Rescue by Fiat

The Chrysler deal confirms President Obama's disregard for the law.

Jacob Sullum | May 6, 2009

The last time the federal government bailed out Chrysler, the Carter administration reached a deal with the carmaker in August 1979, but Congress did not approve the legislation implementing it until December. This time around, the Bush administration dispensed with the legal niceties, loaning billions of taxpayer dollars to Chrysler (and General Motors) without statutory authority.

Although he ran on a promise to respect the legislative branch's constitutional role, Barack Obama applauded the Bush administration's illegal loans, and since taking office he has not sought congressional approval for a bailout that is still operating outside the law. President Obama's high-handed engineering of the pending merger between Chrysler and Fiat, a deal that flouts well-established bankruptcy principles, confirms he is no more committed to the rule of law in this area than his predecessor.

The Obama administration continues to subsidize Chrysler and G.M. (and even the companies that sell them parts) with money that Congress allocated to the Troubled Asset Relief Program (TARP). As the name suggests, the Treasury Department was supposed to use that money to buy troubled assets from financial institutions, the aim being "to restore liquidity and stability to the financial system." There is not a word in the Emergency Economic Stabilization Act, the law that created TARP, about automobile manufacturers.

President Bush acknowledged as much, saying it was inappropriate to use TARP money for loans to G.M. and Chrysler. He changed his mind only after a bill authorizing a carmaker bailout failed to win Senate approval.

On the strength of TARP loans that never should have been made, Obama has dictated one business decision after another. He fired G.M.'s CEO, urged brand consolidation on the company, insisted on Chrysler's merger with Fiat, and demanded the production of cleaner, more fuel-efficient cars, even if that strategy hurts the automakers' bottom lines.

CNS News recently asked House Majority Leader Steny Hoyer (D-Md.) what law authorizes all this meddling. His answer was revealing.

"The administration clearly believes it does have the authority to use some of the remaining TARP funds for the automobile industry," Hoyer said. "I would be kidding you to mouth some words on that, because I don't know technically where that authority would be."

House Financial Services Committee Chairman Barney Frank (D-Mass.), whose panel is supposed to oversee TARP, told CNS News he was "not very well informed" about the president's restructuring plans for the automakers and did not think Congress would vote on them. Frank's counterpart in the Senate, Christopher Dodd (D-Conn.), said he "wasn't consulted at all on the process," adding, "I've been reading about it in the papers, basically."

Regarding the government-backed car warranties that Obama unilaterally promised to buyers of G.M. and Chrysler cars, House Budget Committee Chairman John Spratt (D-S.C.) said, "I would think that for a government officer to extend a warranty that will create a liability for the government, an act of law would be required. If I were the beneficiary of the warranty, I would certainly want to know the entity that extended it to me had legal authority to grant it." And what if he were, say, a legislator with a constitutional duty to control the use of taxpayer money?

Given how congressional leaders have abdicated their responsibilities, perhaps it's not surprising that the secured creditors who challenged the Obama-imposed Chrysler merger deal were too polite to note that the president lacks statutory authority to intervene in the car industry. "Even assuming that TARP provides the Treasury Department with authority to provide funding to the Debtors," they said, it is neither fair nor legal to let unsecured creditors such as the United Auto Workers get more of their money back than creditors who by statute have a superior claim. But for a president who tramples on the Constitution in his rush to save companies from the consequences of their own bad decisions, the bankruptcy code is no obstacle.

Jacob Sullum is a senior editor at Reason and a nationally syndicated columnist.

© Copyright 2009 by Creators Syndicate Inc.

Comments

Untermensch|5.6.09 @ 7:32AM|#

This gets scarier and scarier by the day. But thank Cthulhu that we have the right man at the helm now…

|5.6.09 @ 8:26AM|#

I wonder how desperate is Fiat that they'd get into this when it is shaping up to be a total clusterfuck of lawsuits and lawyers. Throw in some congressional hearings (ya know when congress decides to give a fuck) and it's a good thing Fiat isn't paying anything for control of Chrysler.

High Every Body|5.6.09 @ 8:46AM|#

How do we toss about "illegal" for funds appropriated by the Congress and handed over to the Executive to administer*, but "illegal" is rarely used by Reason employees on the illegal immigration issue?

*I am against that action too, but they DID jump through the appropriate administrative hoops to do it.

|5.6.09 @ 9:20AM|#

I think the LP and other libertarian organizations should focus entirely on pushing the concept of limited government back to the forefront of American thinking.

