Senate Democrats fault lack of judicial review in Bush financial rescue proposal

[JURIST] US Senate Democrats [party website] on Monday questioned the constitutionality of the Bush administration's proposal [fact sheet] to stabilize financial markets and introduced their own plan [materials] allowing courts to review purchases of troubled assets by the Treasury Department [official website]. The administration's proposed legislation, submitted to Congress [White House statement; AP report] on Saturday, would authorize the Treasury to acquire as much as $700 billion in mortgages and other loans. US Sen. Christopher Dodd (D-CT), chairman of the Senate Banking Committee [official websites], criticized a provision in the administration's proposal that would preclude judicial oversight of the purchases, which Dodd said "may be illegal." An alternative proposal by Dodd and other Democrats would permit courts to set aside purchases found to be "arbitrary, capricious, an abuse of discretion, or not in accordance with the law." That language was written by Sen. Patrick Leahy (D-VT), chairman of the Senate Judiciary Committee, who said [press release]:

I would like to see progress toward a balanced bill to address the disastrous effects of eight years of the Bush administration's hands-off economic policies. But passing legislation that eliminates the role of the courts in reviewing the decisions and policies of the administration invites abuse.

I am pleased Senator Dodd has included my language to allow for court review in his proposal. As the Congress considers this important legislation, I hope we are careful to ensure that the American taxpayers’ money is not misspent, misplaced, and mishandled, without even so much as the possibility of review and recourse for bad decisions.
The Treasury has asked Congress to consider the administration's proposal this week. Bloomberg News has more.

Some observers have expressed concern that the Bush proposal would represent an unconstitutional delegation of the spending powers granted to Congress by Article I of the US Constitution [text]. In 1935, in Schechter Poultry Corp. v. United States [text], the US Supreme Court [official website] struck down part of President Franklin D. Roosevelt's National Industrial Recovery Act [materials] as violating the nondelegation doctrine, finding that that law gave the president "virtually unfettered" discretion in enacting trade regulations. Since then, the court has consistently upheld broad delegations of power to the executive branch. In a 1989 case challenging federal sentencing guidelines developed by the US Sentencing Commission [official website], the court held [Mistretta v. US text] that Congress may make such a delegation as long as it provides an "intelligible principle" to guide administrative decisionmaking.

 

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