Legal News

Two legal items inward final week's tidings caught my eye: The legal challenge to Dodd-Frank, together with a challenge to Virginia's "certificates of need" for novel hospitals.  I've written virtually both from an economic, together with slightly political-economy viewpoint. The legal challenges are a novel together with interesting angle.

Links:

• Why Dodd-Frank is Unconstitutional, a WSJ OpEd by  C. Boyden Gray together with Jim Purcell, who are bringing the case. 
• A overnice video from WSJ inward which Editor James Freeman explains the case; 
• Press release, a listing of links together with details of the complaint from the Competitive Enterprise Institute
• The Insitute for Justice on "Colon Health Centers of America, LLC, et al. v. Hazel, et al." together with their to a greater extent than extensive background

I am troubled past times Dodd-Frank's reliance on discretionary mightiness given to appointed functionaries. "Systemically important" is whatever they decide it to be, fifty-fifty after the fact.  There is no rulebook, no manner to know ahead of fourth dimension how to avoid "designation" together with "resolution" together with lilliputian recourse if y'all disagree. This strikes me equally a pitiable machinery from a moral-hazard, rules-vs-discretion, precommitment-vs-expost ascendance economical basis, together with worse from a political economical footing of avoiding capture, "crony capitalism," keeping regulation from existence subverted to stifle competition, together with and therefore on. But, knowing lilliputian virtually law,  I didn't recollect it was unconstitutional. All sorts of lightheaded laws are constitutional.

"Certificates of need" for hospitals are ane of the many barriers to entry enacted past times ground governments together with enforced past times ground regulators. To starting fourth dimension a hospital, a ground board needs to give y'all ane of these certificates, together with all your competitors larn to come upwardly to the hearing together with complain that you're stealing their business. In Illinois, keeping upwardly the profits of incumbents is written correct at that topographic point inward the statute defining the board that hands out certificates.

Again, horrible economics, but governments receive got been using the fig-leaf of consumer protection to stifle contest together with prop upwardly politically-connected incumbents for centuries if non millenia.

Well, maybe the framers of the constitution had to a greater extent than foresight than I thought. There is an interesting prospect that both of these horrible bits off economic science are inward fact unconstitutional together with tin hold upwardly brought downwardly past times legal challenge.

Both threads volition come upwardly together this week. We volition take heed on the constitutional challenge the constabulary forthwith called Obamacare fifty-fifty past times its defenders.  But hither the legal challenge -- the mandate -- is ane of the to the lowest degree objectionable pieces of economics. I  wishing stupid economic science were unconstitutional, together with lawyers could become after the take in of the bill.  If the separation of powers representative for Dodd-Frank works, maybe they will, for the sick defined terms, arbitrary power, regulator discretion together with and therefore forth inward the wellness constabulary brand fifty-fifty Dodd-Frank await good.

In the large picture, our Obamacare debate has focused on wellness insurance, but the awful economic science together with regulatory devastation of the wellness care markets should hold upwardly higher on the list. Why can't y'all walk inward to a infirmary together with receive got whatever thought what the existent prices are? Why does "thank you, I'll pay cash" hateful you'll larn socked amongst a huge bill, non a overnice discount? Anti-competitive regulation is a large answer.  Perhaps the Virginia representative tin start the dismantling of ground together with federal regulation strangling contest inward wellness care.

----

The principal legal challenge to Dodd-Frank centers on the Consumer Financial Protection Bureau.  Gray together with Purcell starting fourth dimension amongst a overnice quote from President Obama

"Our fiscal organisation alone works—our marketplace is alone free—when at that topographic point are clear rules together with basic safeguards that foreclose abuse, that depository fiscal establishment check excess, that ensure that it is to a greater extent than profitable to play past times the rules than to game the system." We completely agree.

As do I. "Rules." Which is non how Dodd-Frank is structured:

The FSOC tin declare a fiscal work solid "systemically important"—that is, equally good large to fail—based on "any" "risk-related factors" that it "deems appropriate." And the CFPB tin punish fifty-fifty responsible lenders who inward skillful organized faith offering loans that the bureau afterwards deems to hold upwardly "unfair," "deceptive" or "abusive."

Those open-ended standards house no limits on the regulators' power. Indeed, inward Jan newly appointed CFPB Director Richard Cordray told Congress that he believes it is "probably non useful" to essay to define inward advance what an "abusive" lending practise is. Instead, he intends to utilization his enforcement powers to retroactively punish lenders based on his view of the "facts together with circumstances" of each case.

They echo my complaints virtually the FSOC.

Stupid, yes. But unconstitutional? Their declaration rests on separation of powers, together with "checks together with balances:"

The Constitution empowers the president together with Congress, equally good equally our courts, to foreclose regulators from running amok amongst excessive, arbitrary or fifty-fifty partisan regulations.

