Update: Revising the Powers of the Secretary of the Treasury

Rick Pildes

The just released latest draft (non-final) of the bailout bill reconfigures the relationship of the Secretary of the Treasury to the new Financial Stability Oversight Board. From the structure, there is reason to think that this revised structure is in response to the kind of concerns raised in earlier posts.

The revised Section 104 now takes away any legally binding power the Board would have over the Secretary. Instead, the new Board has the power to make "recommendations" to the Secretary, and then the Board is given the power "to ensure that the policies implemented by the Secretary are in accordance with the purposes of this Act; in the economic interests of the United States; and consistent with protecting taxpayers, in accordance with [other provisions of the Act]." The memberships of the Board and its executive committee are also changed slightly, though not in ways relevant here.

These new provisions are obviously much more vague than in the prior draft. I view this as "studied ambiguity" about the relationship of the Board to the Secretary, and I think that ambiguity is probably wise. This structure will encourage a high degree of discussion, negotiation, and sharing of views concerning major decisions between the Secretary and the executive committee of the Board. The Board will also be able to be a fire alert for Congress and the public should a Secretary be moving in directions that concern the Board. But this avoids a direct confrontation with separation of powers principles by avoiding giving the Board decisive, formal legal control over the Secretary. Congress and the public is likely to get meaningful oversight of the Secretary's decisions, which appears to be the goal, without provoking a direct confrontation with separation of powers principles by formally subordinating the Secretary to the power of this new Board.
Posted 5:14 PM by Rick Pildes [link]