Co-conspirator Eric Posner writes:
Meanwhile, right now niceties of statutory construction must be ignored because the people who drafted the statutes did not anticipate the nature of this emergency though of course they knew that emergencies could happen. Back in 1932 (the most recent amendment was in 1991), Congress apparently believed that the Fed could respond to a financial crises solely by making loans so there was no need to give it the power to purchase businesses, a power that could be abused. Turns out this belief might have been wrong. Some loans may not be wise unless the lender can more or less control the borrower and can earn a portion of the upside, which just means that the Fed should have the power to purchase equity as well as debt. Going forward, all that Congress can do is provide even greater statutory discretion by expanding old authorities, so that next time round there will be no doubts about legality, and hope that the Fed does not abuse this discretion. There is, and can be, no serious debate about the best way to respond to the emergency in advance of it, and no time to have a debate during it. So Congress proves itself again an utterly helpless institution. It can whine (http://online.wsj.com/article/SB122176444088253287.html?mod=googlenews_wsj) today, hold oversight hearings tomorrow, and dutifully hand over more authority to the Fed on the next day. In the meantime, bad decisions by our government during this financial crisis, and future ones as well, will harm Americans and people around the world just as much as bad war-on-terror decisions do. Sorry, my libertarian friends; this is the world we live in. And there is no conceivable alternativeHe's probably right, sad to say -- Congress can no more give direction in crises like this one than it can direct troop movements during wartime. But one (small) point should be stressed here: the current bailout is being crafted not just by the Fed, but by the Treasury Department in conjunction with the Fed. It's not an insignificant point -- the Fed, after all, is almost completely shielded from political pressure, which is (usually) a good thing. But I, for one, would be a lot more nervous about the current bailout (and future bailouts) if I thought that the Fed was acting on its own; at least the occupants of the Treasury Dep't have some claim to having been chosen by the electorate, and are not entirely independent of voters' claims.
And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?
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