Steve Davidoff and I have been following the financial crisis blow by blow on DealBook and at the Conglomerate. We thought it would be useful to combine our perspectives in a paper that offers an initial history of the bailout and posits an overarching theme to the government's response. The title is Big Deal: The Government's Response to the Financial Crisis, and the paper is available for download here. The abstract:
How should we understand the federal government's response to the financial crisis? The government's team, largely staffed by investment bankers, pushed the limits of its statutory authority to authorize an ad hoc series of deals designed to mitigate that crisis. It then decided to seek comprehensive legislation that, as it turned out, paved the way for more deals. The result has not been particularly coherent, but it has married transactional practice to administrative law. In fact, we think that regulation by deal provides an organizing principle, albeit a loose one, to the government's response to the financial crisis. Dealmakers use contract to avoid some legal constraints, and often prefer to focus on arms-length negotiation, rather than regulatory authorization, as the source of legitimacy for their actions, though the law does provide a structure to their deals. They also do not always take the long view or place value on consistency, instead preferring to complete the latest deal at hand and move to the next transaction. In this paper, we offer a first look at the history of the financial crisis from the fall of Bear Stearns up to, and including, the initial implementation of the Economic Emergency Stability Act of 2008. We analyze in depth each deal the government concluded, and how it justified those deals within the constraints of the law, using its authority to sometimes stretch but never truly break that law. We consider what the government's response so far means for transactional and administrative law scholarship, as well as some of the broader implications of crisis governance by deal.
Do give it a read, and please let us know what you think.
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1. Posted by Mike Price on November 25, 2008 @ 12:03 | Permalink
The financial crisis is the under pinning of poor judgement by Congress...look at history prticularly when Clinton was in office. His administration reversed the side bet laws that we enacted to prevent what has happened.
The solution is to move to a flat tax system and take the poor decision-making out of the equation. For example, wihtout the IRS there would be no needed to vote on Taxes and laws like the alternative minimum tax that hurt the middle-class. Face it, Congress passed a law with no idea of the outcome.
Flat tax would stop government waste and balance the budget...too simple.
What's happening is lawmakers are passing tax laws that create loop holes and they are spending as if they are collecting based upon tax brackets. Not so fast, what about those loop holes and tax write offs, etc. A flat tax system would keep the budget balanced and overspending by governmant would be minimized.
Do the math!
Mike
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