Thursday, October 02, 2008

Lessons for Legislators

There are many things that can still be said to your Congressman regarding the "bailout" (I'm sorry: the "rescue plan"). Even if, as you're reading this, the House has already reversed itself and passed the "No Banker Left Behind" bill. Jim Babka gives us a lengthy list.

Article 1, Section 7, Clause 1 of the Constitution is clear:

All Bills for raising Revenue shall originate in the House of Representatives;

This was the branch that was closest to the citizenry. Members of the House were to be, in the fullest sense of the word, "representatives." With Representatives facing elections every two years, even voters with notoriously short memories can take them out in less than two years. This wasn't a new idea. William Blackstone called it an "antient indisputable privilege and right."

William Blackstone, Commentaries 1:163--64, 1765

The Framers were defending their rights as Englishmen, and stood on rights going back before 1689:

Bill of Rights, sec. 4 1 W. & M., 2d sess., c. 2,, 16 Dec. 1689

If you're like the Senate, and don't like constitutional history, scroll past these references to the principle of House control of the federal purse strings:

Stamp Act Congress, Declaration of Rights, 19 Oct. 1765
Benjamin Rush to Catherine Macaulay, 18 Jan. 1769
Delaware Constitution of 1776, ART. 6
Virginia Constitution of 1776
Records of the Federal Convention
Luther Martin, Genuine Information, 1788
Theophilus Parsons, Massachusetts Ratifying Convention, 23 Jan. 1788
Debate in Virginia Ratifying Convention, 14 June 1788
House of Representatives, Duties, 15 May 1789
James Wilson, Legislative Department, Lectures on Law, 1791
Joseph Story, Commentaries on the Constitution 2:§§ 871--77, 1833

Yes, the Senate was to be a check on the excesses of the House. The President was given a veto to check them still further. And finally the Courts could put a stop to un-Constitutional spending not specifically enumerated or authorized by the Constitution. But the power to spend the People's money began with the representatives of the People -- at least among those who kept their oath to "support the Constitution."

Not any more.

The Senate is overthrowing the prescriptions of the Constitution. They have no bill from the House. The People spoke loudly and clearly, and the House rejected the bailout. But it is all-too-typical for Congress to loudly stand by the People, take advantage of photo-ops, and then a few days, weeks, or months later, quietly reverse their public position and trample on the rights of the People.

New Hampshire Senator Judd Gregg, appearing on TV last night, suggested that they had a way around the Constitution. He said it's done all the time. The Senate will simply attach its bailout bill to a current "CR" -- a Continuing Resolution. In other words, they'll attach it to another, unrelated bill -- and send it back over to the House.

Not only is this un-Constitutional -- a violation of Article I, Section 7 -- but this Judd Gregg approach also breaks the principle of the One Subject at a Time Act.

The parallels to the response to 9-11 are easy to draw. The PATRIOT Act was passed without a legislator even being allowed to read it, and the rush to get the Bailout voted on in a hurry violates the transpartisan principles of the Read the Bills Act. The House is being strong-armed.

There is no economic evidence that a delay on a re-vote in the House -- allowing thoughtful evaluation and deliberation over a trillion-dollar expenditure -- is going to bring about a depression that can only be prevented by acting a week or two sooner.

Now as if that's not bad enough, Judd Gregg wasn't done being reckless. When asked about potentially suspending the "mark-to-market" rules, he said that the Congress didn't have the specialization necessary to address that issue. Instead, addressing mark-to-market needed to be left in the hands of the (un-elected) “experts” at the Securities and Exchange Commission.

So Congress is expert enough to authorize, in one bill, without study, the single largest seizure ever of American wealth, the largest increase ever in federal government spending, the largest transfer ever of wealth to special interests, and a Constitution-altering semi-nationalization of the entire lending industry, with nearly unreviewable power lodged in the hands of one Treasury Czar, but Congress is not qualified to address a little accounting rule!

By the way, that too is a violation of Article I. Only Congress has the legislative power. That authority cannot be delegated to un-elected bureaucrats, or anyone else for that matter. But such illegal delegation happens routinely. And then, as in this case, once the power is delegated by Congress, Congress is told they can never rescind or review that delegated authority. That's why wrote the Write the Laws Act.

Of course, Congress has no authority to save the markets or give such vast, discretionary authority to one man or one agency of the government. So it violates the principles underlying the Enumerated Powers Act as well – an act which would compel Congress to cite, chapter and verse, from where, in the Constitution, the bill they’re voting on is authorized. More on the "enumerated powers" doctrine.

The federal government is already bankrupt. The bailout bill is unmatched for adding to inflation and deficits. Tell your legislator to tighten the belt, and pass the Fiscal Responsibility Act. This bill, also known as H.R. 500, if passed into law, would trigger a cut in Congressional pay for each year in which the federal government runs a deficit.

Maybe Congress would be more interested in changing arbitrary rules like mark-to-market than expending $700 billion if they had to take a pay cut. But since you and your offspring are going to get the bill, why should they be concerned about the expense? Why start now?

You can use the Educate the Powerful System to get your voice heard, because we must defeat this socialization/bailout once again in the House.

Ignore Their Threats

Do you really believe that if ten of the top twenty lending institutions go belly up -- as they should -- for greedy, immoral, reckless, and (to use a technical term from economics) BAD investments -- that ten other lending institutions would not be happy to rise up and fill their places and start lending more responsibly?

Supporters of the bailout would have us believe that without bailing out lenders who loaned to uncreditworthy borrowers, and repackaged bad debt for foolish investors, there will be no lenders who reject such policies and are ready to loan to creditworthy borrowers. Nothing about such a claim makes any sense.

There's no reason why a new generation of responsible lenders cannot take the place of an old generation of irresponsible and greedy lenders -- victims of capitalist competition -- and loan out money created out of thin air by the Federal Reserve. (!)

Threats of "credit contraction" are, to put it nicely, a self-fulfilling prophecy, and to put it less kindly, extortion. The only reason the Federal Reserve wants to bail out old lenders rather than allow more competitive new lenders to take their place, is epitomized by Treasury Secretary Henry Paulson, himself an old lender from Goldman Sachs, who expects Congress to bail out his friends with our money.

But we've already pointed out that this whole racket is a fraud. The purpose -- openly admitted, even boasted of -- of the rules that created the current crisis, was to permit the "disadvantaged" and minority American to go into debt for a home. "Home ownership" for the poor -- that was the stated goal. It was the Federal Reserve that "expanded credit" so that loans could be made to the poor. The money did not come from savings -- Americans are notoriously bad savers. Nobody is saving, everyone is spending. The money for new borrowers was created by the Federal Reserve System. There is no reason why that "fiat money" could not have simply been placed directly into the hands of the poor. Instead, the money ("credit expansion") was placed into the hands of lending institutions so that they could make interest off the poor.

The primary beneficiaries of the system are Wall Street tycoons, not the poor, and the primary beneficiaries of the Senate bailout are the same people: Wall Street, not Main Street. The levels of fraud, immorality, and deceit are staggering.

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