Politics & Policy

Bailing on the Constitution?

Reading the Bailout.

A “resolution of disapproval” provision listed in the congressional Wall Street bailout compromise looks at first blush like an unconstitutional whooper, at least to nerd lawyers like me. Yet, I have an “inside” reason to believe it would not only be constitutional, it would be economically and democratically prudent. My former Department of Justice colleague, Marty Lederman, is on the right track. But it may not stay that way.

#ad#Apart for the tricky “resolution of disapproval,” there is no evidence the White House or congressional negotiation team had their pocket Constitutions with them. The outline of the deal suggests: (1) the negotiators will not fix the fundamental constitutional problems with the previous bailout bills, and (2) they will raise new constitutional concerns. The figurative devil likely will be in the details of this compromise package, but let’s begin with a review the constitutional problems with the previous bailout bills. As Andrew Grossman and I wrote in a three-page webmemo for Heritage:

The Paulson proposal, and the several congressional proposals based upon it, raise substantial constitutional questions regarding: (1) Congress’s enumerated power—or lack thereof—to intervene with private markets in the manner contemplated, (2) the lack of meaningful standards to guide the extremely broad grant of discretion to the Treasury secretary (the “legislative delegation” problem), (3) limitations on judicial review over the exercise of that almost limitless discretion, and (4) related separation of powers concerns.

From a constitutional standpoint, the current versions of the legislation are different in scope, and especially in kind, from almost any federal legislation that has come before. Many analogies to past emergency economic powers, such as those exercised in response to the thrift failures of the 1980s, are not on point with regard to these central constitutional concerns.

And these concerns are serious, regardless of how the courts might resolve them. Some would treat the Constitution merely as a legalistic contract and employ narrow legalistic arguments to circumvent its strictures and protections. The substance of this debate, however, should not turn on what provisions might or might not pass muster with the courts under a pinched conception of our fundamental law. Rather, it is the principles the Constitution embodies, which have served us well through so many crises, that should be the focus of debate. In short, Americans should take little comfort that [this or that provision] might barely pass muster in the courts if the legislation does serious damage to the underlying constitutional principles that were designed to protect our individual rights against governmental usurpations.

[T]hose who argue that we need to suspend the fundamental charter in order to save it (or the economy) have it backward. Our fundamental charter has always been a bulwark for the free market. [Addressing these] constitutional concerns should not only improve the short-term value of any emergency legislation; it should also support the long-term viability of free markets and, ultimately, free people.

Instead of addressing the sweeping and seemingly standard-less delegations of discretion to the executive branch by doing what lawmakers are supposed to do: Actually write a law with the objective criteria that would guide and limit the executive official’s exercise of the unprecedented new authority (see our two pages of recommended fixes), the negotiators want to add new provisions that make matters worse.

One of the principal benefits of the constitutional separation of powers is that citizens know which branch to hold accountable when something goes wrong. It is symptom of the separation of powers sloppiness of modern times that instead of writing detailed laws that the president is then responsible to execute, Congress delegates vast new authority to the executive branch to “fix” he 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.

The outline of the compromise bill seems to do very little to guide the Treasury secretary’s almost limitless discretion on what financial or other debt he may buy, for what purposes, to whom he may sell it, and on what terms. Instead, congressional negotiators simply added the tools of modern micromanagement: a quasi-unconstitutional inspector general (depending on how “independent” he is when the ink is dry), extra-special GAO audits and reviews, multiple layers of specially burdensome congressional reporting, and a questionable-sounding, whiz-bang oversight board.

James Madison would not approve. It’s a classic recipe for fingerpointing if something goes wrong and an equally worrisome precedent even if the immediate “crisis” abates. I prefer the Constitution.

Todd Gaziano is the director of the Center for Legal and Judicial Studies at The Heritage Foundation.

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