Summary: as our ruling elites use the financial crisis to gather economic and political power, the next step is the granting of extraordinary powers to our Executives. Following historical precedent, these will follow the usual forms while greatly changing the substance.
- A historical precedent
- Hot excerpts from the Paulson proposal
- See the following post: “Legal experts discuss if the Paulson Plan is legal“
1. Historical Precedent
America’s original Founders borrowed extensively from practices of the Roman Republic. So do today’s Founders of the new American regime when expanding the government’s power. From Wikipedia (slightly edited):
Dictator was a political office of the Roman Republic. Appointed in a time of crisis, the dictator was above the three branches of government in the constitution of the Roman Republic, as no other body or officer could check his power.
A legal innovation of the Roman Republic, the dictator (Latin for “one who dictates orders”) — officially known as the Magister Populi (“Master of the People”) and the Praetor Maximus (“The supreme Praetor“) — was an extraordinary magistrate whose function was to perform tasks exceeding the authority of any of the ordinary magistrates.
The Roman Senate passed a senatus consultum authorizing the consuls to nominate a dictator, who was the sole exception to the Roman legal principles of collegiality (multiple tenants of the same office) and responsibility (being legally able to be held to answer for actions in office); there could never be more than one dictator at any one time for any reason, and no dictator could ever be held legally responsible for any action during his time in office for any reason.
The reasons which led to the appointment of a dictator required that there should be only one at a time and great power was visited upon them — the imperium magnus, having the ultimate imperium maius(a higher degree of imperium), which was the ability to overrule or remove from office the other curule magistrates upon whom imperium was conferred, including the ability to order their death. The dictators that were appointed for carrying on the business of the state were said to be nominated rei gerundae causa (for the matter to be done), for the “putting down of rebellion”, or ironically in the case of Sulla, as “Dictator for the making of laws and for the settling of the constitution”.
Of course Secretary of the Treasury Paulson will not become a dictator. The term has little utility, weighted down by a millenium of baggage. Nor does history repeat; it just rhymes. Still, the discretionary scope of power and freedom from judicial review to be granted Paulson are without precedent in American history, even in wartime.
2. The Paulson proposal
Go here to see the full text of the legislative proposal from Treasury Department for authority to buy mortgage-related assets. Here are a few of the choice items. Section 8 is my favorite.
Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.-The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.-The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Sec. 8. Review.
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.
Key Treasury Department documents
We cannot plead the “we didn’t know the details in the fine print” excuse. The important details about this massive nationalization have been clearly spelled out for us. See this page for a current list of Treasury Department documents.
Some FM posts about causes of the current crisis
- The post-WWII geopolitical regime is dying, 21 November 2007 — Why the current geopolitical order is unstable, describing the policy choices that brought us here.
- Diagnosing the eagle, chapter I — the housing bust, 6 December 2007
- Death of the post-WWII geopolitical regime – death by debt, 8 January 2008 – Origins of the 1982 – 2006 economic expansion; why the down cycle will be so severe.
- Let us light a candle while we walk, lest we fear what lies ahead, 10 February 2008 – Putting the end of the post-WWII regime in a larger historical context.
- A vital but widely misunderstood aspect of our financial crisis, 18 September 2008 — Too many homes.
- A picture of the post-WWII debt supercycle, 26 September 2008
- Debt – the core problem of this financial crisis, which also explains how we got in this mess, 22 October 2008
- Causes of the financial crisis (no, its not the usual list), 29 October 2008
- Government policy errors and the Great Depession, 1 November 2008
- A look at our government’s debt – rising because we like to spend, 29 December 2009
- Economics is not a morality tale, 14 January 2009
- Q&A on the FM website – who to blame for the mortgage crisis?, 16 January 2010
For a full listing see the FM reference page about the Financial crisis – what’s happening? how will this end?.