But Dodd-Frank does non abide by checks together with balances. It eliminates them. The CFPB is non dependent patch to Congress's "power of the purse,"... Instead, Dodd-Frank lets the CFPB claim to a greater extent than than $400 ane yard m from the Federal Reserve each yr together with prohibits Congress from fifty-fifty reviewing that budget. The president's command over the CFPB is express because past times constabulary he tin take the agency's manager alone nether strictly express circumstances. Finally, Dodd-Frank limits the courts' review of CFPB's legal interpretations.

The details of the complaint adds lovely particular on the Alice-in-Wonderland character of the words "abusive" "deceptive" together with "unfair" practices, (see p. 10), adds the legal declaration that theyare ex-post-facto constructs. Maybe the prohibition on bills of attainder tin apply to regulatory decisions?

I wishing the accommodate emphasized to a greater extent than the FSOC rather than the CFPB, which is a larger constituent of Dodd-Frank together with a much bigger danger. But y'all don't receive got to hold upwardly equally good much of a conspiracy theorist to realize why the large banks nether the FSOC's pollex aren't willing to sign on to a complaint. It's rather courageous that together with therefore many pocket-size banks signed on. Given the CFPB's broad discretion, they are putting themselves at existent risk.

Will it work? I don't know. The obvious counterargument is that this construction is laid forth inward legislation, passed past times Congress together with signed past times the President. If they desire to surrender their power, they tin do so. The electrical load (p.29) already tries to counter this past times pointing out precedents on the limitations of Congress' mightiness to devolve its power.

The electrical load together with oped larn actually mad virtually the director's appointment

Moreover, Mr. Obama nullified ane of Congress's few remaining limits on the CFPB—namely, Senate review together with confirmation of its nominated director—by deeming the Senate to hold upwardly inward "recess" during a curt pause inward early on Jan together with unconstitutionally appointing Mr. Cordray manager without the Senate's advice together with consent

But this signal is actually non virtually the construction of the bill, it is a criticism of President Obama's action. The statute says the manager should hold upwardly approved past times the Senate. If the Administration acted unconstitutionally inward its appointment of the director, I tin encounter how they tin contrary that action, but I don't encounter how that makes the statute unconstitutional. But it's amend for me non to play lawyer.

Still, I do detect the thought attractive (am I existence equally good hopeful?) that something together with therefore awful inward its economical construction is also unconstitutional -- together with for much of the same reasons.

----

The Insitute for Justice summary of their electrical load against Virgina's bureau is a overnice primer on how ground "consumer protection" is actually "competitor protection,"

If y'all desire to offering novel healthcare services, fifty-fifty something equally routine equally opening a private clinic, y'all receive got to obtain special permission from the [Virginia] ground government. And permission is non slow to come upwardly by: Would-be service providers receive got to persuade ground officials that their novel service is “necessary”—and they receive got to do together with therefore inward a physical care for that verges on full-blown litigation inward which existing businesses (their would-be competitors) are allowed to oppose them. Not surprisingly, this physical care for tin hold upwardly incredibly expensive, together with it oftentimes results inward novel services existence forbidden to operate at all.

To hold upwardly clear, this requirement (called a certificate-of-need or CON program) has nil to do amongst world wellness or safety. Separate ground together with federal laws principle who is allowed to practise medicine together with what sort of medical procedures are or are non permitted. Virginia’s CON programme alone regulates whether someone is allowed to opened upwardly a novel business office or purchase novel equipment; it is explicitly designed to brand certain novel services are non allowed to accept customers away from established healthcare services.

Both inward Virginia together with Illinois, these restrictions were also position inward house inward the elevate of "cost control," i.e. to halt businesses from "needlessly" edifice equally good much capacity. Our national policy is forthwith going to echo these brilliant ideas.

Well, y'all had me when y'all said hello, but why is this illegal, specially unconstitutional? Heck, taxi medallions piece of work the same way.  The IJ website says only

The Constitution protects individuals’ correct to earn an honest living gratuitous from unreasonable regime interference, together with it prevents states from putting upwardly unnecessary barriers to interstate commerce.

Sorry guys, the constitution equally currently interpreted doesn't enjoin anything virtually a "right to earn an honest living."  See the 1873  here) which found that "a citizen's 'privileges together with immunities,' equally protected past times the Constitution's Fourteenth Amendment" do non extend to economical freedoms, so  "a ground may grant concern monopolies to about of its citizens but non to others without running afoul of the Constitution." See Wickard v Filburn which found that the Federal Government tin halt a farmer from growing wheat for his ain utilization without permission. (Recently reinforced past times Justice Scalia, inward Gonzales v Raich.) And  it's going to hold upwardly difficult to fighting that opening a clinic or buying an MRI machine is protected interstate commerce.

Yes, libertarians become to slumber each black praying that these interpretations volition hold upwardly reversed about day. But that is a dissimilar than hoping Dodd-Frank, Obamacare, Certificates of Need, together with other ham-fisted economical policy tin hold upwardly declared unconstitutional on their own.

Not existence a lawyer, I didn't runway downwardly the legal arguments on this ane whatever further. I'll only larn out the endeavor equally a ray of hope.