Legislation & Lobbying

Bush Bailout Plan Would Protect Treasury Secretary from Lawsuits

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Treasury Secretary Henry Paulson would be insulated from lawsuits under the $700 billion Wall Street bailout plan advanced by the administration.

Two legislators have also made bailout proposals, and one of them, advanced by U.S. Rep. Barney Frank, D-Mass., also eliminates judicial review, the Daily Journal reports (sub. req.). Frank is chair of the House of Representatives Financial Services Committee. Senate Banking Committee Chairman Chris Dodd, D-Conn., has a proposal that would allow courts to set aside a decision by Paulson when it is “arbitrary, capricious, an abuse of discretion, or not in accordance with the law.”

The Daily Journal story quotes a partner in securities class action firm Coughlin Stoia Geller Rudman & Robbins who is a critic of the lawsuit ban. “Vesting a single unelected official with the right to basically control a large part of the market is dangerous at best,” said partner Darren Robbins. “To also have that person be somebody who has immunity from any private right of action is a recipe for disaster.”

Antitrust litigator Maxwell Blecher of Blecher & Collins in Los Angeles told the publication that the bailout could generate many lawsuit opportunities, if they are allowed. Disputes could arise over the distribution of aid or whether government intervention in an area restricts competition.

In any event, suits would be allowed for constitutional violations under Supreme Court precedent, said constitutional law professor Jonathan Varat of UCLA law school.

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