Yesterday I described a Constitutional conflict that the President’s Executive Clerk deftly avoided last week. This process was Constitutionally important, but since it was about a superfluous continuing resolution, the underlying substance was trivial. A few former White House colleagues reminded me of a case when this conflict had a real effect on policy.

At the end of 2007, Congress passed the annual Department of Defense Authorization bill. That bill contained an amendment by Senator Lautenberg to allow victims of the Pam Am 103 terrorist attack (over Lockerbie, Scotland) to go after Libyan financial assets in the United States. The provision was drafted broadly, however, and it also would have subjected Iraqi financial assets in the United States to a high legal risk. After the bill had passed but before being presented to the President, the Iraqi government reached out to tell the Administration that this was a huge problem. Administration lawyers agreed that the risk to Iraqi financial assets was real, and that it would be reasonable to assume they might have to withdraw all their financial assets from the U.S. if it became law. No one in the Legislative or Executive Branch had anticipated this, but it was too late. The bill had already passed both Houses of Congress.

A feisty internal Administration Situation Room debate resulted in a recommendation that the President veto the bill over the excess breadth of the Lautenberg amendment. DOJ lawyers then explained that the bill could not be vetoed because the Congress had already adjourned. Well, then we’ll just pocket veto it, the group (almost) concluded, leading to further explanations of why a pocket veto might provoke the Congress to challenge in court the Constitutionality of the pocket veto. The pocket veto-return veto dispute between the Legislative and Executive Branches posed a serious risk to American foreign policy.

President Bush’s advisors did not want the Constitutional conflict, and certainly not in a fight about Iraqi assets in the U.S., where it wasn’t clear whether Congress would fight us because of the underlying policy question.

After ruining the Christmas vacations of several senior Administration officials with a seemingly endless series of conference calls within the Administration and with Congressional leaders, the President’s advisors finally settled on a pocket veto with protective return. They chose this path only after being reassured by Congressional Republican leaders that they would produce the votes, if necessary, to sustain a return veto in the face of a possible override attempt. Here’s the memorandum of disapproval, our public statement, and the press briefing.

Congress did not attempt to override the veto (or accepted the pocket veto, depending on your perspective), and instead passed a new bill in January, which was the text of the old bill minus the broad version of the Lautenberg language. Iraqi assets were not affected by the new law. The President’s team dodged both the bad policy outcome and the Constitutional conflict. By the fall of 2008, there was legal progress on the Pan Am 103 front and Libya set up a victims compensation fund, leading Congress to revoke the remainder of the Lautenberg amendment.

Thanks to Dan Meyer, Deb Fiddelke, and Brent McIntosh, who helped me with this post. Each of them, and many others, lost some of their 2007 Christmas vacation to solve this problem.