T

he legalists in American law schools rage at the Bush administration for claiming constitutional authority to wage the war on terrorism rather than going to Congress but are indifferent when the Bush administration cites, as authority to address the current financial crisis, a statute enacted by Congress seventy years ago and a judge-made doctrine that permits agencies to interpret ambiguous statutes expansively. Is it really so difficult to see that these two cases are the same from the perspective of the rule-of-law values that the rule of law is supposed to advance: public debate and authorization of policy by a representative body for the purpose of addressing events that it is actually aware of?

It's not at all difficult to see that they are the same. However, everyone in Congress and in the Universities and the Media, etc. seems to think they are arm chair generals. However, they all know they are in way over their heads when it comes to finance and are more than happy to let someone else sort it out. How else can they take credit if it works and blame others if it doesn't which seems to be Congress' main preoccupation these days?

Well, actually, what I said regarding the credit blame thing would apply to the war on terrorism as well.

Gee, you want Congress to think and work? How dare you? Why bother with the Constitution when you've got a cushy job, health care for life, a fabulous retirement and many, many perks?

My biggest fear is that this Congress will try to but in and do something. No surer way to ensure financial ruin for this country.

...talking about the Nazi philosopher...

Well, heck, if you're gonna talk about Nazis, those promoters of eugenics, then let's talk about their modern day counterparts.

I don't think they are the same. Many GWOT policies affect the actual constitutional rights of individual people. These things would arguably be unconstitutional without Congressional action. The bailout does not affect individually protected liberties. I do not have a constitutional right to a small and effective government that respects free markets. I do have a right to counsel/ freedom from unreasonable searches/ speedy trials etc. Those rights were violated by the wiretapping etc. The bailout does not affect individual liberties.

The bailout does not affect individual liberties.

Your money. The soundness of your monetary system. The amount the Government puts you in hock for doesn't affect your individual liberties? Who would have thought? I have never met a soul who was wiretapped or searched unreasonably, etc. and they seem to be darned hard to find. I dare say, all of us will feel the effects of this action.

I am not saying that the Government was right or wrong in either case. But, I hardly see the distinction, Ace.

The fact that the Constitution addresses war specifically might be the difference.

Speaking of Nazis*. "Role over."

It is bad theater and I pray this one act(or) play closes on opening night but I fear this is intermission.


*probability this post contains errrors -- 100%

If a "mortgage related asset" turns out to be anything like the commerce clause, then this bill could stand as the most massive economic power transfer to the executive branch in the history of the United States. This thing sure looks like rule by decree without review. In particular

... are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

is a really scary clause. Monday I will be on the phone telling my Senators and congressman to vote "no."

This act could lead the US to hyperinflation like Germany experienced in 1923 where prices doubled every 49 hours, or Hungry in 1946. Here is how it could unfold.

1. At every stage we will hear that printing money is better than doing nothing.

2. When inflation ignites, the executive passes emergency wage and price controls to protect the people from price gouging.

3. When (2) fails, index wages, interest rates, pensions, etc to the rate of inflation where inflation is defined by the executive of course.

4. Americans are forbidden to own gold. FDR did this in 1933 by executive order.

5. When (3) fails US fiat currency will have become worthless and the US will adopt another medium of exchange, say The New Dollar= (fill in a large number) old dollars.

After WWII Hungry experienced the mother of all hyperinflations*, where prices doubled every 15 hours. The final banknote was the 100 million b.‑pengő. Then they gave up an issued a new currency

florent= 400,000,000,000,000,000,000,000 000,000 ‑pengő

Sounds too fantastic for the US? Perhaps but who would have dreamed last year that the US financial system would approach collapse in 2008?

*Hungry has been outclassed by Yugoslavia and Rhodesia (Zimbabwe). Zimbabwe even made inflation illegal!

"Sounds too fantastic for the US? Perhaps but who would have dreamed last year that the US financial system would approach collapse in 2008?"

Quite a few people did. Given the timing, the most notable I would assume would be John McCain:

“If Congress does not act,” McCain said in 2005, “American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”

I observe lots of people complaining about the fact that the administration took action, but nobody tells us what should have been done.

For those who don't like the AIG rescue, exactly what do you think should have been done? Specifics?

For those who object to the Fed injecting money into the banking system, what should have been done? Specifics?

For those who think Congress should be taking the lead, do you observe Congress taking up the problem now? What are they doing?

For those who advocate no action, can you tell us the result of letting Fannie Mae, Fredde Mac, Lehman, Bear Stearns, Merrill Lynch, and AIG default on their obligations and enter bankruptcy?

