Reason Magazine
- reason.com
- reason.tv
- reason.org
- Donate
- Site Search:
Reason on Facebook
Reason on Twitter
Reason on YouTube
Reason RSSGet Reason E-mail Updates!
Manage your Reason e-mail list subscriptionsadvertisements
If G.M. Fails, the Terrorists Win
Since Congress declined to approve the auto industry's Bridge Loan to Nowhere, President Bush says the Treasury Department will have to help G.M. and Chrysler on its own, using some of the $700 billion Congress appropriated for the Troubled Asset Relief Program (TARP). Along with the usual economic and philosophical objections to an auto industry bailout, this move should provoke concern about the rule of law. The Emergency Economic Stabilization Act of 2008 (PDF), 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. That much is familiar. But usually he does this sort of thing under the banner of national security. Is the failure of the Big Three automakers to produce cars that people want to buy part of an Al Qaeda plot?
Addendum: Episiarch suggests the Bush administration could argue that the automakers' finance divisions makes them "financial institutions." But GMAC and Chrysler Financial are no longer wholly owned subsidiaries of the carmakers: A consortium of investors, including Cerberus Capital and Citigroup, owns a controlling interest in GMAC, while Chrysler Financial became a standalone company in 2007. Ford Credit is still wholly owned by Ford, but a manufacturer with a finance division is plainly not what Congress had in mind when it passed the law authorizing TARP. Ford, in any event, is not seeking a government loan right now.
|12.12.08 @ 11:55AM|#
But a carmaker is not a "financial institution," and loaning
it money is not purchasing a "troubled asset."
Don't they have huge financial divisions for giving out car
loans?
Taktix®|12.12.08 @ 12:04PM|#
Despite how little I should be, I'm actually surprised at this
news.
With all the loopholes and vagaries they put in that bailout bill,
they still can't obey the law.
Too bad it's only going to get worse in five weeks...
Geoff Nathan|12.12.08 @ 12:11PM|#
If you read the Detroit papers you would learn that in WW II the
car companies built tanks and stuff, so, of course the bailout is
vital to national security.
They're actually saying that.
Of course General Dynamics makes the Abrams tank and the Stryker
fighting vehicle, Boeing makes F-15's, F/A-18's, Lockheed-Martin
makes the F-22, but the big 2.5 might make something some
time.
I guess...
Mike Laursen|12.12.08 @ 12:16PM|#
But usually he does this sort of thing under the banner of
national security.
Yup, auto industry spokesmen have been getting the national
security talking point in for a few weeks now.
|12.12.08 @ 12:18PM|#
Don't they have huge financial divisions for giving out car
loans?
I believe GM spun off GMAC into its entity, so loaning money to GM
can't be construed as loaning money to GMAC.
|12.12.08 @ 12:20PM|#
Unfortunately, I don't see anyone with the resources and
motivation to challange it in court.
Who are you going to call? The ACLU? not exactly their usual line
of work.
|12.12.08 @ 12:22PM|#
Why send money to badly managed companies? In his quest to keep
the failure of Detroit from falling on his watch Bush has become an
enemy of the Republic. The proper response to the economic meltdown
is to go after those who have broken the law, and leave the market
alone.
http://www.wkyc.com/news/news_article.aspx?storyid=102901
Ska|12.12.08 @ 12:23PM|#
How many times have the terrorists won already? I think I'm
losing count.
Pretty much every time you hear/read the news.
So I guess every Exxon, Walmart, Brooks Brothers, Macy's, PC
Richards, and every other retailer or whoever that have their own
credit cards and financing plans are all financial institutions
too.
John|12.12.08 @ 12:26PM|#
This is going to end up being just one more in a long line of
reasons that Bush should have been impeached years ago, before he
had the chance to do any more damage.
It is also one more sign that we no longer under a system of
government with even a semblance of "checks and balances".
John|12.12.08 @ 12:27PM|#
It is also one more sign that we no longer live under a system of government with even a semblance of "checks and balances".
|12.12.08 @ 12:28PM|#
Actually, I think GMAC has been trying, for a while, to get
themselves reclassified as an eligible institution, with no
success. Eligible for the gravy train which is the TARP, that
is.
And, what's all this nattering about laws, and proscribed acts?
Everybody knows the President is an omnipotent deity, who cannot be
constrained in any way.
Kaiser|12.12.08 @ 12:33PM|#
It is also one more sign that we no longer under a system of government with even a semblance of "checks and balances".
