The World Financial Crisis and the Unitary Executive

Slate's blog on legal issues.
March 17 2008 4:40 PM

The World Financial Crisis and the Unitary Executive

While everyone seems to be focused on which sermons Barack Obama heard from his minister and what the Second Amendment means,the United States, and by extension the world, is on the brink of afinancial melt-down, which the Federal Reserve Board is doing its bestto prevent.

The Fed is now taking emergency actions-- for example approving a 30 billion dollar loan to J.P. Morgan to purchase Bear Stearns -- that it would not dream of taking in ordinary circumstances. In essence ,the Fed is trading loans that are very low risk for loans that are veryhigh risk and while simultaneously taking control of Bear Stearns'portfolio in order to protect itself. It has also announced that itwill offer loans to other similarly endangered Wall Street investmentfirms.

It is still unclear whether the Fed's strategies willwork. From a constitutional standpoint, however, what is interesting isthat few people seem to doubt the Fed's authority to take these stepswithout consulting anyone, including the President and Congress. Thatis, few people currently doubt the Fed's unilateral authority to makedecisions that shape the fate of the world's most powerful economy.Indeed, not only do most people not object to this quasi-dictatorialpower, they expect and even demand that the Fed take action immediatelyto stem the crisis. And, what is even more interesting, not only do they not expect President Bush to takecontrol of these matters, they do not even want him to.

Jack M. Balkin is Knight professor of constitutional law and the First Amendment at Yale Law School.

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