Is bail-out plan constitutional? Probably
This article first appeared in the St. Louis Beacon: September 23, 2008 - There are two main constitutional questions about the bailout bill. One is whether Congress violates the Constitution by cutting off all judicial review. The second is whether this is an unconstitutional delegation of legislative authority to the Treasury secretary.
A story in the Nation lays out the case against constitutionality. It quotes Jamie Raski, a constitutional law professor at American University saying, "It's hard to run afoul of the nondelegation doctrine, but if anything does, this is probably it. How does Congress just give away $700 billion and tell the Secretary of the Treasury to figure out the rest?"
The nondelegation theory goes like this: The Constitution says that all legislative power resides with Congress, so Congress can't just give it away without providing any standards. It is true that the Supreme Court has often referred to this nondelegation theory , but it only used the doctrine to strike down New Deal legislation in the 1930s. Those decisions are now widely viewed as discredited.
Because those decisions are discredited, many legal experts in Internet posts have disagreed with Raski's conclusion.
Stripping the federal courts of judicial review also could present a problem. In Hamdan v. Rumsfeld in 2006, the Supreme Court refused to allow Congress to take away its jurisdiction to hear habeas corpus appeals from Guantanamo detainees in the war on terrorism.
One professor posed the issue this way:
"Section 8 of Secretary Paulson's proposed bailout contains the following provision: 'Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.'
"Given the rulings in the detainee cases, I have been operating on the assumption that this provision has approximately the same chance of surviving Supreme Court review as I have of being elected Homecoming Queen."
Maybe the professor has a shot at homecoming queen because most law professors disagreed. The Hamdan case involved a constitutional right - the right of habeas corpus. Congress can't take away a person's constitutional right without allowing the person to go to the courts to vindicate the right. But the Bush bill may not violate anyone's constitutional right. Congress can just as easily block judicial review of the Bush bill as it could cut off review of the Fed's decisions on interest rates.
There is one very good reason to cut off federal court review of the bail-out bill: It lends finality to Congress' action; that finality is important if the bill is to have an impact on the markets.