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Granted, there are circumstances in which timeliness precludes explicit Congressional authorization. But the understanding could stipulate that the emergency lending is transferred to the books of the Treasury after a brief period of time has elapsed. Moreover, the Treasury could be given explicit line of credit authority, as they now have for Fannie Mae, Freddie Mac, and other entities. For longer-term credit programs that are meant to support specific market segments, and that are designed and implemented over a period of weeks, there would not seem to be any practical impediment to seeking explicit Congressional authorization.
I spoke earlier of my sense that the scope of the financial safety net will need to be scaled back. This could be difficult. When a financial crisis threatens one or more institutions that appear to pose "systemic" risks to a broad array of counterparties, it can be hard to contemplate not intervening. But, it may also be the case that the systemic risks are partly the result of expectations about the likelihood of government intervention. This is a classic example of a so-called time consistency problem. (7) One would like market participants to believe you are committed to resist lending, although following through later will be difficult. A credit accord could help limit the financial safety net by placing a hurdle in the way of intervention beyond a well-defined set of circumstances. Transferring authority for most government lending to the U.S. Treasury and subjecting that authority to a legislated framework can help commit authorities to a bounded government safety net.