Oh there is still in balances, the problem is the checks and the
balances are on the same side of the fence. Doesn't matter democrat
nor republican they're main goal is screwing us in the ass.
I mean this can't really be too surprising to anyone, after all it
is Bush we are talking about. I won't stop being surprised at the
list of fuck ups that just keep growing until he is actually out of
office so he can't make any more. Although that being said, the
next 4 years won't be any better...
The Wine Commonsewer|12.12.08 @ 12:37PM|#
If G.M. Fails, the Terrorists Win
Can't wait for GM to fail. The other two as well.
It's just bad form to drive the Mercedes to the welfare office and
when all three of those CEO's arrived by private jet.....well,
let's just say that was the final straw.
Arrogance isn't becoming a welfare queen.
The Wine Commonsewer|12.12.08 @ 12:41PM|#
Lame duck Bush is like playing Risk with the guy who gets pissed because he can't possibly win so he plays 'wreck'. Meaning he tries to ruin everybody else's strategy on his way down.
|12.12.08 @ 12:46PM|#
Ok, so my finance division idea didn't pan out. What if the auto
makers buy a bank or two? That could work, right?
Or Paulson can just ignore TARP's wording and not get called on it
by Congress.
|12.12.08 @ 12:50PM|#
Epi,
Just take an easier route. They build things that 99% of people
have to get a loan to buy. This will also allow them to bailout
housing construction companies sitting on entire neighborhoods of
spec houses that are slowly rotting.
Or easier: Anything involving money is now an eligible financial
institution.
|12.12.08 @ 12:51PM|#
Bush, Paulson. "legal authority", "rule of law" and TARP all in
the same paragraph.
Hilarious.
|12.12.08 @ 12:53PM|#
I've always hated the Mustang, but this whole bailout boondoggle is making me look at Ford with much greater fondness. My understanding is that they're actually basically a viable entity as they are, but they're concerned that if GM goes under they'll take the whole supply chain with them. That's the real problem here, not that GM's workers might be out of a job or that the world might go without Buicks, but that GM's failure will bankrupt any number of otherwise-viable companies, as well as inflict a world of pain on their stable competitors (the Japanese manufacturers in America, who are dependent on the same supply chain).
|12.12.08 @ 12:55PM|#
Anything involving money is now an eligible financial
institution.
Auto makers have finances, making them a "financial" institution!
Perfect!
tekende|12.12.08 @ 12:56PM|#
Are you all really pretending this is something only Bush would do? Obama would probably do the same thing. Clinton would have. Just about any politician we have right now would do the same in Bush's position.
|12.12.08 @ 12:59PM|#
sugarfree, epi,
Considering what they've done to the Commerce Clause, that isn't
such a stretch.
Naga Sadow|12.12.08 @ 12:59PM|#
I sleep late and THIS is what I have to wake up to? SHIT!!! I have a credit card AND I loan money to family and friends when I feel like it! Where's my bailout!!!!???? Fuck!
Naga Sadow|12.12.08 @ 1:01PM|#
Episiarch,
Your post at 12:55 just brought my rage down to a tolerable level.
I need some caffeine.
Chuck|12.12.08 @ 1:03PM|#
This one is easy. The banks, make major loans to the car
companies, in exchange for heaping helpings of their near-worthless
stock. The stock then becomes a "troubled asset" of the banks,
which Paulson can then use the bailout money to buy at an inflated
price, effectively repaying the loan. The banks, of course, will
gladly do this, since Paulson is now their biggest
stakeholder.
Problem solved.
Naga Sadow|12.12.08 @ 1:05PM|#
Ahhhhh . . . I love the taste of cherry pepsi in the morning. I don't drink coffee. Anyway, GM needs to be starved into bankruptcy so someone can pick up its carcass on the cheap. GM still has millions of customers, it should be worth the risk of picking it up since bankruptcy should break the UAW/management chokehold.
Xeones|12.12.08 @ 1:06PM|#
TWC, every time i play Risk it turns into Wreck. That's just
how i roll. But then, i'm not president of anything at the
moment.
tekende, i doubt anyone here (maybe not even joe) is pretending
that this is something only Bush would do.
Xeones|12.12.08 @ 1:20PM|#
No worries, Naga, it's Creative Commons licensed. Seriously, though, Paulson can eat a bag of dicks up.
ed|12.12.08 @ 1:22PM|#
Bridge Loan to Nowhere
Tee hee hee. I'm really enjoying this game of political hot-potato.
