Obama's Doctrine of Necessity

Jacob Sullum | December 19, 2008

In my column this week, I wondered what position President-elect Obama would take on President Bush's unilateral, legally unauthorized bailout of G.M. and Chrysler, given the former's criticism of his predecessor's above-the-law approach to terrorism policy. Now we know:

President-elect Barack Obama endorsed the plan, calling it a "necessary step" to avoid a major blow to the economy.

"The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry," Obama said in a statement.

Evidently Obama is only against unnecessary abuses of executive power.

Comments

|12.19.08 @ 2:20PM|#

Bush is routing the funding through their financing agencies, making the use of TARP money for the auto bailout perfectly consistent with the law.

Johnny Nowhere|12.19.08 @ 2:22PM|#

"Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves." - William Pitt

joe prime|12.19.08 @ 2:24PM|#

and Bush used Fisa and Un resolutions, making warrantless wiretapping and the Iraq war perfectly consistent with the law.

|12.19.08 @ 2:32PM|#

Delicious. It seems the only bright spot in all this mess is watching Obama completely fail to be anything resembling "change". Solely for the lulz at his supporters, of course--him actually opposing the auto bailout would have been nice to see.

|12.19.08 @ 2:37PM|#

Remember when the Democrats were denouncing Bush's drug benefit giveaway because it was too small? Maybe we should look at Obama's endorsement as a glass half full. He could be moaning that Bush is a tightwad Scrooge...

Rhywun|12.19.08 @ 2:37PM|#

I'd like to know which recent president or recent major candidate (i.e. one that had a chance of winning) would be against this bailout, or any of the previous ones this year.

|12.19.08 @ 2:40PM|#

joe prime,

The Bush administration itself has acknowledged that it did not, in fact, use FISA in its wiretapping programs. That's why they're illegal.

As for the UN resolutions, they were never authorized to launch and invasion and occupation, and the concept of "international law" isn't really comparable to actual law anyway.

So, no, neither of those are really comparable.

|12.19.08 @ 2:42PM|#

Episiarch | December 19, 2008, 2:32pm | #

Delicious. It seems the only bright spot in all this mess is watching Obama completely fail to be anything resembling "change".

See, the reason this is such a compelling argument is because only the adoption of libertoid fringe policies would actually be a change, or at least, the type of change that is desired by the people who elected him.

We don't care if you approve of the changes he's bringing, Episiarch.

|12.19.08 @ 2:44PM|#

Do they still teach that the legislative branch sets fiscal policy in high school civics classes? Or is that considered a quaint old notion unsuited to our modern, complex economy?

Mike|12.19.08 @ 2:46PM|#

I'd like to know which recent president or recent major candidate (i.e. one that had a chance of winning) would be against this bailout, or any of the previous ones this year.

Since the election already happened, we now know that every candidate other than the winner had a zero percent chance of winning.

If you mean candidates that you thought might have a chance of winning, I suspect the answer is none.

That said, it shows the necessity of third party politics including the Libertarian party to oppose actions that the vast majority of americans disapprove of, but our elected officials endorse.

Jordan|12.19.08 @ 2:46PM|#

Christ, it looks like this dumbshit is going to give Jimmy Carter and Dubya a run for their money in the race for worst president in recent memory. Who knows, by the end he might even make Woodrow Wilson and LBJ look good.

|12.19.08 @ 2:48PM|#

We don't care if you approve of the changes he's bringing, Episiarch.

I know! Because you approve of anything he does, because that's how you roll. When your first post is you explaining how all this is technically legal, it's very hilarious. The fact that you don't seem to understand how glaringly obvious it is that you'd defend him for, say, assraping your own mother on live TV is doubly hilarious.

joe prime|12.19.08 @ 2:49PM|#

fair enough joe.

Bush is authorizing 'midnight regulations' through the appropriate agencies, making their passage perfectly consistent with the law.

|12.19.08 @ 2:52PM|#

The auto companies must not squander this chance to reform bad management practices

like, you know, folding like a two dollar lawn chair every time they go up against the UAW?

|12.19.08 @ 2:54PM|#

Bush is routing the funding through their financing agencies, making the use of TARP money for the auto bailout perfectly consistent with the law.