Forget all the details: Unlimited power bad; limited power good. See examples.

|5.6.09 @ 9:21AM|#

"How do we toss about "illegal" for funds appropriated by the Congress and handed over to the Executive to administer*, but "illegal" is rarely used by Reason employees on the illegal immigration issue?

*I am against that action too, but they DID jump through the appropriate administrative hoops to do it."

Umm...no they didn't- funds are appropriated for a certain purpose and can only be spent for that purpose. See 31 USC 1301, 31 USC 1341 and numerous Comptroller General and federal court opinions saying so. Just because money is appropriated DOES NOT mean that the executive gets to spend it on whatever it wants.

|5.6.09 @ 9:24AM|#

Just wait til all the cars say, "In God We Trust" on 'em...

High Every Body|5.6.09 @ 9:28AM|#

Adam,

Just exactly what controls were put on that lending? If the Congress did not fence it much then the Executive is free to use it for anything that can be dreamed into the appropriation.

|5.6.09 @ 9:34AM|#

American Leyland - If only we could learn from our British cousins.

In the end, no matter what the pols do and how much money the taxpayers spend in the Democrat's plan to continue the UAW tithing the Democrats enjoy, only Ford* and the foreign brands will remain. The ironic thing is the "foreign" brands are as likely or not to contain a higher percentage of US produced components then cars from the US brands even if the US brand is assembled in the US.

* Assuming Ford is not screwed by having to compete with subsidized competitors.

|5.6.09 @ 9:37AM|#

High Every Body,

Not quite sure what you're asking- the executive is limited to spending appropriated for the purposes Congress stated in the appropriation or otherwise authorizes by law. Of course, Congress can leave the purposes very open ended, or it can write them very tightly- that's up to Congress under the appropriations clause of the Constitution. Now, if you're talking about practical consequence to violating this, well, for the ordinary government employee, it's a criminal act to spend appropriated funds for a purpose that isn't authorized. But, if you happen to be the President, then you get to control the enforcement of criminal laws, so the only real control is Congress growing a pair.

Troy Camplin|5.6.09 @ 9:43AM|#

What? Obama is ignoring rule of law? Stop the presses! In fact, if we have a proper understanding of rule of law, even if Congress did approve of these actions, it would still be outside the rule of law. Under rule of law, all laws apply to everyone equally. To do anything for a specific company or individual that would not be or is not being done to or for any other is the government granting privilege, and is therefore outside the rule of law.

High Every Body|5.6.09 @ 9:45AM|#

Adam,

Not quite sure what you're asking- the executive is limited to spending appropriated for the purposes Congress stated in the appropriation or otherwise authorizes by law.

You say no but you mean yes. I asked quite clearly what the appropriation was for and how was it limited.

Of course, Congress can leave the purposes very open ended, or it can write them very tightly- that's up to Congress under the appropriations clause of the Constitution.

More yes right there, you coy one.

Now, if you're talking about practical consequence to violating this, well, for the ordinary government employee, it's a criminal act to spend appropriated funds for a purpose that isn't authorized.

I am well aware of this too. The hook is on the fiscal managers to spend as legally appropriated.

But, if you happen to be the President, then you get to control the enforcement of criminal laws, so the only real control is Congress growing a pair.

All you have stated here is that you agree with me that this should not have been appropriated. Neither you nor Jacob have shown one word of evidence of violation of any misappropriation, anti-deficiency violation or illegal impoundment.

I am of the position that the Congress should not be making appropriations like this because they have no enumerated power to appropriate money for this purpose. That brings us to the issue of impoundment. Should the Executive apparatus create illegal impoundments to satisfy you, me, Jacob and a few others?

|5.6.09 @ 9:55AM|#

Chrysler debt holders are claiming they are receiving death threats for objecting to the governments plans. Union thugs, no doubt. This is getting scary - MNG, care to defend death threats as a political tool?

|5.6.09 @ 10:00AM|#

he is no more committed to the rule of law in this area than his predecessor.

While I yield to no one in my contempt for Bush's craven lunging for a legacy with the initial bail-out, I don't see how anyone can say that Obama is no worse than Bush on this issue. He has gone way, way beyond anything Bush attempted in casting aside the rule of law to shower benefits on his supporters.

|5.6.09 @ 10:03AM|#

High Every Body,

The operative provisions of TARP (PL 110-343) say:
"Any funds expended or obligated by the
Secretary for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure or obligation."

