Four Ways to Rationalize the AIG Deal --

1. It really is a loan, not a purchase. 2. It’s a purchase but it’s called a loan and words like “interest rate” are used, so therefore the Fed can do it under the terms of the statute. 3. Even if it’s a purchase, the statute does not literally say that the Fed can’t purchase things and therefore (presumably under Chevron), the Fed has the authority to purchase (see Marty’s comment on my earlier post). 4. It’s an emergency, and a Schmittian state of exception is in play. No one really cares whether the transaction is lawful or not, just do something! Cite something in the Constitution – Article II, somewhere. I mean go to #3 and cite the canon of avoidance just to be sure! (Indeed, this post suggests that the executive branch is really pulling the strings.)

#2 is silly; #3 is a respectable type of legal argument, according to which every grant of authority to an agency for limited purposes turns into a grant of vast discretionary authority unless Congress very very busily lists all the things the agency can’t do; #1 remains possible but unlikely; #4 is most plausibly the truth. We might call #3 the polite version of #4, but to find out for sure I agree we’d need a test case where the Fed actually broke a clear rule – arrested AIG shareholders and put them in Guantanamo Bay or something like that. Maybe tomorrow.