For those who think Obama knows the answer, can you tell us what it is?

For those who think McCain knows the answer, can you tell us what it is?

Does anyone know of an elected politician who has the knowledge to understand exactly what is happening now, rather than complain about "regualtion, deregulation, greed, mismanagement, reform, and lobbyists?" Who?

Mac says:

"My biggest fear is that this Congress will try to but in and do something. No surer way to ensure financial ruin for this country."

Which presumes that the country is in good financial shape now? Isn't Bush asking for a $700 billion legally unreviewable giveaway, which will not be accompanied by any required reforms or consideration for the taxpayers, except for those few who will be the bailees? What is the urgency? Is this a surprise?

From Calculated Risk: New York Times Makes a Funny.

The plan only limits the Treasury to "$700,000,000,000 outstanding at any one time", so the total purchases can exceed $700 billion. In fact, every time the Treasury sells some securities, they will probably plow the net proceeds back into more troubled assets until the entire $700 billion is gone.

Think of a drunk gambler at a slot machine. He starts with $100 and slowly loses. Every now and then he wins some money, but he keeps putting the coins back into the slot until he has lost everything. That is how this plan will work.

Unless there is a dramatic changes, there will be no upside participation in the financial companies for taxpayers, and the taxpayers will recapitalize the banks by, in Krugman's words, "having taxpayers pay premium prices for lousy assets".

From the Market Ticker-- The Mother of All Frauds.

This gets better and better.

This, at first blush, would seem to indicate that only American firms would be covered. Nothing is further from the truth. If the Chinese wish to unload some of their purchased toxic sludge they merely sell it to, oh, Goldman Sachs for 40 cents on the dollar and then Goldman sells it to the Treasury for 50. This, under the black letter of the law here, is perfectly legal, which means that one must assume that Paulson will in fact foist off all the bad paper on world markets that was originally based on a mortgage in the United States, while allowing his banker buddies here to loot the taxpayer by acting as an intermediary in the transaction!

Read the whole thing, he dissects it piece by piece.

Casper,

if the POTUS started dropping bombs on yet another sovereign nation without congressional consent.

When did that ever happen? Outside Cuba, Sudan, Serbia, and Iraq in the mid-'90's, that is..

"Why doesn't he remind the voters of that fact in his campaign? Instead he tell the voters that he doesn't understand economics."

I have no idea

regarding the 'no judicial review' part of the law-isn't it a little superfluous anyway given standing doctrine?

the supreme court has pretty consistently said that paying taxes does not give anyone standing to challage the legality of a certin spending program

hence-none would really have standing anyway-so the nonreviewability language is really just another way to speed things up.

the old liberal slogan "Better that ninety-nine (nine?) guilty men should go free than that one innocent man should hang."

Liberal? That saying predates liberalism itself. You can find its equivalent in Blackstone, who was by no means a liberal.

Does that mean $700 Billion FACE AMOUNT

Good question. I think it means the Sec'y has $700B to spend; he could buy much more than that in the face amount of MBS once they're discounted.

Zarkov,

Sorry, that was poorly written: Unlike our little excursions in Cuban, Sudan, and Serbia, Iraq has experienced multiple encounters, but it's only the major invasions where I'm 100% sure there was congressional approval, so that's what I was trying to restrict. But even if all the no-fly-zone stuff was approved, too, I'm pretty sure the aspirin-factory attack wasn't voted on any more than the Bay of Pigs was.

I wish I was an economist and could better understand what is going on. What's puzzling me at the moment is why more attention isn't being paid to shoring up the mortgages themselves, in the form of helping all those individual borrowers to refinance or otherwise keep afloat and keep paying their obligations? Is it just that nothing significant can be done to help prevent the defaults? Or is it that it would take too long and thus wouldn't restore confidence quickly enough to prevent a meltdown? In my simple and maybe simplistic thinking about this, it seems like a good idea to improve the quality of all the bad securities out there, by making it easier for people to keep paying and avoid losing their property.

I share the concerns that this gives too much power to the executive branch, seemingly without Congress taking much time to think over the ramifications. I can understand why some emergency ability to act might be needed, so that action to prevent an immediate calamity can go forward without being held up by meritless legal challenges. However, can anyone explain to me why all of the decisions made should remain beyond later legal review? Why would that be so bad? Kind of like actions Bush took in the war on terror were occasionally subject to later review, which has provided at least some measure of accountability. There's language in the proposal about Congress having some oversight, but it's not clear to me how that will work.

Don51,

Yep. Someone must have missed that.

You wrote; "role over". Great pun, was it intentional?