"The Secretary is authorized to establish the Troubled Asset Relief Program (or ``TARP'') to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution, on such terms and conditions as are determined by the Secretary, and in accordance with this Act and the policies and procedures developed and published by the Secretary."

I don't see anything in TARP appropriating funds for the purpose of making loans to auto companies. The authorized purpose is to purchase troubled assets from financial institutions. Chrysler is not a financial institution. The government is not purchasing any assets from it. The language is not particularly open ended.

|5.6.09 @ 10:10AM|#

Adam,

who is going to make that claim? who has standing? only congress can. and they dont want to. So, it's effectively written into the law that "Obama can use this for any damn thing he wants"

|5.6.09 @ 10:16AM|#

domoarrigato,

You're right- the law doesn't mean a whole lot when you're talking executive-legislative relations- that's the political sphere. It's unlikely that anyone would have standing in a court, and even if they did, a court would likely dodge the issue. that doesn't make it legal though.

|5.6.09 @ 10:30AM|#

So we agree that not every illegal act is enforceable. In many cases that's a feature, not a bug. just not this time.

|5.6.09 @ 10:33AM|#

domoarrigato,

absolutely, i agree. i would never say otherwise. i've worked in appropriations law for 20 years now, at federal agencies and on committee staff- i know perfectly well that what goes on on both sides, even in pretty mundane areas, often has little to do with the law and a lot to do with power relationships.

|5.6.09 @ 11:42AM|#

on such terms and conditions as are determined by the Secretary

In other words, the Secretary may use these funds at his own discretion, and may define "financial institution" as he deems appropriate.

The Congress has completely abdicated their responsibility. Why do they even bother to show up?

|5.6.09 @ 11:48AM|#

Congress has been doing that for years, handing away legislative authority to the administrative agencies and deferring like crazy to the president. Our whole system depends on interbranch warfare. Without it, checks and balances are meaningless, especially when the courts tend to give great deference to "political questions."

|5.6.09 @ 11:59AM|#

It seems as if the pace has quickened significantly in the recent past.

Actually, TARP might be the template for the new, "simplified" tax code we've all been waiting for.

"The Secretary is authorized to obtain funds as necessary to finance the continuing operations of the Federal Government."

|5.6.09 @ 12:30PM|#

Obama may be the first president who would be more properly referred to as an elected monarch. Bush/Cheney pushed the president's unlimited authority based (primarily) on war powers. Obama doesn't even bother with that.

We should apologize to England about being wrong about that Revolutionary War and tyrant stuff. Tyrant's are good!

max hats|5.6.09 @ 1:30PM|#

You've got to be kidding me.

Obama may be the first president who would be more properly referred to as an elected monarch. Bush/Cheney pushed the president's unlimited authority based (primarily) on war powers. Obama doesn't even bother with that.

We should apologize to England about being wrong about that Revolutionary War and tyrant stuff. Tyrant's are good!

HISTORY OF PAST GREAT FATHERS NO READ, BIG CHIEF?

WAYS OF PALEFACE HISTORY LONG. HISTORY NO BEGIN 2008.

max hats|5.6.09 @ 1:32PM|#

It's the end of the world! Nothing like this has ever happened before! Our past centuries of limited government and restrained executive power have been cast aside!

One thing about Obama I do marvel at: he has a way of turning his opponents completely insane.

|5.6.09 @ 1:35PM|#

Oh, so things have always been this way. Incrementalism is a myth. Obama is not, in fact, expanding his power from what Bush did. And Bush didn't expand presidential power from Clinton. And so on. This is exactly how Washington operated.

What color is the sky in your world max hat?

max hats|5.6.09 @ 1:46PM|#

yo chief, have you ever even heard of Theodore Roosevelt or Andrew Jackson, or Truman, or Nixon? Or pretty much any president besides the last three?

If this is tyranny, I wonder what you call government imposed wage controls, or rationing, or breaking up companies, or unilaterally deciding one is not bound by the Supreme Court's rulings?

It really does sound like you just woke up fully formed in 2009, and all you have to go off on previous American history is the back page of a libertarian pamphlet.

|5.6.09 @ 1:52PM|#

Earlier presidents had less unchecked power to abuse. No doubt that TR or even Nixon would be worse today than they were in their times.

|5.6.09 @ 1:55PM|#

Obviously you can't even read a comment correctly. I'm well aware that most presidents have attempted to or have expanded their power beyond constitutional limits. And it's rare that it's reigned back in (the post Nixon years being one of the rare examples, weak though it was). But we have reached a level where the rule of law doesn't even seem to matter anymore.

