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Monday, September 22, 2008

Law - More on: Text of Draft Proposal for Bailout Plan

Updating this ILB entry from earlier this morning:

"Dodd, Democrats Question Lack of Court Access in Rescue Plan ," a report by Greg Stohr in Bloomberg News, reviews the legal issues, noting: "Judicial bypass provisions are common in statutes and in some cases have been upheld by the U.S. Supreme Court. Congress, nonetheless, may choose to revise the administration plan to permit some independent review."

The WSJ reports "Few Limits Proposed for Treasury." Jess Bravin's story reports:

WASHINGTON -- If the Bush administration has its way, anyone harmed by the Treasury Department's handling of the $700 billion Wall Street bailout might have no remedy.

Draft legislation proposes sweeping powers for Treasury Secretary Henry Paulson to buy and sell mortgage-related securities however he sees fit. Aside from requiring periodic reports to Congress, the bill provides no oversight of the bailout's management -- and specifically bars any court or agency from reviewing it. * * *

In 1974, the Supreme Court upheld a statute barring judicial review of certain benefits decisions made by the Veterans Administration. While Congress can block review of discretionary decisions under a statute, it can't stop lawsuits claiming violation of constitutional rights.

Under the draft legislation, claimants apparently would be barred from suing on grounds that the Treasury Department undervalued their assets or didn't fairly consider a seller's situation, Mr. Levy said. However, a court might hear a constitutional claim, such as allegations that the method of deciding who gets paid or how much assets are worth violates the Fifth Amendment's Due Process Clause, he said.

Such claims may be difficult to prove.

The draft language blocks review only of "decisions by the Secretary" under the act. Mr. Levy said that leaves open the door to challenges to the act itself. Such a claim might, for instance, allege that the statute improperly delegates congressional power to an executive official.

See also Dan Slater's post in the WSJ Law Blog, titled "Judicial Oversight of the Bailout Plan? Fuggedaboudit."

Posted by Marcia Oddi on September 22, 2008 09:32 AM
Posted to General Law Related