Thursday, 8. December 2011
Obama’s National Emergency Powers
As financial markets struggle with repeated failures by our central planners in ‘managing’ the crisis in the Eurozone, a recent statement by President Barack Obama is worth highlighting. On September 13, 2011, in a speech addressing criticism of his jobs plan, Obama stated in part:
“I get fed up with that kind of game plan, and we’ve been seen it for too long. Too long. We’re in a national emergency.”
Granted, this has been the worst recession, and worst jobs recovery from a recession, since the Great Depression. But a national emergency? Are we talking nuclear attacks, poison in the water supply, or a new and unstoppable infectious disease?
What is a ‘national emergency,’ anyway? Might those words carry legal meaning?
In fact, they do, and speaking of the Great Depression and financial markets, well, history matters.
When Obama was giving his speech back in early September, the flare-up in the crisis in the Eurozone was just getting started. Stock prices for large financial services firms in the US exposed to their counterparts in Europe were falling anew, while the CBOE “VIX” index (a volatility index, also called the ‘market fear index’) was spiking sharply higher. Money market funds in the US were also exposed, with European investments comprising a surprisingly large share of their assets.
Was this financial backdrop one component of Obama’s ‘national emergency?’ Correlation is not necessarily causation, the saying goes in econometrics. In other words, it could have just been a coincidence.
But it is worth recognizing as well the tinderbox underneath that phase. There is a very important area of constitutional law called ‘national emergency powers.’ The area deals with assertions of extraordinary Presidential and executive branch authority during a crisis, including any formally declared state of national emergency or a ‘time of war.’
For example, back in 1933, 48 hours after taking office amid a financial crisis, President Franklin Delano Roosevelt declared a national emergency and effectively ordered the closure of all the banks in the United States. At the time, the source of authority cited for this action was, quite questionably, the Trading With the Enemy Act of 1917.
After several decades of statutory evolution, a broader range of questionable but statutory authority for sweeping executive branch power over financial markets remains on the books today. In fact, one such current font of authority, 12 U.S.C. 95a, dates to the Trading With The Enemy Act. Another was developed soon after FDR took his extraordinary action. This statute, 12 U.S.C. 95(a), differs from the former on a few dimensions, not just the parentheses. It is the current product of the Emergency Banking Relief Act of 1934.
Do the safeguards promoting limited government envisioned by the authors of the United States Constitution bend and sway with the whims of central authorities during crises? Can emergency powers be abused by special interest groups at general expense? We will have more to discuss about this important area down the road. For now, interested readers are referred to a thorough, excellent paper by Congressional Research Service scholar Harold Relyea, a 2007 CRS report titled simply National Emergency Powers.
(p.s. Thanks to Ed Crane, founder and president of the Cato Institute, for flagging that Obama quote in a recent talk Crane gave in Chicago)
# # # #
This site depends exclusively on readers’ support. Please help us continue by subscribing .