So go back to the Daily Kos and celebrate. We have reached statist Nirvana.

|5.6.09 @ 1:58PM|#

Let's not leave out the master of executive power inflation, FDR, icon of the left. Criminally fantastic. I'm just amazed he didn't appoint his son to succeed him.

max hats|5.6.09 @ 1:58PM|#

Pro Lib, FDR and Truman basically controlled the entire United States economy during WWII through rationing. The current powers of the Federal Government are far more limited than they were then. It is not a continually increasing line.

max hats|5.6.09 @ 2:00PM|#

Let's not leave out the master of executive power inflation, FDR, icon of the left.

Great, let's not. For your earlier statement to be true:

Oh, so things have always been this way. Incrementalism is a myth. Obama is not, in fact, expanding his power from what Bush did. And Bush didn't expand presidential power from Clinton. And so on. This is exactly how Washington operated.

Obama should have more power than FDR. Care to back that up?

|5.6.09 @ 2:05PM|#

Sure. Obama is continuing to run an undeclared war. He didn't start it, but he does continue it. He could also get the US in another undeclared war at any time. I don't believe FDR could have done that. Truman barely pulled it off but only by using UN authorization and calling it a "police action". Johnson expanded it from there, as did Nixon. So now the whole thing about Congress declaring a war is a joke. So Obama has the power to fight a war without a clear war declaration. FDR did not.

max hats|5.6.09 @ 2:14PM|#

Sure. Obama is continuing to run an undeclared war. He didn't start it, but he does continue it. He could also get the US in another undeclared war at any time. I don't believe FDR could have done that.

http://en.wikipedia.org/wiki/United_States_occupation_of_Haiti

max hats|5.6.09 @ 2:16PM|#

Look at the history of the Marine Corps from the turn of the century until WWII. A long string of undeclared wars. Undeclared wars in latin America were normal at the time. There was even a cutesy name for the practice - "banana wars."

|5.6.09 @ 2:21PM|#

max hats,

True enough. In fact, I think the emergency powers used during war--of which there's virtually no constitutional basis--has helped get us to the point where we're at today. We've obviously not been on a total war footing since at least the height of the Cold War, and really since WWII. At least during war, there is often a loose national consensus that extraordinary means should be used, as wrongheaded as that thinking might be.

Heretofore, doing those kinds of extralegal things was only considered okay in major war situations. Now it's okay for pretty much any reason or no reason. There's also greater general federal control over pretty much everything now, which makes it all the more insidious.

max hats|5.6.09 @ 2:26PM|#

There's also greater general federal control over pretty much everything now, which makes it all the more insidious.

Again, I don't think so. What are we talking about here? Giving money to a company. What are we comparing it to? Wage controls, price controls, massive federal involvement in the smallest economic details. If you want to see a truly staggering history of federal giveaways to private entities, look at the railroads. This here does not even rate.

|5.6.09 @ 2:27PM|#

Point taken, he could do this in the Western Hemisphere through the expansion of the Monroe Doctrine. But even this was an incremental action, and unconstitutional. But FDR would probably been restricted to this hemispehere. WWII was, after all, a declared war. Certainly these actions did make it easier for Truman to expand it to Korea. But the point is that Obama has almost unquestioned ability to send troops anywhere. FDR still got a declaration of war after Pearl Harbor. Bush only needed a thumbs up to go into Afganistan.

|5.6.09 @ 2:59PM|#

Past government excess does not excuse new government excess. I can't believe you are seriously proposing that the scope and range of government power is smaller now than before.

This article was specifically about misappropriation of funds. It is taking a bad law and making it worse by using the money in ways it's not supposed to spent.

Leftists may excuse Obama simply because this crook is their crook, just like the right did with Bush.

I am against all the movement to more executive power, regardless of party. Obama is buiding on Bush's excess. This is not a good thing, nor is it unique. I just think we've reached a tipping point where it's no longer clear that there is any limit to executive power.

max hats|5.6.09 @ 3:16PM|#

Past government excess does not excuse new government excess. I can't believe you are seriously proposing that the scope and range of government power is smaller now than before.

