Just Take My Word For It

In all of the handwringing about the Supreme Court over the last couple of years, brought to a head by the death of Justice Antonin Scalia, I don’t think that enough attention has been devoted to how poorly the Obama Administration has fared in the courts. In short, the administration is overreaching and the number of 9-0 decisions refutes the common assertion that it’s all politics.

The editors of the Wall Street Journal remarking on the administration’s most recent loss, the rejection of Treasury’s assertion of the systemic risk posed by MetLife, touch on the reasons for this:

Mr. Lew and the gang still claim the Dodd-Frank law that created his council does not require cost-benefit analysis. But the judge cited Michigan v. EPA and other precedents to show that even if a statute doesn’t explicitly demand such analysis, that doesn’t relieve federal regulators of the duty to consider relevant facts.

Judge Collyer also noticed that the risk council never explained in detail the alleged dangers at MetLife or the risks it could pose to the financial system. The council argued—bromide alert—that “contagion can result when relatively modest direct, individual losses cause financial institutions with widely dispersed exposures to actively manage their balance sheets in a way that destabilizes markets.”

But Judge Collyer found that the council “never projected what the losses would be, which financial institutions would have to actively manage their balance sheets, or how the market would destabilize as a result.” The judge added that she “cannot affirm a finding that MetLife’s distress would cause severe impairment” of the financial system when Mr. Lew’s council “refused to undertake that analysis itself.” Predictive judgment, she noted, “must be based on reasoned predictions; a summary of exposures and assets is not a prediction.”

That’s the basic problem with technocracy: the technocrats don’t ever expect their judgments to be questioned or feel they need to explain themselves. When a case was brought before a court, Treasury was confronted by another technocrat, in this case a judge, who had even more authority in their area than the Treasury technocrats did in theirs.