Discriminatory Authority: The Arizona Immigration Law and Financial Reform

President Obama has recently attempted to thread the needle in his criticism of the Arizona anti illegal immigration law. Now, he says it has the potential for discrimination and abuse.

I think the Arizona law has the potential of being applied in a discriminatory fashion. Now, after it was initially passed, the Arizona legislature amended it and said that this should not be carried out in a discriminatory way. But I think a fair reading of the language of the statute indicates that it gives the possibility of individuals who are deemed suspicious of being illegal immigrants from being harassed or arrested. And the judgments that are going to be made in applying this law are troublesome.

At the same time, Obama is pushing financial reform and in that reform is the ability for the federal government to take over any financial institution that they deem on the verge of failure and a "systemic risk".

Under the new law, the government would be able seize the wobbly firm, fire its executives, and fund its operations until it could sell them off in pieces. The proceeds from these sales would pay the government back; whatever was left would go to bondholders, who would presumably suffer some losses. The shareholders—the people who own common stock—would get wiped out entirely. (If the proceeds weren’t enough to repay the government, it would recoup the rest by levying a fee on the industry.) This is basically a scaled up (and stretched out) version of the way the FDIC handles smaller-bank failures.

First, every law has the potential for abuse and discrimination. Second, the standard "reasonable suspicion" has been part of case law for years. Meanwhile, systemic risk is a relatively new concept and it will be applied entirely by the federal government. So, isn't this law open to just as much abuse and discrimination as the Arizona law?

After all, what's to stop the Obama administration from liquidating a financial firm simply because that firm contributed to Republicans? There's little since "systemic risk" is a vague term to be applied by the Treasury Department. Here's how Dick Morris described the potential for abuse.

The bill authorizes the secretary of the Treasury — a political appointee — to seize any financial company (bank or nonbank) simply because, in his opinion, it is too big to fail and in danger of insolvency.

This power can be used for political retribution, pressure for campaign funding, or any other abuse bureaucratic whim or partisan politics can conceive. It is a power Fidel Castro or Hugo Chavez would love to have!

Yet, Obama has used every opportunity possible to sound the alarm about the potential abuse of the Arizona law. Meanwhile, not once has Obama even considered the possibility that the sweeping financial reform bill will lead to the same kind of abuse.