Considering the federal government used to control the entire economy, and had the power to strip tens of thousands of Americans of their property and freedom based solely on their ethnicity, I cannot imagine how you could possibly believe Obama has more power than FDR. Your entire thesis is obviously false. I cannot imagine the mental gymnastics you must be going through to maintain your prior beliefs.

|5.6.09 @ 3:25PM|#

But you think this was a good thing, right?

|5.6.09 @ 3:33PM|#

To clariy, do you think FDR or Obama had/has too much power?

max hats|5.6.09 @ 3:56PM|#

FDR absolutely had too much power. Obama has too much power in the national security sphere, in regards to wiretapping, detaining hostiles and probably some other things I am forgetting. Not sure why that matters here. My point is that it is clear that FDR had more power than Obama, and that federal power is not a continuously increasing thing. It usually goes up, sometimes it goes down, and it used to be much higher.

|5.6.09 @ 4:01PM|#

So what occurred since FDR to roll back Obama's power?

|5.6.09 @ 4:04PM|#

max hats,

I'm not arguing that it hasn't spiked in the past, but I think the ubiquity of federal power today makes the lack of limits more of a problem. In FDR's day, there were plenty of checks on his power--checks he struggled to overcome for most of his administration. Still, his administration is the closest we ever came to a dictatorship, even compared to Lincoln (who, of course, was also operating under a crisis footing).

One thing to consider, too, is that a decent portion of FDR's power grab never went away.

max hats|5.6.09 @ 4:09PM|#

So what occurred since FDR to roll back Obama's power?

War time rationing ended shortly after the war, cultural values have evolved to currently believe concentration camps are not okay, and the steady erosion of the New Deal since Reagan.

|5.6.09 @ 4:17PM|#

But rationing could come again, and has been proposed many times. Just because it ended in fact doesn't mean the president can't reinstate it, so the power is still there. I also think you're on shaky ground with camps. The experiences with Gitmo and the reluctance to deal with the torture issue, along with additional powers given through the Patriot Act would indicate that the government can still detain and hold on slim evidence. The size of government has grew under Reagan and has continued.

Obama could probably reinstate anything FDR did. The power is still there.

max hats|5.6.09 @ 4:24PM|#

Obama could probably reinstate anything FDR did. The power is still there.

There's obviously nothing I could ever say or show that would ever make you feel otherwise. Your belief in the steadily increasing power of the federal government is faith-based.

|5.6.09 @ 4:36PM|#

Your belief in Obama is even more so.

|5.6.09 @ 4:40PM|#

max hats,

No. If you take a Constitutional Law course in law school, the focus for much of the class is on the limits on government power. As you edge into the modern era, the limits become fewer and fewer. We spent over a week on the Commerce Clause and how it limited Congressional authority, but when it came time for the exam (which focused on current law), the Commerce Clause answer was basically that Congress now has a general police power.

That's just one example, but it's true in most areas. There are a few counterexamples, but, for the most part, federal power--whether actually used or not--has grown quite a bit. Noting that more invasive uses of that power have occurred in the past doesn't change the fact that much greater power is available to any Congress or president that wants to wield it.

One of the things that I find most disturbing about modern America is the loss of our basic distrust of government power. Is it so hard to believe that human beings can't be trusted with unrestrained power over others? Those of you on the left who talk about libertarian faith in limited government seem to have an awful lot of faith in government benevolence. Was Bush so long ago?

Invisible Finger|5.6.09 @ 6:17PM|#

He has gone way, way beyond anything Bush attempted in casting aside the rule of law to shower benefits on his supporters.

I agree with you in spirit, R C, but the Patriot Act is probably the worst piece of legislation in the history of the nation since Prohibition. I know it was bipartisan, but the favors bestowed on government and its employees cemented a caste system in law that was unspoken and tenuously enforced beforehand. What Obama is doing for favored parties has been going on since 1792.

Invisible Finger|5.6.09 @ 6:23PM|#

Considering the federal government used to control the entire economy, and had the power to strip tens of thousands of Americans of their property and freedom based solely on their ethnicity,

maxhats, as usual, is so obtuse and stupid it's comical.

Before we interred people for their ethnicity, now we do it for what they choose to put in their mouths. And for how much cahs they happen to carry. And for their beliefs.

We have a higher percentage of the populace in prison NOW than ever before, and asshats/maxhats actually tries to bullshit people into thinking the government has LESS power. How stupid can you get?

The New Guy|5.6.09 @ 8:57PM|#

Can't be forgetting about that Federal Income Tax: why try to dodge the Constitution when you can always carrot/stick the states into submission?