Unconstitutionality of the Federal Reserve?

[brian0918]

A coworker whose probably liberal, and supports the bailout, was talking about the history of the Federal Reserve, and how, when it was created, people complained that it was unconstitutional. He wondered why nobody made the same claims today, about the bailout and the government involvement in the economy. Clearly he hasn't been looking too far.

I asked him if he thought the Federal Reserve was unconstitutional, and he said that because there's nothing in the Constitution saying the government couldn't have a bank, that it should be alright. I explained that the people who say it's unconstitutional are those who say that the Constitution dictates exactly what the government is restricted to doing. Are there any specific statements in the Constitution that make this clear, or any statements by founders to support this view of the functions of the government?

[aequalsa]

A coworker whose probably liberal, and supports the bailout, was talking about the history of the Federal Reserve, and how, when it was created, people complained that it was unconstitutional. He wondered why nobody made the same claims today, about the bailout and the government involvement in the economy. Clearly he hasn't been looking too far.

I asked him if he thought the Federal Reserve was unconstitutional, and he said that because there's nothing in the Constitution saying the government couldn't have a bank, that it should be alright. I explained that the people who say it's unconstitutional are those who say that the Constitution dictates exactly what the government is restricted to doing. Are there any specific statements in the Constitution that make this clear, or any statements by founders to support this view of the functions of the government?

They're mostly ignored by way of 'necessary and proper', but these were pretty clear about the limitation of power.

The 10th Ammendment

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people. "

9th

"The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people"

[DavidOdden]

By the "Necessary and Proper Clause":

The Congress shall have Power - To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof

combined with the 10th Amendment means that you have to show that the act is necessary to do that which is authorized. One of the enumerated powers is to coin money and regulate the value thereof, and Congress may collect taxes, borrow money and regulate trade. Thus the necessity: "necessary" does not mean "the only way to do it" (this was the holding of SCOTUS). And so now, here we are.

[adrock3215]

Here is my post in the other thread, that nobody answered. But it relates to this same issue:

I have a very limited understanding of Constitutional law. But I know that Article 1 Section 1 states:

Section 1. All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.

Given this, how (throughout the 20th century) has the federal government been transformed into a sort of regulatory entity with legislative power? There must have been some interpretation or loophole that enabled the state to expand its powers to what we currently have, where a member of the executive branch (Paulson) can actually propose a piece of legislation ($700 billion bill).

[DavidOdden]

Here is my post in the other thread, that nobody answered.

Well, speaking for myself, I didn't read your post, which is why I personally didn't answer. I'm sure others could explain their reasons.

I think you're laboring under a misperception about the mechanics of law and government in the US. When you say "There must have been some interpretation or loophole that enabled the state to expand its powers to what we currently have...", that is just wrong. The fact is, the government can do anything it pleases, unless there is an incontrovertable legal proof that it may not do so. And even then, it does it, at some risk of being overturned. There is this concept of "deference", whereby courts show "deference" to the executive or legislative branches unless there is no possible world in which the legislative or executive branches could be correct in their actions. There is no such absolute proof in the present case.

[themadkat]

Well, speaking for myself, I didn't read your post, which is why I personally didn't answer. I'm sure others could explain their reasons.

I think you're laboring under a misperception about the mechanics of law and government in the US. When you say "There must have been some interpretation or loophole that enabled the state to expand its powers to what we currently have...", that is just wrong. The fact is, the government can do anything it pleases, unless there is an incontrovertable legal proof that it may not do so. And even then, it does it, at some risk of being overturned. There is this concept of "deference", whereby courts show "deference" to the executive or legislative branches unless there is no possible world in which the legislative or executive branches could be correct in their actions. There is no such absolute proof in the present case.

Yes, government in this country is an exemplar of the bromide "it is better to beg forgiveness than to ask permission". And sad to say, I've found this to be a practically helpful rule of thumb for the most part, especially when dealing with bureaucracies or administrations of any kind.

[adrock3215]

Well, speaking for myself, I didn't read your post, which is why I personally didn't answer.

It's odd that you would take my post personally.

I think you're laboring under a misperception about the mechanics of law and government in the US. When you say "There must have been some interpretation or loophole that enabled the state to expand its powers to what we currently have...", that is just wrong. The fact is, the government can do anything it pleases, unless there is an incontrovertable legal proof that it may not do so. And even then, it does it, at some risk of being overturned. There is this concept of "deference", whereby courts show "deference" to the executive or legislative branches unless there is no possible world in which the legislative or executive branches could be correct in their actions. There is no such absolute proof in the present case.

