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Tuesday, December 16, 2008

Our Schmittian Bailout Bill?

Eric Posner has a very nice post on Volokh asking whether the Treasury department has authority to bailout the auto industry after Congress rejected the bailout bill. The answer turns on the right interpretation of the term "financial institution" in the Troubled Assets Relief Program ("TARP").

As Eric notes, the text of the statute is unhelpful. Looking at analogous statutes, Eric makes a case that 'financial institution' in 31 U.S.C. 5312(2)(T) is defined to include "a business engaged in vehicle sales, including automobile, airplane, and boat sales." But he dismisses this application of the "pari materia" principle as question-begging -- rightly, in my view -- and instead emphasizes the purposive point that "how Congress understands 'financial institution' or any other term depends on what it is trying to accomplish" and that Congress left the details of who ought to get aid up to Treasury: Automakers'"financial health clearly matters to the resolution of the financial crisis, which is what TARP is for," such that "[w]ith Chevron deference to the Treasury’s reasonable interpretation, this would not be a hard case."

The post is reminiscent of Adrian Vermeule's point that we have a "Schmittian administrative law." There is no point in searching for a "legal" answer -- in the sense of parsing the text or legislative history for either a formal or purposive answer to the question. instead, one simply has to decide which decision-maker has the power to decide when the rule runs out -- that is, determine the shape of the "exception," in Schmitt's term.

Whom do we trust? Courts or Treasury? Does not the question posed in this context with these particular agencies -- i.e., a financial emergency being managed by bureaucrats who appear to be earnestly wonky in their efforts to get it right -- answer itself?

Posted by Rick Hills on December 16, 2008 at 02:48 PM | Permalink


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I think that insofar as political economy is concerned you may be right that arguing over the definition of "financial institution" or "troubled assets" (I contend that the use of the past participle indicates that Paulson's purchase of newly issued preferred stock in banks is contrary to law, as well as would be purchase of newly minted commercial paper in auto companies)is really a surrogate for who do you trust, the administration or the courts. I know who I trust to pass the buck in the first place, and that is the branch you failed to mention.

It is probably a close call anyway whether the catchall "any financial instrument" he wants to buy language insulates these readings, but what really insulates them is Sec 119 on Judicial Review that says


(A) INJUNCTION- No injunction or other form of equitable relief shall be issued against the Secretary for actions pursuant to section 101, 102, 106, and 109, other than to remedy a violation of the Constitution."

After subjecting the entire act to Review under 5 USC chapter 7 which provides a cause of action not for monetary damages.

Maybe there is some loophole here, but I think the lack of equitable relief with regard to the secretary's actions essentially eliminates contrary to law challenges for the specified sections.

But all of this is preserved for constitutional challenge and it seems non-delegation is so blatantly obvious that I remain surprised that even as a back-bencher of a doctrine it is not being more actively debated in the legal realm here.


Posted by: Devil's Advocate | Dec 17, 2008 10:06:06 AM

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