March 23, 2009
Is the PPIP legal?
Posted by David Zaring

I asked my administrative law students today whether Treasury will get Chevron deference or Skidmore deference when it is sued over its new public-private toxic asset protection plan, and I'd love to hear your thoughts.  Treasury announced this new plan through a press conference, a fact sheet, and a white paper.  Whatever happened to ordinary administrative procedure during the bailout, where agencies would make policy through rulemaking or adjudication?  I have yet to see either from Treasury or the Fed.

But still, courts will find a way to classify what it was that Treasury was doing - if I were a government lawyer I'd analogize it to a request for proposals. If it is an RFP, there would be a ripeness issue and a standing issue that could prevent judicial review from happening until the partnerships are up and running.  The government won't be able to avoid judicial review forever, though, and that review would be related to the usual ways that agencies make policy - the ways that Treasury and the Fed have eschewed.  Section 117 of the TARP statute provides:

Actions by the Secretary pursuant to the authority of this Act shall be subject to chapter 7 of title 5, United States, including that such actions shall be held unlawful and set aside if found to be arbitrary, capricious, an abuse of discretion, or not in accordance with law.

The good news for Treasury is that funding a public-private asset purchasing partnership looks comfortably within the purpose of the TARP, as section 101(a)(1) of its enabling legislation suggests, so it probably is "in accordance with law":

The Secretary is authorized to establish the Troubled Asset Relief Program (or ‘‘TARP’’) to purchase, to make and fund commitments to purchase, from any financial institution, on such terms and conditions as are determined by the Secretary, and in accordance with this Act and the policies and procedures developed and published by the Secretary.

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