Perhaps I misphrased or misunderstood. I meant to say: Given Article 1, Section 1 of the Constitution, which seems to deny the executive branch the power to legislate, how does the executive branch have the power to legislate?

If the answer is as unsophisticated as "Because they said so and they have the guns", then that's fine. But I was asking under the presumption that there is general respect for the Constitution, and that maybe there was some (invalid) "interpretation" which "proved" it says one thing but means something entirely different.

Edited September 26, 2008 by adrock3215

[DavidOdden]

It's odd that you would take my post personally.

I, personally, didn't answer your post. I certainly didn't take it personally. Use a smiley if you've being funny.

Perhaps I misphrased or misunderstood. I meant to say: Given Article 1, Section 1 of the Constitution, which seems to deny the executive branch the power to legislate, how does the executive branch have the power to legislate?

I understood your point, I'm just telling you that you are basing your question on a false premise, that in fact the government cannot act except in that specific fashion. The prohibitions against government action are way too weak and vague, and advance permission is only rarely required. We have "constitutional interpretation" to thank for that.

Perhaps the way to understand this is to go back to McCulloch v. Maryland and read Marshall's opinion. The Constitution says cetain things; Marshall dictated what exactly those words mean. You cannot overturn that fact, all you can do is creatively nitpick his finding in some obscure case where his holding is not applicable, or fou can cut the legs out from under the decision by constitutional amendment. Basically, you cannot overturn McCulloch v. Maryland or Roe v. Wade, because those are the law of the land. You can however construct a clever get-around, at least of Roe.

[eriatarka]

Its worth pointing out that dubious readings of the Constitution havent been exclusively used for the expansion of government powers - for instance there was a period at the start of the 20th century where a speculative interpretation of the Due Process clause was used to implment a libertarian(/Objectivist) agenda regarding labour laws: http://en.wikipedia.org/wiki/Lochner_era . And Roe v Wade is fairly indefensible on strictly Constitutional grounds regardless of whether its the correct decision morally (which it is).

Edited September 26, 2008 by eriatarka

[brian0918]

Its worth pointing out that dubious readings of the Constitution havent been exclusively used for the expansion of government powers - for instance there was a period at the start of the 20th century where a speculative interpretation of the Due Process clause was used to implment a libertarian(/Objectivist) agenda regarding labour laws: http://en.wikipedia.org/wiki/Lochner_era . And Roe v Wade is fairly indefensible on strictly Constitutional grounds regardless of whether its the correct decision morally (which it is).

How was that reading of the Due Process clause "dubious"? Are you opposed to freedom of contract? Or do you simply believe the ends (no more child labor or long hours) justify the means (getting rid of all freedom of contract)?

Edited September 26, 2008 by brian0918

[adrock3215]

The prohibitions against government action are way too weak and vague, and advance permission is only rarely required.

Ahh. I understand. In that case, what, specifically, should a Constitution say about this? I take it that it should have stronger prohibitions against governmental intervention than our (America's) Constitution has?

Perhaps the way to understand this is to go back to McCulloch v. Maryland and read Marshall's opinion.

That is interesting and I have it marked on my to do list. From a quick browsing of Wikipedia: Do you take issue with the "implied powers" reading of Marshall? To me, it seems somewhat arbitrary.

[brian0918]

Wikipedia mentions DC Court of Appeals Judge Janice Rogers Brown as being a support of Lochnerism. Too bad they picked Samuel Alito over her for the Supreme Court spot.

Edited September 26, 2008 by brian0918

[eriatarka]

How was that reading of the Due Process clause "dubious"? Are you opposed to freedom of contract?

What I'm opposed to is irrelevant, the question is whether theres a constitutional basis for the type of freedom of contract found in Lochner (there isnt).

You cant just start saying judicial activism is a good thing when it happens to support a position you personally agree with, and claim to have respect for constitutional government. The point is that judicial activism has went both ways throughout history so portraying it as something which always acts to expand government power is misleading - some of the most dubious Supreme Court decisions have acted to increase freedom rather than to reduce it (Roe v Wade being the obvious example).

Edited September 26, 2008 by eriatarka

[brian0918]

What I'm opposed to is irrelevant, the question is whether theres a constitutional basis for the type of freedom of contract found in Lochner (there isnt).

This book by this guy claims that there is. I stuck it on my reading list. What's your evidence that there isn't?

Edited September 26, 2008 by brian0918

[DavidOdden]

I take it that it should have stronger prohibitions against governmental intervention than our (America's) Constitution has?