Too bad the outcome could destroy the nation. Oh well, we had a
pretty good run.
I wonder if Canada would be interested in some rust-belt border
states, cheap? Good fishing, lots of deer, one-third of the
original NHL...think about it, Ottawa.
Naga Sadow|12.12.08 @ 1:26PM|#
ed,
You got it backwards, my friend. Start arming yourselves
Canadians!
ed|12.12.08 @ 1:30PM|#
Naga,
No, really, I will sacrifice Ohio, Michigan, and what the
hell...Minnesota too. They're practically Canadian anyway, what
with their sickening niceness and screwball politics.
Naga Sadow|12.12.08 @ 1:44PM|#
ed,
Ah. I'm not sure if you know your history or not but the U.S.
doesn't sell territory, it buys it or takes it. Also, the U.S. has
been trying to get their hands on Canada for two centuries. The
time is now!
|12.12.08 @ 1:46PM|#
Osama bin Laden could probably do a better job of running GM than Rick Wagoner; I say, give him a chance!
|12.12.08 @ 1:50PM|#
tekende
No but he is supposed to be from the "capitalist" party. The
concept is two parties that have different opinions not just one
party with two different names.
Naga Sadow|12.12.08 @ 1:53PM|#
P Brooks,
Ah. A little "keep your friends, and your enemies closer" approach.
I like your style.
tekende|12.12.08 @ 2:02PM|#
bladedoc,
Oh, I know. Don't get me wrong, I'm not trying to defend Bush or
anything. I just see this as less of a "Blame Bush" situation and
more of a "Blame our screwed-up government in general" thing.
ed|12.12.08 @ 2:12PM|#
the U.S. doesn't sell territory
That was before we had a genuine, half-black, big-eared,
media-adored change president! Come on! Aren't Ohio,
Michigan and Minnesota worth half of our national debt? I'm sure
China would like a piece of that, too. Everybody wins!
Citizen Nothing|12.12.08 @ 2:14PM|#
I for one welcome my new Chinese masters.
How do you say "Go Bucks!" in Mandarin?
ed|12.12.08 @ 2:16PM|#
Caveat: I'd much rather sell off the southern border states (Texas, New Mexico, Arizona), but who the hell would want them, what with all those Beaners? Then again, how is Mexico fixed for cash?
Naga Sadow|12.12.08 @ 2:20PM|#
ed,
I would. Cheap labor. They get uppity over wages and BAM! Off to
Mexico you go, buddy. But then I'm aiming to carve me out a kingdom
come the apocalypse.
cunnivore|12.12.08 @ 2:32PM|#
Lame duck Bush is like playing Risk with the guy who gets
pissed because he can't possibly win so he plays 'wreck'. Meaning
he tries to ruin everybody else's strategy on his way
down.
He's doing what the majority in Congress wanted him to do two weeks
ago. It's the Senate Republicans who are trying to screw up The
Plan.
|12.12.08 @ 6:22PM|#
Thats like saying the Dallas Cowboys are America's Team (which they are ) and if you don't root for them, you are not rooting for America and therefore you're a terrorist. (Which you are) How 'bout the Cowwwboyyyys!!!
mw|12.12.08 @ 9:41PM|#
In my fantasy world, the 60%+ of Americans who oppose these
bailouts start voting with their wallet by shunning companies
suckling at the Federal teat, and supporting companies that resist
the temptation, even if their competitors do not. In this case, it
would mean
buying Ford, boycotting GM & Chrysler. There is far greater
manufacturing capacity than there are customers. Why wouldn't
rational customers preferentially buy from a company that shows the
minimum management competence of understanding their marketplace
and operating without bailouts? If more consumers make this choice,
it would keep the Ford lines running, and shut more GM lines
down.
Don't get me wrong. Ford CEO Alan Mulally did not cover himself or
his company in any more glory than the rest of the bozos in either
of his two appearances before Congress. But this week, Ford finally got it
right, and said they would not take Federal money this round.
Maybe I am grasping at straws, but it's something.
Site comments/questions:
Media Inquiries and Reprint Permissions:
(310) 367-6109
Editorial & Production Offices:
3415 S. Sepulveda Blvd.
Suite 400
Los Angeles, CA 90034
(310) 391-2245