The Financial Services Bailout
The following audio and video were recorded on March 19, 2009.
Article I of the Constitution provides that the legislative powers granted by the Constitution are vested in the Congress. As a result, basic lawmaking policy decisions must be made by Congress and cannot be delegated either to an executive branch agency or to the private sector. There must be an “intelligible principle” in the legislation to guide the actions of those who would implement the law. But are there such restrictions on the power of the Treasury Secretary in deciding how to spend the bailout funds?
Another less noted constitutional problem surrounds actions by the Federal Reserve to spend trillions of dollars off budget, as it were. The Fed’s quasi-governmental status is itself arguably an issue of some constitutional concern. Article I, section 8 of the Constitution specifies that Congress has the power to borrow money on the credit of the United States and to coin money and regulate the value thereof. And Article I, section 9 expressly provides that “No Money shall be drawn from the Treasury, but on Consequence of Appropriations made by law.” Should the Fed be able to spend money backed by the full faith and credit of the United States, without an appropriation from Congress?
Finally, there is the long-ignored requirement that Congress can spend tax revenues only for purposes of the “common defense” and “general welfare.” While our common discourse today might view a massive bailout of the financial services industry (or of the automobile industry or the various states and cities) as serving the general welfare, did the founders have something distinctly different in mind when they chose that language, namely, to limit Congress’s spending power to matters of national welfare as opposed to regional or local welfare (or as opposed to the welfare of a particular sector of the economy)?
These matters warrant much greater attention and deliberation than they received at the time, but it is never too late to consider the constitutionality of actions by the government.
THURSDAY, MARCH 19
9:30 a.m. - 10:30 a.m.
Debate: The Founders' Intent, Constitutional Provisions, and Limits on Spending Power and Delegation
- Dr. John Eastman, Dean, Chapman University School of Law
- Prof. Louis Michael Seidman, Carmack Waterhouse Professor of Constitutional Law, Georgetown University Law Center
- Moderator: Hon. Wayne Abernathy, Executive Vice President, Financial Institutions Policy and Regulatory Affairs, American Bankers Association
National Press Club