The Federalist Society hosted its financial services panel at its National Lawyers Convention this afternoon. The panel’s title was “The Constitutionality of the Dodd-Frank Financial Services Reform Act.” Hon. C. Boyden Gray; Professor Ronald M. Levin; Hon. Peter J. Wallison; and Professor Arthur E. Wilmarth, Jr. made up the panel. Hon. Carlos T. Bea moderated.
Mr. Gray was the first panelist to speak and he began by noting vagueness concerns associated of the Dodd-Frank Act. He continued on to note how the Act cuts Congress and the White House out the equation, at least in part, due to funding coming from the Federal Reserve. Mr. Gray concluded his opening remarks by suggesting that the Act presents significant risks of agency capture and resent seeking.
Professor Levin started his opening remarks with commenting on the non-delegation doctrine difficulties that the Act invites and the inevitable difficulty that courts will face in light of the line drawing that the Act all but guarantees. He went on, however, to suppose that the vagueness that appears in the Act may have been the best Congress could have done given the extraordinary circumstances in which they were operating.
Mr. Wallison started his opening remarks by suggesting that it is an open question whether not acting during the financial crisis was a credible option. He raised the question of just how much power Congress can delegate to the Executive Branch while simultaneously not running afoul of the separation of powers doctrine. Mr. Wallison concluded his opening remarks by suggesting that at least one reading of the Act would cause the Federal Reserve to essentially be managing the financial services market. Put differently, the Federal Reserve will have the ability to decide who will succeed and who will fail in the competition for business from consumers in the financial services market.
Professor Wilmarth maintained that the Act effectively does not solve the “too big to fail problem” and would still allow bailouts. He noted a number of loopholes that allow the problems to persist.
Following the opening remarks from the panelists, Professor Levin suggested that in the context of separation of powers questions, there is a difference between one branch grabbing power from another branch and one branch giving power to another branch. The second case, according to Professor Levin, does not evoke separation of powers concerns that are as severe because the “giving branch” is losing power voluntarily, can oversee and manage the power, and ultimately take back the power if it wishes to do so.
Mr. Gray decried the provision of the act that requires district court judges make decisions on certain cases within twenty-four hours. The limited time permitted to decide these cases, combined with an additional constraint that they must occur in secret, lead Mr. Gray to liken the arrangement to a star chamber. Professor Levin admitted that Mr. Gray’s interpretation of the Act is possible, but also suggested that it was unlikely to occur in light of the typical ways that courts interpret statutes.
In response a question from an audience member, Mr. Wallison explained how the individual responsible for managing the financial services market will not only be effectively unaccountable to the Congress and the President, but also from the Federal Reserve.
Towards the end of the panel, Mr. Wallison contended that the Dodd-Frant Act did not address the United States’ housing policy, which was, him, the major cause of the financial crisis. Mr. Wallison pointed out that Congress actually passed the legislation that was meant to address financial crisis before a study on what caused the crisis was completed. Moreover, the Act permits the U.S. government to continue to create the same sort of mortgages that contributed to the financial crisis.