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The government's response to the financial crisis and 9/11 compared.

A paper (coauthored with Adrian Vermeule) is here; some of the ideas I contributed to it originated as posts on this blog. The abstract follows.

This essay compares crisis governance and emergency lawmaking after 9/11 and the financial meltdown of 2008. We argue that the two episodes were broadly similar in outline, but importantly different in detail, and we attempt to explain both the similarities and differences. First, broad political processes and constraints operated in both episodes to create a similar pattern of crisis governance, in which Congress delegated large new powers to the executive. We argue that this pattern is best explained by reference to the account of lawmaking in the administrative state offered by Carl Schmitt, as opposed to the standard Madisonian view. Second, within the broad constraints of crisis politics, the Bush administration asserted its authority more aggressively after 9/11 than in the financial crisis. Rejecting competing explanations based on legal differences, the nature of the threat, or other factors, we attribute the difference to the Bush administration's loss of popularity and credibility over the period between 2001 and 2008 and to the more salient and divisive distributive effects of financial management.

TheWhaler (mail):
Dude, your Dad, honorable judge tho he be, has gone a bit daffy in his last few posts. Since when did he become a LBJ Democrat?
11.16.2008 10:43pm
John Moore (www):
I would attribute some of the difference to the fact that 9-11 cried out for war-making by the executive, while this crises is not as cleary an executive branch issue.
11.16.2008 10:58pm
TokyoTom (mail):
I would attribute some of the difference to the fact that 9-11 cried out for war-mongering by the Republicans for political gain, while the executive branch issue and Republicans have been at a loss for how to extract political gain from the financial crisis.
11.17.2008 1:27am
Aslam (mail):
I think the 9/11 give lot of losses to the country but now the situation is better, i have visited a law website Rechtsanwaltthat provide service in such situations.
11.17.2008 3:25am
Splunge:
I'm sorry, you reject differences based on the nature of the threat and feel that the Bush Administration's poll numbers changed how they acted?

That's plain nuts. Very few ordinary people regard death by flaming airplane in the same way they regard panic in the stock market, firstly. Doesn't matter that the latter may, in the long run, have a broader effect on more people, any more than the fact that the Japanese argument that the United States really started the war on the Pacific through its restrictions on oil exports -- that little business at Pearl Harbor didn't cause nearly as much suffering. Only a very dessicated thought process can equate the two, duly making multiplications of harm per person times number of persons.

Secondly, when's the last time the Bush Administration gave a damn about its poll numbers? Their numbers sucked when Bush proposed his surge, and he did it anyway. Nor is it a case, I think, of people just ignoring Bush. He just didn't push.

And maybe he didn't care to. Why would he? In the first place, Bush himself doesn't much care about finance, and he certainly has no particular love for the New York Goldman-Sachs crowd. War and peace are his thing, not credit markets and bailouts. I imagine the whole business rather turns his stomach. Thirdly, once he's done whatever his economic people tell him is necessary over the short run, I can imagine he's more than happy to hand over as much of the problem as possible to Barack Obama. Again, why not? The credit, if any, will go to Obama no matter what -- why not make the kid earn it?
11.17.2008 4:35am
PLR:
War and peace are his thing

... though perhaps not in equal measure.
11.17.2008 7:57am
loki13 (mail):

Thirdly, once he's done whatever his economic people tell him is necessary over the short run, I can imagine he's more than happy to hand over as much of the problem as possible to Barack Obama. Again, why not? The credit, if any, will go to Obama no matter what -- why not make the kid earn it?


I think that a major problem many (including myself) have with the Bush administration is that they put partisan political considerations over governance. You are elected from your party, but to govern the country.

This post is emblematic of that thinking- it's okay to screw over America as long as the Democrats take a collateral hit.
11.17.2008 8:26am
Brian Mac:
Interesting paper, but I thought that the dismissal of "the nature of the threats" as an explanatory variable was a bit weak. Simply translating the two events into the language of probabilities and harms, and arguing that they're plausibly similar on this basis, wasn't particularly persuasive.

