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Those Pushing the Mortgage Bailout Legislation need a short lesson in Constitutional Law

One of the little quirks in the proposed $700 billion financial bailout legislation is that the bill would prevent judicial review of actions taken within the scope of the legislation. Those drafting the legislation are trying to avoid court challenges to actions taken while executing the this bailout legislation. This is likely to open a "huge can of worms" and it poses some series constitutional issues that can have huge ramifications for future legislation.

In short, the proposed financial bailout legislation is being designed to prevent citizens from taking legal action to block the purchases and (hopefully) sales of the most toxic mortgage backed securities. Unfortunately for Congress, legislation that restricts judicial review has been deemed unconstitutional in a number of cases going all the way back to the 1803 case of Marbury v. Madison. Thus, while Congress is attempting to prevent individual lawsuits from gumming up the process of buying and selling the questionable securities, it is risking that the entire law itself will be ruled unconstitutional and will be put on hold. This will most likely occur first in lower courts which will almost assuredly have challenges put in front of them almost immediately. If a lower court rules the 2008 Bailout legislation to be unconstitutional because of limits on judicial review this "emergency" legislation may quickly get put into neutral.

If this occurs Congress and the Executive branch have only a few alternatives. They can rush the case (or cases) immediately to the Supreme Court and hope for a favorable ruling, which is probably a 50-50 bet given the Court's current ideological makeup. Republican presidents have tried to put in judges that are inclined to be restrictive of government power so its a fair possibility that this will come back to bite them if the Court rules that the power the Treasury Department is seeking is excessive.

The other alternatives are even riskier for Congress. It can abolish the lower courts altogether (it does have this authority) to keep them from blocking their actions or it can try to muster enough support for a Constitutional Amendment to allow them to do what they want. If past experience is any indication, the Courts are willing to allow for extraordinary acts in time of war but not in times of financial crisis. This is best demonstrated when much of the legislation passed by President Roosevelt in 1933 failed to get Court approval.

It is ironic that for months those in charge of the economy have been proclaiming that the fundamentals of the economy are sound. They may soon have to make an appeal to the Courts that economy is close to complete collapse if they want the Courts to stand aside and allow them to continue without judicial interference. It is even more ironic that the American public my be asked to sacrifice more than just $700 billion to clean up a mess caused by greed and ill-conceived banking legislation. They may be asked to dispense with the Constitution at the same time.

It is painfully clear that regardless of how competent those writing and reviewing this legislation are, the long term consequences cannot be foreseen in a weekend's worth of work. It would be nice to punish those responsible for producing and perpetuating this financial disaster but because both parties have their hands dirty there isn't really a way to accomplish this. If there is a time historians will note as the turning point for the United States decline this may very well be the point and there isn't much the public can do except watch with amazement and dismay.


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Added: Sep-22-2008 
By: crazymman
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Tags: Mortgage, Bailout, Legislation, Constitutional, Law
Views: 8793 | Comments: 6 | Votes: 1 | Favorites: 1 | Shared: 0 | Updates: 0 | Times used in channels: 1
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