A critical - and radical - component of the bailout package proposed by the Bush

administration has thus far failed to garner the serious attention of anyone in
the press. Section 8 (which ironically reminds one of the popular name of the
portion of the 1937 Housing Act that paved the way for subsidized affordable
housing ) of this legislation is just a single sentence of thirty-two words, but
it represents a significant consolidation of power and an abdication of oversight
authority that's so flat-out astounding that it ought to set one's hair on fire.
It reads, in its entirety:

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.
In short, the so-called "mother of all bailouts," which will transfer $700 billion
taxpayer dollars to purchase the distressed assets of several failed financial
institutions, will be conducted in a manner unchallengeable by courts and
ungovernable by the People's duly sworn representatives. All decision-making power
will be consolidated into the Executive Branch - who, we remind you, will have the
incentive to act upon this privilege as quickly as possible, before they leave
office. The measure will run up the budget deficit by a significant amount, with
no guarantee of recouping the outlay, and no fundamental means of holding those
who fail to do so accountable.

Is this starting to sound familiar? Robert Kuttner cuts through much of the gloss
in an article in today's American Prospect:

The deal proposed by Paulson is nothing short of outrageous. It includes no

oversight of his own closed-door operations. It merely gives congressional
blessing and funding to what he has already been doing, ad hoc. He plans to retain
Wall Street firms as advisors to decide just how to cut deals to value and mop up
Wall Street's dubious paper. There are to be no limits on executive compensation
for the firms that get relief, and no equity share for the government in exchange
for this massive infusion of capital. Both Obama and McCain have opposed the
provision denying any judicial review of decisions made by Paulson -- a provision
that evokes the Bush administration's suspension of normal constitutional
safeguards in its conduct of foreign policy and national security. [...]

The differences between this proposed bailout and the three closest historical
equivalents are immense. When the Reconstruction Finance Corporation of the 1930s
pumped a total of $35 billion into U.S. corporations and financial institutions,
there was close government supervision and quid pro quos at every step of the way.
Much of the time, the RFC became a preferred shareholder, and often appointed
board members. The Home Owners Loan Corporation, which eventually refinanced one
in five mortgage loans, did not operate to bail out banks but to save homeowners.
And the Resolution Trust Corporation of the 1980s, created to mop up the damage of
the first speculative mortgage meltdown, the S&L collapse, did not pump in money
to rescue bad investments; it sorted out good assets from bad after the fact, and
made sure to purge bad executives as well as bad loans. And all three of these
historic cases of public recapitalization were done without suspending judicial
review.

Kuttner's opposition here is perhaps the strongest language I've seen used,
pushing back on this piece of legislation, in any publication of repute, and even
here, Section 8 is not cited by name or by content. McClatchy Newspapers also
alludes to Section 8 with concern, citing the "unfettered authority" that Paulson
would be granted, and noting that the "law also would preclude court review of
steps Paulson might take, something Joshua Rosner, managing director of economic
researcher Graham Fisher & Co. in New York, said could be used to mask previous
illegal activity." Jack Balkin also gives the matter the sort of attention it
deserves on his blog, Balkinization.

But elsewhere, the conversation is muted. The debate over whether Congress is
going to pass the Paulson bailout package, or pass the Paulson bailout package
really hard seems to have boiled down to a discussion of time and concessions. The
White House has made it clear that they want this package passed yesterday.
Congressional Democrats seem to be of different minds on the matter, with some
pushing back hard, and others content to demand a small dollop of turd polish to
make the package seem more aesthetically pleasing, at which point, they'll likely
roll over and pass the bill. Neither candidate, John McCain or Barack Obama, seem
all that amenable toward the bailout, but neither have either demonstrated that
they are willing to risk their candidacies to do much more than exploit the issue
for electoral purposes.

Sunday morning came and went, with Paulson traipsing dutifully from studio to
studio, facing nary a question on Section 8. Front page articles in the New York
Times, Washington Post, and the Wall Street Journal detail the wranglings, but
make no mention of this section of the legislation. On TV, cable news networks are
stuck in the fog of the ongoing presidential campaign.

Throughout the coverage, one catches a whiff of what seems like substantive
pushback on this power grab, but it largely amounts to a facsimile of journalistic
diligence. Most note, in general terms, that the bailout represents a set of
"broad powers" that will be granted to the Department of the Treasury. Yet the
coverage offsets these concerns through the constant hyping of the White House's
overall message of "urgency."

But one cannot overstate this: Section 8 is a singularly transformative sentence

of economic policy. It transfers a significant amount of power to the Executive
Branch, while walling off any avenue for oversight, and offering no guarantees in
return. And if the Democrats end up content with winning a few slight concessions,
they risk not putting a stop-payment on the real "blank check" - the one in which
they allow the erosion of their own powers.

Over in the Senate, Christopher Dodd has proposed a bailout legislation of his
own, which critically calls for "an oversight board that not only includes the
chairman of the Federal Reserve and the SEC, but congressionally appointed, non-
governmental officials" and would require the President to appoint an "independent
inspector general to investigate the Treasury asset program." In Dodd's
legislation, Section 8 is effectively stripped from the bill.

Nevertheless, the fact that Section 8 of the Paulson plan seems to strike few as a
de facto dealbreaker can and should astound. The failure of Congress to hold the
line on this point would be truly embarrassing. But if we make it through this
week with nobody in the press specifically informing the public about the
implications of this single sentence - in the middle of a complicated bill, in the
middle of a complicated time - then right there, you have the single largest media
failure of this year.