Really? The statutory language is:

The term "financial institution" means any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company, established and regulated under the laws of the United States or any State, territory, or possession of the United States, the District of Columbia, Commonwealth of Puerto Rico, Commonwealth of Northern Mariana Islands, Guam, American Samoa, or the United States Virgin Islands, and having significant operations in the United States, but excluding any central bank of, or institution owned by, a foreign government.

Granted, there's some squish there, in (inevitable) use of the "including but not limited to" clause, but I don't think, really, that a captive purchase money lending facility is really in the same boat as a "bank, savings association, credit union, security broker or dealer, or insurance company."

If the interpretation that we're putting on this is that anyone who lets their customers pay over time is a "financial institution", then I think we can safely say the term is meaningless.

We don't care if you approve of the changes he's bringing, Episiarch.

What changes would those be, joe?

blech|12.19.08 @ 2:54PM|#

We don't care if you approve of the changes he's bringing, Episiarch.

Rah rah rah!

Go Team, go!

|12.19.08 @ 2:54PM|#

Do they still teach that the legislative branch sets fiscal policy in high school civics classes? Or is that considered a quaint old notion unsuited to our modern, complex economy?

I don't think "civics", as I was taught it back in the early 70s, is even taught anymore in high school or middle school. There is no instruction on the structure and function of our government. This is from me talking to a couple students recently.

If anyone knows otherwise, please correct me here.

|12.19.08 @ 2:54PM|#

I know! Because you approve of anything he does, because that's how you roll.

Actually, there are a number of things he's done that I disapprove of. Supporting "clean coal" nonsense. Inviting Rick Warren to give he opening prayer at the inauguration. I criticized the Hillary pick.

Once again, you're merely doing what you always do, dividing the world into "what Episiarch thinks" and "everything else," so that even holding a different set of objections than you is indistinguishable for across the board acceptance.

|12.19.08 @ 2:55PM|#

joe prime,

Yes, Bush's midnight regulations push is perfectly legal.

This, like my previous comment, and like the post I was responding to, is about legality.

|12.19.08 @ 2:56PM|#

the concept of "international law" isn't really comparable to actual law anyway.

Let the backpedaling from the standards used to browbeat the Bush administration begin! Our Guy is about to be in charge, after all, and we don't want anyone holding him to those standards.

|12.19.08 @ 2:56PM|#

Alright joe, I'll bite...by this logic, can you name a single company that couldn't be bailed out with this money? Or is it just the world's biggest general fund?

|12.19.08 @ 2:58PM|#

RC Dean:

I think Bush can get around any restrictions on the definition of "financial institution" by using his convenient "signing statement" power which he invented recently. It's probably in one of the penumbras of the Constitution, somewhere.

|12.19.08 @ 2:59PM|#

RC Dean,

You use a vague term like "in the same boat" because the language disproves your point.

The auto financing subsidiaries are completely consistent with that definition.

Next time you're in court, try that "not in the same boat" argument when there's no legal language to back you up. We'll see how that goes.

If the interpretation that we're putting on this is that anyone who lets their customers pay over time is a "financial institution", then I think we can safely say the term is meaningless. No, that's not it. These are not furniture companies that defer your payments. They're lending institutions that loan you money, and even sometimes sell those loans. GMAC even does mortgages.

|12.19.08 @ 3:00PM|#

Rah rah rah!

Go Team, go!

Is is supposed to be an insult to accuse a Democrat of supporting Democrats, and of supporting Democrats when they do things that are consistent with Democratic philosophy?

If so, wow, you really got me there.

The Narrator|12.19.08 @ 3:02PM|#

Among Libertarians who did not vote for Obama and never supported him, the disappointment in Obama is nearly unanimous. Shockingly, the president-elect has taken many positions in line with the democratic party. No one could have seen this coming, and on many a message board there rises a plaintive wail. . .

"That's not change we can believe in."

Franklin Harris|12.19.08 @ 3:03PM|#

I have only this to say to GM, Ford, and Chrysler:

http://www.youtube.com/watch?v=Swvf3w6hcY4

|12.19.08 @ 3:05PM|#

Let the backpedaling from the standards used to browbeat the Bush administration begin! Our Guy is about to be in charge, after all, and we don't want anyone holding him to those standards.

