Billion 'WeDeserve It

      Dividend' more than I do the geniuses at AIG or in

      Washington DC. And remember, The -plan only really costs

      $59.5 Billion because $25.5 Billion is returned instantly in

      taxes to Uncle Sam.

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