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September 26, 2008

Federal District Court Obstructs Lawsuits
Challenging Authority for Bailouts

Judiciary Scuttles Motions Demanding U.S.
Produce Evidence of Constitutional Authority

Late last week, WTP Chairman and constitutional activist Robert Schulz filed a federal lawsuit in United States District Court in Albany seeking to halt the execution of the emergency bailout of Wall Street insurance giant American Insurance Group, AIG. On Wednesday, Schulz filed a second federal lawsuit seeking to block the larger Wall Street bank bailout currently being negotiated through the U.S. Congress.

Yesterday, while ignoring the dissimilar legal issues raised in the two lawsuits, the U.S. District Court issued an Order combining the two cases into a single case and denying the applications for injunctive relief requested.  The Court, in effect, ducked a judicial (and very public) hearing to examine the critical legal question at the heart of the bailouts: What Constitutional authority exists for the U.S. Government or Federal Reserve to use public (taxpayer) funds for definitively private purposes?

Again, what legal authority allows the U.S. Government to directly purchase the distressed assets and contracts of privately owned Wall Street firms for the express purpose of mitigating their private investment risks and losses? 

Together, the lawsuits assert that the commitment of public funds and credit for the direct benefit of privately owned banks is an ultra vires act by the United States Government and Federal Reserve, i.e., beyond the limited legal authority granted by the Constitution. Both lawsuits had asked for a "show cause" hearing demanding that the Government defendants produce evidence of their alleged legal authority to commit public funds for such purposes, as well as emergency and permanent injunctions halting the bailout efforts.

Specifically, the second lawsuit charges that Congress lacks any Constitutional authority to grant the Executive any legal authority to directly participate in commerce as a buyer or seller of private property (as opposed to "regulating" commerce) and that Congress also lacks any authority to utilize public (taxpayer) funds for definitively private, i.e., non-public purposes. The first lawsuit charges the Government has no authority to use public funds to guarantee a loan between the privately held insurance firm AIG and the privately held Federal Reserve Bank.  

Despite Schulz's extensive federal litigation experience, the Court's Order (erroneously) claims that the lawsuits fail to provide any "citation to authority or an explanation of this court's jurisdiction, except conclusory statements of the law…" 

One unnamed practicing attorney also with several decades of federal litigation experience agreed that the District Court's basis for denying the injunction hearings was contrived to provide cover to block any public, judicial examination of the highly controversial constitutional questions raised by the bailouts adding, "If the Court had dared sign that request, all those cameras now in Washington would immediately be up here in New York."

Schulz plans to file an emergency appeal to the U.S Court of Appeals for the Second Circuit in Manhattan on Monday, challenging the lower Court's improper dismissal of the requests for Temporary and Permanent injunctions.

Click here to read:  
Bank Bailout Complaint
                             Bank Bailout Memorandum of Law
                             Press Release 9-25-08
                             U.S. District Court Order
denying injunction requests to stop the bailouts
                             Last week's WTP
AIG lawsuit update

On Wednesday, We The People Foundation issued a press release regarding the second lawsuit.  In part, it cites Schulz:

"Beyond the moral hazard and dangerous precedent to be established by this legislation, it is of vital importance that the American people recognize that the present financial crisis is not the result of ineffective regulatory oversight or defective government policy but rather a direct and predictable result of decades of constitutional violations by the Federal Government.  Through a long-standing program of disinformation and collusion with the Federal Reserve and Wall Street financial elite, the United States Federal Government has denied the public access to vital information about the secretive operations of the privately owned and operated Federal Reserve System and its monopoly control of America’s monetary system."

"This monopoly control of our currency by a private banking cartel is the root cause of the increasingly distorted, volatile and damaging economic conditions experienced in the U.S. and abroad.  America’s fiat currency is produced from thin air and manipulated by the Federal Reserve for the benefit of its private owners, major Wall Street institutions and to enable the numerous unconstitutional activities of the Federal Government.  Beyond this, the Fed's vast operations are substantively beyond accountability to the taxpayers or the Congress. These abuses of the Constitution have taken our financial system to edge of the abyss. The chickens have come home to roost."

Since 2002, the We The People Foundation and its supporters have tried, thus far unsuccessfully, to get the Government to respond to a number of First Amendment Petitions for Redress of violations of the Constitution, including the Federal Reserve System’s violation of the money clauses of the Constitution. Had the Government honored the Constitution and its obligation to respond to the citizens’ Petitions for Redress, many of the nation’s current financial and monetary problems could have been avoided.


The We the People Congress now encourages everyone to contact their Congressional representatives and tell them what you think about the bailout.

We strongly encourage personal phone calls and faxes, rather than emails. Don't forget to call your representative's local District offices located throughout the 50 states.

Click here for a .txt file of FAX numbers of Senators and Representatives.

Click here to find local phone numbers and other Congress contact information
(lookup info by map, zipcode, etc.)

Here's the main Capital Switchboard number in Washington: 202-224-3121

Here are the TOLL FREE Capital Hill switchboard numbers:



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