I've never budged and inch. I never argued, or thought much of, the "against international law" argument against the war. You won't find me doing so in the archives. But nice try!

Johnny Clarke,

Only financial institutions would qualify. The Big Three all have big financial institutions these days. GM has been described as "a highly profitable bank with a car company attached to it."

It's a sneaky move by Bush, but once again, this is a question of legality. The law allows him to use the money on financial institutions.

|12.19.08 @ 3:06PM|#

The Narrator gets it right.

Who cares if the differences between Bush and Obama aren't change Episiarch can believe in? He never said he'd bring that kind of change.

Fluffy|12.19.08 @ 3:10PM|#

Joe, do you have a link where it's specified that the financing arms get the funds?

I'm not disputing your claim yet, I just haven't seen that detail online anywhere.

I would think it would create all sorts of problems. GMAC's financing arm is partially spun off, for example. I also don't see how the capital could get over to operations once it's in the financing division[s], which presumably have loan covenants for their existing financing governing the use of capital account funds.

|12.19.08 @ 3:12PM|#

OK, but let's take, say, McDonald's, which is really a property investor and franchiser, could that be twisted into the definition of "financial institution"? Or what about any of the various companies, such as Sears, which have their own credit cards...?

BTW, I honestly don't understand your motivation for sticking around here and taking the abuse, but you definitely keep the threads interesting.

Fluffy|12.19.08 @ 3:13PM|#

I've never budged and inch. I never argued, or thought much of, the "against international law" argument against the war.

You've talked about our treaty obligations in the realm of torture policy many times.

And rightfully so.

I hope that isn't one of those "not really that important" international laws Obama won't have to obey.

Shockingly, the president-elect has taken many positions in line with the democratic Bush administration, which was supposed to be the worst administration evah party.

Fixed that for you.

Fluffy|12.19.08 @ 3:15PM|#

Also, joe, if the Bush administration always had the authority to bail out the car companies, what was the point of Congressional hearings to discuss whether or not the Congress should vote for a bailout? Was that all just a great big charade?

|12.19.08 @ 3:23PM|#

Fluffy,

I saw it on teevee. Sorry, no linkee. I don't know the details.

Johnny Clarke,

The language in the bill really is loose. I imagine that all sorts of entities that weren't originally foreseen could qualify under the language of the law. I don't know about McDonald's exactly, because neither a property investor nor a franchiser is a financial institution - that is, a business that engages in financial services - but it certainly is a vague definition.

Fluffy,

You've talked about our treaty obligations in the realm of torture policy many times. Treaties have the force of American law once they're adopted by the Senate. That's in the Constitution.

Pray tell, which treaty endorsed by the Senate dictates when we can start wars?

Also, joe, if the Bush administration always had the authority to bail out the car companies, what was the point of Congressional hearings to discuss whether or not the Congress should vote for a bailout? Was that all just a great big charade? Prior to this week, Bush was insisting that he would not use TARP funds to bail out the auto industry. That's what changed.

|12.19.08 @ 3:27PM|#

I heard Barack Obam is going to work in the Oval Office. That's not change we can believe in!

He supports a graduated income tax, just like George Bush! Can you believe those suckers who thought anything was going to be different?

Hey, look at that, George Bush caved to the Democratic position on the auto industry, just like he did on permanent bases in Iraq. You know what that means? Barack Obama is going to be implementing the same position as George Bush!

Ha ha ha. Suckers. You thought things would change! I'm so smrt.

|12.19.08 @ 3:31PM|#

The auto financing subsidiaries are completely consistent with that definition.

Really? They aren't a:

bank,
savings association,
credit union,
security broker or dealer, or
insurance company,

so just what definition of "financial institution" encompasses them, that doesn't also cover every business that lets their customers pay over time?

You know, almost any jewelry store lets you pay over time. Does that make Zales a financial institution? If not, then what is the principled distinction between Zales and GM?

And, for your information, "including but not limited to" is not read by the courts mean "including every damn thing, whether or not on the following list." "In the same boat" is quite a bit broader than what a court will usually require before extending the list under that clause; I was being nice.

