Tuesday, April 6, 2010

Geithner's Delay of Currency "Manipulation" Report Might Be Smart, but Is It Legal?

On Sunday, I noted that Treasury Secretary Tim Geithner formally announced that he would delay by several months the Department's April 15 report on foreign countries' currency practices.  Upon hearing of the announcement, I and everyone else immediately put on our wonk hats, and breathlessly analyzed the decision and its policy implications.  However, AEI's Phil Levy recently emailed me a simple, but equally important, question that thus far appears to have been totally ignored by the administration, Congress and the chattering classes (myself included):
Is Geithner's decision to delay the currency report legal?
Well, from a quick review of the law, it appears that it was not.  As I've noted before, the Treasury report (the "Semi-Annual Report to Congress on International Economic and Exchange Rate Policies") must, by law, be published twice per year.  The Report's requirements are set forth in Sections 3004 and 3005 of the Omnibus Trade and Competitiveness Act of 1988.  Section 3005 (22 U.S.C. 5305) in particular states (emphasis mine):
(a) Reports Required.– In furtherance of the purpose of this title, the Secretary, after consultation with the Chairman of the Board, shall submit to the Committee on Banking, Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, on or before October 15 each year, a written report on international economic policy, including exchange rate policy.

The Secretary shall provide a written update of developments six months after the initial report. In addition, the Secretary shall appear, if requested, before both committees to provide testimony on these reports.
In legalese, the term "shall" denotes the mandatory, not the permissive.  It is a requirement, and there are no exceptions in all of Section 3005 that would limit this imperative.  (Paragraph (b), the only other paragraph, of Section 3005 sets forth the content requirements for the currency report.)  In short, US law requires the Treasury Secretary to submit a currency report to Congress on October 15 of every year, and then six months later (i.e., April 15), without exception.

The last report was issued on October 15, 2009.  On the very first page of the report, it states "This report reviews developments in international economic and exchange rate policies, focusing on the first half of 2009, and is required under the Omnibus Trade and Competitiveness Act of 1988, 22 U.S.C. § 5305 (the 'Act')."  As noted above, that law requires the Secretary to submit the next currency report six months later - i.e., on or before April 15, 2010.  Without exception.  Indeed, last April's report reiterates this express legal requirement (again on p. 1).

Thus, there can be no question that Geithner's formal delay of the Treasury Report expressly violates US law.  Granted, the Bush Administration routinely delayed the currency report, but it did so very quietly.  Indeed, I can't recall the administration ever releasing a formal announcement of its intent to violate the reporting requirements of US law.  And Geithner's April 3 announcement of the report's delay makes no mention of the legal requirement - only the Secretary's decision.

Of course, the practical implications of this legal revelation are likely quite small - I can't imagine a congressional currency hawk or free trader vocally demanding that Geithner issue the report pursuant to the explicit legal mandate.  Nevertheless, it's important to note that not only is the White House "voting present" on the China currency issue, it's doing so in express violation of US law. 

(And I'll let you add your own commentary about whether this move is indicative of a broader trend for the Obama administration re: its respect, or lack thereof, for the rule of law.)

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