December 12, 2008

Breaking The Law

Apparently, Treasury Secretary Henry Paulson didn't get the memo: the people, particularly Republicans, are opposed to bailing out the auto industry. So since Republicans in the Senate did not cooperate with the Democrat-approved, Presidentially-sanctioned, bipartisan boondoggle bailout of the failed American auto industry, Secretary Paulson is going to use TARP money to bail out the Big Three, specifically General Motors. Jacob Sullum puts it nicely:
The Emergency Economic Stabilization Act of 2008, which created TARP, authorizes Treasury Secretary Henry Paulson "to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution." Paulson already was stretching the law when he decided to instead purchase stakes in banks (presumably on the theory that shares of their stock constituted "troubled assets"). But a carmaker is not a "financial institution," and loaning it money is not purchasing a "troubled asset." In other words, Bush is acting not only without legal authority but contrary to the stipulations of a law that Congress passed at his behest.
I also like Sullum's characterization of the bailout as the "Bridge Loan To Nowhere." Quite simply, Congress never intended TARP money to be used to bail out any particular company. Congress intended that the money be used to relieve the financial stresses of dramatically under-securitized loans that were crippling a number of banks.

So, Secretary Paulson, this video is dedicated to you:


Michael Reynolds said...

It surprises you that the Bush admin ignores the law? Someone better check the signing statements on the TARP legislation.

By the way, even though I agree with you, I wonder if the GOP has thought this through politically. If they get the blame for "killing Detroit," they can forget Michigan's 17 electoral votes forever. And there are a lot of automotive jobs in Ohio, too, which is probably more important.

Politically this ends up looking like a South vs. North thing. They're digging themselves a deep political hole.

Burt Likko said...

It surprises me not at all that the Bushmen think nothing of ignoring the law. I point it out to serve as a platform for a cheesy Judas Priest reference.

Politically, what should have been done was a GOP offer of a "legislative bankruptcy" borrowing from Chapter 11 but permitting some "concessions" to the special industry. But no one in either party has yet been smart enough to pick up that banner and claim it as their own.

Michael Reynolds said...

There's never a bad time for a cheesy Judas Priest reference.