When surveying the vast wreckage of the 2008 financial crisis, many classical liberals worry that the most profound damage done was to the rule of law in America. Though it is difficult to pin down the concept with great precision, the core of the rule of law is simple: we have a government of laws, not men. Our officials must follow rules that have been publicly and clearly set forth in advance rather than acting on their own caprice, and they are not welcome to simply make up rules as they go along and declare their conduct lawful in retrospect. Without adherence to this precept, government’s actions can have no basis for legitimacy.
If we closely scrutinize what the Treasury Department, Federal Reserve, and other agencies of the federal government did in response to the recent financial crisis, there is no avoiding that they made a mockery of the rule of law. Indeed, as Lawrence H. White puts it, “The approach of Federal Reserve and Treasury officials during this crisis, unfortunately, has been to consider every possible remedy but applying the rule of law.”