Also, this dismissal led to some contradictions later on in the paper. For example a later section acknowledged that 9/11 required a violent response to a foreign enemy, in contrast to the financial crisis, and that this made it easier for the executive to act assertively in the former. Surely this supports the argument that differences in the nature of the threats were significant?
11.17.2008 9:09am
Bart (mail):
The proposition that Mr. Bush acted more aggressively responding to 9/11 than to the banking liquidity crisis is questionable. Of the world leaders, Mr. Bush was the first to act and the scope of his bailout actions were unprecedented since the Depression. Indeed, Mr. Bush can perhaps be criticized for being overly aggressive with his predictions of impending financial doom, scaring the hell out of the markets and instigating the subsequent market free fall.
11.17.2008 9:25am
Chieftain1776 (mail):
Bruce Bartlett makes a similar point in his book Imposter (a great expose btw...in which he also predicts a financial crisis) about bailouts specifically on pg 118 "A good example is Bush's decision to give the airline industry billions of dollars in government aid...Critics pointed out that the enabling legislation was passed with unseemly haste—just days after the attacks-- and that there was a lack of consideration to any alternatives...It also brought forth predictable-and equally unjustified-- requests for government aid from a long list of other industries."
11.17.2008 10:03am
Smokey:
TokyoTom:
I would attribute some of the difference to the fact that 9-11 cried out for war-mongering by the Republicans for political gain...
It's a darn good thing that not many Democrats voted for the war, or you wouldn't be able to make that argument.

Oh, wait...
11.17.2008 10:37am
Oren:
Yeah, post-911 overreaction was a bipartisan brain-melt.
11.17.2008 10:59am
Crust (mail):
Smokey:

It's a darn good thing that not many Democrats voted for the war, or you wouldn't be able to make that argument.
Lots of Democrats voted for the AUMF for Iraq. Still, it was a minority of Democratic Congressmen who did so. Also, we forget, but at the time the Bush administration sold it as a hardball negotiating tactic not an actual vote for war (whether that is or was credible or not is debatable; Hilary Clinton certainly found it was not with Democratic primary voters).
11.17.2008 12:06pm
Crust (mail):
[T]he Bush administration asserted its authority more aggressively after 9/11 than in the financial crisis.
Initially, the Bush administration tried to assert authority in the financial crisis too. Witness the initial three-page TARP proposal which asked for money with very few strings attached and a preemptive get out of jail free card. What was different vs. 9/11 was they were aggressively challenged — from both sides of the aisle — and they quickly folded.
11.17.2008 12:14pm
Crust (mail):
Re "get out of jail free card", this is what I was talking about from Section 8 of Paulson's proposal (via Greenwald)
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
I don't think the Bush administration tried any kind of equally aggressive (public) assertion of authority in the immediate aftermath of 9/11.
11.17.2008 12:33pm
israel penhos (mail):
A huge difference between 9/11 and the meltdown is that the executive cannot credibly claim (for the meltdaown) that it has information it cannot disclose and is available only to it. This (naturally) gives congress a better hand in the "game". So its "credibility" is subject to expert verification, that was not true after 9/11.
11.17.2008 12:47pm
Bob from Ohio (mail):

Witness the initial three-page TARP proposal which asked for money with very few strings attached and a preemptive get out of jail free card.


Yeah, those strings really stopped TARP from being converted from a mortgage buying policy to a bank "ownership" policy.

The first "oversight" report is overdue as well.

I believe the inspector general is just now being appointed so won't make his report until after the change of administration.

The changes were cosmetic only and constitute the exact blank check as the original proposal.
11.17.2008 12:54pm
Oren:

This (naturally) gives congress a better hand in the "game". So its "credibility" is subject to expert verification, that was not true after 9/11.

Because Congress can't get good information &advice on military matters? There were plenty of former military/DOD officials on hand to testify in Congress -- did their ability to analyze the situation magically disappear when they took off a military uniform?
11.17.2008 1:05pm
Crust (mail):
Bob from Ohio:
[T]hose strings really stopped TARP from being converted from a mortgage buying policy to a bank "ownership" policy.
Actually, that change was made under pressure from Frank, Dodd and others in Congress as well as outside experts; academic economists were virtually unanimous in condemning the original idea of purchasing troubled mortgage assets directly.
11.17.2008 1:08pm
Crust (mail):
PS to Bob from Ohio, which is not to discount your point that there is still a very significant "blank check" aspect to all this.
11.17.2008 1:09pm
israel penhos (mail):
Because Congress can't get good information &advice on military matters?

Oren:
They couldn't because the executive branch controlled what information it would share, and which members of congress could listen in. Further, they were not allowed to discuss this outside the briefing rooms. That is a staggering informational assymetry.
11.17.2008 2:01pm
israel penhos (mail):
The fact that the disparities can so easily be explained in game-theoritical terms with regard to an informational assymetry that existed in one case and not the other should be enough to sent the authors back to the drawing board (even academics make mistakes sometimes)
11.17.2008 2:15pm
Crust (mail):
One very aggressive executive act after the financial crisis: The Treasury unilaterally changed the tax code without clear legal authority.
11.17.2008 2:30pm
RPT (mail):
The "off the books" accounting/budgeting for the 911 overreaction was a contributing cause of the financial meltdown.
11.17.2008 4:39pm

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