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Who's your constitutional dictator?

By Jack M. Balkin

I note the following comment in a very interesting post on the turmoil in the US financial markets by "The Deal Professor, " Steven Davidoff:

Lesson 11: Henry Paulson Runs the U.S. Economy

Not President George W. Bush, not Federal Reserve Chairman Ben Bernanke?

A note: For those who watch the Fed, it announced Sunday that it would take as collateral much riskier assets ? including equities, junk bonds, subprime mortgage-backed securities and even whole mortgages ? in exchange for emergency loans through the Primary Dealer Credit Facility.

In a day of big news, this is equally as big as the other events. Before, the Fed justified the facility by saying it would only take on safe assets. But now, the taxpayers are really going to be guaranteeing the balance sheets (and investments) of the financials.

For those of us interested in understanding the nature of America's constitutional dictatorship, this is certainly worth mulling. Obviously Paulson occupies his office legitimately: He was nominated by George W. Bush and confirmed by the US Senate. But, as always, one can ask about the scope of authority he (or Ben Bernanke) was given. If they are given the authority to engage in huge economic decisions that significantly redistribute assets, then this is not analytically dissimilar from the Roman dictatorship, in which civic worthies were given similarly wide-ranging discretion to make major decisions without seeking any prior approval (perhaps even from the President, let alone Congress).

I'm not clear, incidentally, why Professor Davidoff thinks he must necessarily choose between Paulson or Bernanke, unless there is evidence of a showdown between them that Paulson won. The major point appears to be that George W. Bush is not a serious presence in this most serious economic crisis since 1931. But if we take Bob Woodward's book seriously, he was scarcely a serious presence in many of the most important decisions with regard to Iraq, so why should things be different with regard to decisions about the economy. Would any serious person want George W. Bush to be a serious player, anymore than any serious person would want Sarah Palin to be "the Great Decider" with regard to dealing with economic crises? But I digress....

UPDATE: The New York Times has just posted an article, "Bush says economy strong enough to handle turmoil." Now, don't all of us feel so much better....

Full post as published by Balkinization on September 15, 2008 (boomark / email).