Are you excited that Obama’s Auto bailout was completely illegal?

The last time the federal government bailed out Chrysler, Jimmy Carter’s administration reached a deal with the carmaker in August 1979, but the agreement did not take effect until Congress approved implementing legislation that December. The Constitution, after all, gives exclusive power of the purse to Congress. This time around, George W. Bush dispensed with the legal niceties, loaning more than billion in taxpayer money to Chrysler and General Motors without any statutory authority.

Although he ran on a promise to repudiate Bush’s sweeping view of executive power and respect the constitutional role of the legislative branch, Barack Obama applauded his predecessor’s illegal loans. Since taking office he has followed Bush’s pattern, expanding the bailout without seeking congressional approval. The president’s high-handed personal involvement in the pending merger between Chrysler and Fiat, a deal that flouts well-established bankruptcy principles by forcing secured creditors to the back of the line, confirms that when it comes to industrial meddling Obama is no more committed to the rule of law than Bush was.

The new administration continues to subsidize Chrysler and G.M. (and even the companies that sell them parts) with money that Congress allocated last fall to the Troubled Asset Relief Program (TARP). As the program’s name suggests, the Treasury Department was supposed to use that money to buy mortgage-backed securities and other “toxic” assets from financial institutions, with the aim of making them more stable and encouraging more lending. There is not a word in the Emergency Economic Stabilization Act, the law that made TARP, about automobile manufacturers.

Some bailout supporters claim that G.M. and Chrysler qualify as financial institutions because they loan money to car buyers. The people who make this argumenttend to overlook the fact that Chrysler’s finance division became an independent company in 2007 and that GMAC, formerly a G.M. subsidiary, was mostly owned by Cerberus Capital Management when Bush approved the automaker loans. In any case, this rationale would make any business that extends credit, including department stores, jewelers, appliance dealers, and plastic surgeons, eligible for TARP money.

The Bush administration, recognizing what a stretch it was to describe loaning money to car manufacturers as purchasing troubled assets from financial institutions, strongly resisted using TARP to bail out automakers—right up to the moment when Congress declined to appropriate funds for that purpose. Now Obama is using loans that never should have been made as a pretext to reshape the auto industry. For those who are inclined to forget that Congress never authorized the bailout (a group that seems to include most members of Congress), here is a review of how Bush and Obama trampled the Constitution in their rush to save American automakers from the consequences of their own terrible business decisions.

http://www.reason.com/news/show/134480.html

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Tags: automobile manufacturers, bailout, barack obama, carmaker, congressional approval, constitutional role, economic stabilization act, executive power, finance division, financial institutions, george w bush, independent company, legal niceties, loan money, mortgage backed securities, new administration, personal involvement, role of the legislative branch, secured creditors, treasury department