The Big Three all have big financial institutions these days.

This is known as "assuming your conclusion."

These are not furniture companies that defer your payments. They're lending institutions that loan you money, and even sometimes sell those loans.

There is no meaningful distinction between deferring your payments and loaning you money, just as there is no meaningful distinction between selling a loan and selling your receivables. Try again, pls.

Fluffy|12.19.08 @ 3:36PM|#

Pray tell, which treaty endorsed by the Senate dictates when we can start wars?

http://www.state.gov/r/pa/ho/pubs/fs/55407.html

The Senate ratified the UN Charter, which requires all international disputes to be settled peacefully, or referred to the Security Council.

Obviously that requirement is not observed very often - by anyone - and I don't support it myself. But hey, you asked.

Lefiti|12.19.08 @ 3:36PM|#

GOVERMENT INTERVENTION! WE HAD IT BEFORE, AND WE HAVE IT NOW! WE'VE NEVER NOT HAD IT!

Fluffy|12.19.08 @ 3:41PM|#

RC -

To be fair, it has always been the first operating principle of our government that definitions are to be read as broadly as possible, when the issue at hand is the limit of a government power, and as narrowly as possible, when the issue at hand is the scope of private autonomy.

If identical language appeared in a state law defining exemptions to, say, licensing requirements for pawn shops, and you opened a pawn shop claiming to be exempt from the law on the basis of the fact that your company did car loans, the state would laugh in your face and throw the book at you.

But since what's happening here is the executive branch circumventing a recalcitrant minority in Congress to throw billions of taxpayer dollars at someone, the definition will be as elastic as necessary. That's good old pragmatism for ya.

|12.19.08 @ 3:42PM|#

RC,

so just what definition of "financial institution" encompasses them, that doesn't also cover every business that lets their customers pay over time?

Do you really not understand that "let their customers pay over time" is NOT what GMAC does?

Are you playing dumb to make a point, or do you actually think that the dealers set up payment schedules, as opposed to making loans?

|12.19.08 @ 3:44PM|#

There is no meaningful distinction between deferring your payments and loaning you money, just as there is no meaningful distinction between selling a loan and selling your receivables.

In the eyes of the law, there are enormous differences. You know this, and are just playing dumb.

Hack.

|12.19.08 @ 3:48PM|#

RC, if I don't take the financing offered by Honda Finance or GMAC finance - no thanks, I don't want a loan, I tell the dealer - do you think he will let me make monthly payments to cover the cost of the car, or do you think he will require me to pay the entire amount up front?

Of course they will require payment up front, because GM doesn't allow a buyer to make his payments over time. GM requires full payment up front, even if the full amount is first paid by a lending company. Sometimes, this lending company is GMAC. Sometimes, it is not.

Once again, you know all of this.

|12.19.08 @ 3:52PM|#

So when they come back for more in three to six months - any guess about how much they'll ask for? 15 - 25- 50 billion?

Kolohe|12.19.08 @ 3:54PM|#

In the eyes of the law, there are enormous differences. You know this, and are just playing dumb.

I gotta say, ianal and all, but I don't think this is the case. Just from personal experience, there's seems to be the same legal mumbo jumbo fineprint the last time I financed a car, the last time I financed a furniture purchase, and the last time I financed an electronic purchase. And if I recall correctly, even though the forms had the ABC car, furniture or electronics store company logo, they all made reference to an XYZ financing corporation. But I have not bought anything depreciable asset on credit this decade.

Fluffy|12.19.08 @ 3:55PM|#

Joe, I am starting to doubt more that the funds will be channelled through the financing units.

GM doesn't own GMAC anymore.

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

They spun it off some time ago.

Again, I'm not saying you're wrong on this, I just don't understand how it would work and I haven't seen anyone but you say that the Bush plan is routing the funds in this manner.

