Academic

I was pleased to be asked by the Legal Times (they've got a nice blog, too) to chime in on how the Obama Administration should handle the bailout.  I think the new team will have to weigh how far to push its extremely broad authority against the usefulness of good governance style collaboration with Congress.  That's not just a bailout issue, it implicates the separation of powers and so on.  You can find a gated version of my ponderings here, and here's a taste:

Consider the flexibility the administration will enjoy under the Emergency Economic Stabilization Act?s executive compensation scheme. The bailout statute provides only that the Treasury secretary ?shall require that? participating institutions ?meet appropriate standards for executive compensation and corporate governance.? Because defining those appropriate standards has been left to Treasury, there is nothing preventing the next administration from enacting, with the stroke of a pen, a more European model of management pay.

That would certainly be novel, but it is hardly the limit of the government?s flexibility. The Treasury Department also has authority to invest in institutions in exchange for equity, to purchase assets of those institutions outright, to devise an insurance scheme, and to issue ?such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities or purposes? in the statute. Those purposes are many, but they include ?the need to help families keep their homes and to stabilize communities? and to promote ?jobs and economic growth.?

When coupled with the ability to impose conditions by contract on the recipients of bailout largesse, one can get a sense of just how innovative the Obama administration could be.

For example, though the Community Reinvestment Act has its critics, if ever there was a time when the administration might be able to encourage financial institutions to set hard targets and benchmarks for investment in the impoverished areas of the country, now is it.

Nor need the administration stop there. As industrial companies begin to line up for their own shares of government largesse, nothing in the bailout statute prevents the Obama administration from requiring a contractual commitment to a card-check scheme from the nonunionized among them in exchange for an injection of equity.