The Supreme Court Holds Up the Chrysler Sale


By Joe Campbell
June 9th, 2009

I actually decided to write a short piece stating my hope that the Supreme Court would look into Obama’s and Bush’s expansion of executive powers in tackling the financial crisis before the Supreme Court delayed the sale of Chrysler to Fiat. Now that they have, I’m relieved if a bit nervous. The key issue is the use of executive power in a crisis – as Michael J. de la Merced explained the issue:

In a broader context, such a decision would also give the justices an early opportunity to consider the scope of the wide-ranging but not unlimited authority that Congress granted the president to address the economic crisis.

I think this is a good thing – though I’m not sure how the timing of this will affect things. Generally, the strongest decisions restricting the executive’s freedom in a crisis have come after the crisis has past. With the rash of bad news on the economic front – even as most indicators seem to be levelling off – this financial crisis is not yet over. On the one hand, strong action by the Court at this time to curb the power of the president could destabilize the economy, as it is confidence in the power and determination of the executive branch and the Federal Reserve to backstop the financial system that seem to have restored confidence in the market and economy itself. At the same time, the Supreme Court is less likely to challenge the president’s authority in the middle of a crisis – making it more likely the decision will be deferential.

It is possible that all of these competing claims could be dealt with responsibly – with a Solomonic decision along the lines of Marbury v. Madison. It’s also possible that the Court may find Presidents Bush and Obama both acted constitutionally in their response. But as a matter of policy, the recent government interventions into the market are ill-advised if they extend beyond the minimum amount of time. As I wrote regarding Obama and the Rule of Law:

The power of the executive branch has grown enormously in the financial crisis – between the Stimulus Bill and the bank bailout. While in the short-term this may be necessary, if steps are not taken, this would undermine the balance of power between the federal government and the states. While this in itself is not a violation of the Rule of Law – it does weaken the system which together helps maintain the Rule of Law.

The one issue that strikes me as worth considering – on matters of constitutionality rather than policy – is whether or not Bush and then Obama acted within their powers in providing loans to Chrysler and General Motors; perhaps a Court should also look at the broad authority given by the TARP bill itself and set some standards regarding what authorities and monies can and cannot be extended to the executive branch by the legislative.

The whole process of drafting and passing the TARP bill was obviously flawed – though it’s difficult to judge legislation passed in the midst of a crisis. The only logical way out of this I’ve heard mentioned would be to “stockpile laws” as Philip Bobbitt once suggested with regards to terrorism.

But even as there is a flawed process, it’s not clear what if anything was unconstitutional.

At the same time, I’m glad to see the Court looking seriously at getting involved. I’m all for these checks and balances.