Command & Control

From former White House Counsel (in the George H.W. Bush Administration) C. Boyden Gray's interesting WaPo op-ed on the financial reform legislation:

Obamacare has dominated the public debate over the legality and desirability of the White House's regulatory agenda, but the legislation seeking to reform Wall Street may in fact create more serious constitutional difficulties.

The Dodd-Frank legislation passed in the summer is supposed to remedy weaknesses in the U.S. financial system -- ensuring transparency and accountability, and removing risks that banks are "too big to fail." Yet the bill created a structure of almost unlimited, unreviewable and sometimes secret bureaucratic discretion, with no constraints on concentration -- a breakdown of the separation of powers, which were created to guard against the exercise of arbitrary authority.

Take, for example, the resolution/seizure authority of Title II, ostensibly designed to end bailouts and "too big to fail" risks. The Treasury can petition federal district courts to seize not only banks that enjoy government support but any non-bank financial institution that the government thinks is in danger of default and could, in turn, pose a risk to U.S. financial stability. If the entity resists seizure, the petition proceedings go secret, with a federal district judge given 24 hours to decide "on a strictly confidential basis" whether to allow receivership.

There is no stay pending judicial review. That review is in any event limited to the question of the entity's soundness -- not whether a default would pose a risk to financial stability or otherwise violate the statute.

The court can eliminate all judicial review simply by doing nothing for 24 hours, after which the petition is granted automatically and liquidation proceeds.

I assume Boyden's being paid by the banks--but that doesn't make him wrong.

The op-ed was published during my Christmas break. But I passed it on to banking maven MaxedOutMama, who (correctly) observed:

This appears to have been designed to deal with investment banks (not regulated by any agency except the SEC), but the way the law is written anything could be seized. It's all Chavez, all the time. Under this law, the feds could seize a department store chain that offers credit, or a car dealership, or any number of businesses. It is an invitation to overreach.

At least since Obama diverted TARP money to automakers, I think overreach (plus foreseeable "unintended" consequences) is this Administration's core mission.