Yes. it should. Something like the Purpose Clause would be helpful in limiting interpteations: "The only proper purpose of a government is to protect man's rights, which means: to protect him from physical violence. All provisions of this constitution and laws passed thereunder shall be deemed valid only to the extent that they serve this purpose".

From a quick browsing of Wikipedia: Do you take issue with the "implied powers" reading of Marshall?

Yes, but I don't think the notion if "implied powers" is complete garbage. A legal system requiring a full specification of each and every act allowed is not a legal system (it's not conceptual in nature). A first step is to adopt a theory of construction that is well-informed by Tara Smith's Duke law paper.

[eriatarka]

This book by this guy claims that there is. I stuck it on my reading list. What's your evidence that there isn't?

Well the description of that book in the link you posted admits that the orthodox position among legal scholars is that Lochner was unjustified.

[brian0918]

Well the description of that book in the link you posted admits that the orthodox position among legal scholars is that Lochner was unjustified.

Alright...? You made a definite statement: "there isn't". On what is this statement based? Appeal to tradition?

This book also argued against an orthodox position among scholars.

Edited September 26, 2008 by brian0918

[eriatarka]

Alright...? You made a definite statement: "there isn't". On what is this statement based? Appeal to tradition?

This book also argued against an orthodox position among scholars.

Citing a scholarly consensus is an 'appeal to tradition', yet citing a fringe book published 15 years ago is a rational argument?

But you dont need even need to cite constitutional scholars here really, theres nothing in the text of the fourteenth amendment that mentions contract law, nor was that intended to be its purpose. If 'freedom of contract' is meant to be a fundamental right then there should be a constitutional amendment supporting it - trying to read rights into passages which only have dubious relevance is the same logic that leads to things like Roe v Wade or the various interstate commerce atrocities (or indeed the Federal Reserve).

Edited September 26, 2008 by eriatarka

[brian0918]

Citing a scholarly consensus is an 'appeal to tradition', yet citing a fringe book published 15 years ago is a rational argument?

I didn't cite anything to make a definitive statement, whereas you did. I simply asked for your evidence, and your evidence is a fallacy.

But you dont need even need to cite constitutional scholars here really, theres nothing in the text of the fourteenth amendment that mentions contract law, nor was that intended to be its purpose. If 'freedom of contract' is meant to be a fundamental right then there should be a constitutional amendment supporting it

It mentions "life, liberty, property". Do you consider those empty words? Combine that with the 9th amendment which makes no restriction on rights not mentioned by the Constitution.

[eriatarka]

It mentions "life, liberty, property". Do you consider those empty words?

Its a bit of a stretch, and requires a lot of interpretative licence. Marijuana is property so do you think that the due process clause makes drug laws unconstitutional, for example?

The purpose of due process isnt to protect specific items of property or individual acts - its to prevent people from being punished without having access to a fair legal trial. Due process shouldnt place any restrictions on what laws can exist (eg outlawing laws which violate freedom of contract), it just means that you cant be punished unless a legal trial establishes that you have broken one of these laws. That is to say, due process doesnt create any rights in itself, it just says that the state cant violate the rights created by other laws unless a person has had a fair trial. Substantive (rather than procedural) due process is often hard to justify without giving the impression that rights are being created to suit the judge's personal ideology, as in Lochner.

Combine that with the 9th amendment which makes no restriction on rights not mentioned by the Constitution.

Yeah but if we go down that road then its difficult to object when left-wingers invoke the 9th amendment to find consitutional rights to privacy/healthcare/education/etc. There arent any constitutional guidelines on what can be classed as a non-enumerated right so there doesnt seem to be a principled basis for saying that (eg) freedom of contract is, whereas privacy isnt.

Edited September 27, 2008 by eriatarka

[brian0918]

Yeah but if we go down that road then its difficult to object when left-wingers invoke the 9th amendment to find consitutional rights to privacy/healthcare/education/etc.

The difference, though, is that the clause, and other parts of the Constitution, mention a right to property, so a right to healthcare would violate that right... unless you can make some bogus argument that your property is yours except when the government wants it, then however much the government asks for, that amount is no longer your property. Does the Constitution have anything to say about this?

Edited September 27, 2008 by brian0918

[utabintarbo]

The difference, though, is that the clause, and other parts of the Constitution, mention a right to property, so a right to healthcare would violate that right... unless you can make some bogus argument that your property is yours except when the government wants it, then however much the government asks for, that amount is no longer your property. Does the Constitution have anything to say about this?

Eminent Domain?