This Is . . . Peculiar

by Pejman Yousefzadeh on April 4, 2009

So, in setting the policy groundwork for future bailouts, the Obama Administration appears to be set to ensure that Congressional restrictions will not apply:

The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials.

Administration officials have concluded that this approach is vital for persuading firms to participate in programs funded by the $700 billion financial rescue package.

The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.

Although some experts are questioning the legality of this strategy, the officials said it gives them latitude to determine whether firms should be subject to the congressional restrictions, which would require recipients to turn over ownership stakes to the government, as well as curb executive pay.

The administration has decided that the conditions should not apply in at least three of the five initiatives funded by the rescue package.

Reading the article, one finds that Congress is upset with this effort to sidestep its authority. For myself, I am glad to see that an effort is being made to prevent Congress from going on more populist jeremiads against executive pay. But there are plenty of concerns that evading the Congressional limits may be unlawful. Moreover, I thought that we were not supposed to like the Imperial Presidency anymore. It’s kind of surprising to see it come back with a vengeance now that a Republican President has given way to a Democratic one, and while Democrats in Congress are protesting, that’s more attributable to their concern that they will be giving way in the power balance between themselves and the Obama Administration, and less attributable to their generic concerns about the Imperial Presidency–concerns they only pretend to have when a Republican President is in office.

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