Sunday, March 29, 2009
Economic stimulus, regulation, bailouts, TARP -- and the Constitution
Linden Blue and Herbert London has a Commentary on p B3 of the Washington Times, Sunday March 29, “Hazards rooted in Sept. 11: Long-term loss of liquidity, market elasticity,” here. The online link has a graphic picture reminding us what the Pentagon looked like on 9/11.
The writers argue that the Bush Administration was justified in cutting taxes loosening controls and in encouraging Greenspan to lower interest rates because the economy was flat on its back in the fall of 2001. (I remember that we got the rebate from the first Bush tax cut in August 2001). The writers are critical of Sarbanes-Oxley, which may be flawed. But what they miss is that we needed some handle on asymmetry and “systemic risk” although I understand the neo argument that labeling companies as “systemic risks” may have the reverse psychological effect (and “anti moral hazard”) of getting them to take even more risks in the future. But, really, what AIG did (with the credit default swaps) makes no sense in the insurance world; you don’t pay off multiple parties for the same policy and break the idea of insurable interest. Regulation should have stopped this.
I, going back to the mid 1990s, had some “conflict of interest” issues myself that in some vague sense parallel Sarbanes. They were perhaps more existential conflicts than real ones, but they caused real issues. I could say that if everyone had followed the same concerns, messes like AIG would have been prevented. Yet I still had a couple major slips, as in 2005 with the school system (discussed elsewhere in my blogs). Back in 2003, I wrote a certification test for a training company on business ethics, and a couple of the questions (that stirred the most interest) were about “conflict of interest.”
Then George Will, on p A15 of The Washington Post, gives us “Bailing Out the Constitution” link here and points out “The Vesting Clause of Article I says, "All legislative powers herein granted shall be vested in" Congress. All. Therefore, none shall be vested elsewhere.” Congress can't simply give away its explicit powers to the Executive Branch! What happens is somebody brings a lawsuit on this idea? Will mentions Freedom Works (which pits itself against “Move On”) with this article on the unconstitutionality of TARP and the bailouts.