Kolohe|12.19.08 @ 3:58PM|#

iow I thought 'no payments until 2010!' = financing. But I concur that the general public doesn't believe them to be equal, the retailers like it like this, and that's how many get in trouble with consumer debt

|12.19.08 @ 4:00PM|#

Joe,

Regardless of the legality of what Bush's doing, this bailout violates the intent of the bill. He's not injecting liquidity into GMAC or buying their distressed assets (current car loans in arrears), he's shoveling a bumch of money directly at the manufacturing side of the business so they can pay their obligations (basically funding GM's payroll). We might as well just send all of these pensioners on government welfare for all the good this will do GM, because they'll bleed money anyway while trying to do as little as possible AND a whole bunch of people will soon be unemployed with no pension. This is a stupid move to conclude a stupid presidency leading into an even stupider economic policy which we will all pay for soon enough.

|12.19.08 @ 4:02PM|#

http://reason.tv/video/show/178.html

I have seen the above video in a while but I vaguely remember Napalitano talking about Bush changing that definition so it would include pretty much any place that exchanges money, like a deli or shoe store. Maybe it applies in this issue, maybe not.

|12.19.08 @ 4:05PM|#

Since when has Bush cared about the intent of Congress?

|12.19.08 @ 4:12PM|#

I can't tell you how delightful it is for me to watch joe relying on "corporate form over substance" arguments in supporting a Republican President bailing out major corporations.

So, if I have this right, joe, all Zales has to do to qualify for a bailout is have a corporate subsidiary that handles their consumer receivables? Because, as kolohe notes, that's how nearly everyone does it these days.

Still waiting, joe, for a principled definition of "financial institution" that shows some family resemblance to the listed institutions and does not encompass Circuit City and Zales.

|12.19.08 @ 4:14PM|#

Kolohe,

Actually, most furniture stores and whatnot now have relationships with outside lends for their financing arrangements. I bout two appliances from Dracut Appliance, but sent my payments to Western Union Financing.

Like I said, I don't know the details of how it will work, and am interested in seeing them.

LiT,

The merits of the idea of the bailout are one thing.

Sullum was making a point about the legality, and then using that point to argue that since Obama was willing to accept an illegal arrangement on this, it's evidence that he will shit all over law, like Bush has.

Except in this case, Bush isn't shitting all over the law. His actions are completely legal.

|12.19.08 @ 4:23PM|#

Ah, spin. Is there nothing that it cannot explain?

Gilbert Martin|12.19.08 @ 4:24PM|#

"GM doesn't own GMAC anymore."

GM doesn't own 100% of GMAC anymore but they do still own a minority percentage.

The majority percentage was sold to an investor consortium

|12.19.08 @ 4:56PM|#

GM doesn't own 100% of GMAC anymore but they do still own a minority percentage.

And I own a minority percentage of Citibank. I guess that makes me legally eligible for bailout money, then.

The "unitary executive" plus "signing statements" means never having to recognize the intent of Congress. And then there's "off budget" spending, which neutralizes Congressional authority over the budget.

So much for rule of law. It will be interesting to see if Obama expands on this, or reigns it in. I have my guess.....

|12.19.08 @ 4:59PM|#

Pro Libertate | December 19, 2008, 4:23pm | #

Ah, spin. Is there nothing that it cannot explain?

This a lawyer, dismissing the difference between compliance and violation of the law as "spin."

How honorable.

junior|12.19.08 @ 5:26PM|#

I thought GM divested GMAC and that GMAC is no longer a subsidiary of GM. Joe...can you point me somewhere that states that GMAC is a subsidiary or that this is how Bush plans to funnel the money to GM?

junior|12.19.08 @ 5:31PM|#

Read this. GMAC is not a wholly owned subsidiary of GM. How does that impact Joe's legality argument?

http://www.gmacfs.com/us/en/about/who/index.html

|12.19.08 @ 5:49PM|#

Not to beat a dead horse (well, OK, I am beating a dead horse), but all the listed institutions are specifically licensed and regulated as financial institutions. I checked, and GMAC actually has a bank, so they probably qualify.

And, more to the point, is GMAC in need of a bailout? Last I checked, they were pretty healthy. They posted some losses, but they are a long, long way from insolvent.

junior|12.19.08 @ 6:02PM|#

is GMAC in need of a bailout?

_http://www.forbes.com/2008/12/10/gmac-tarp-update-markets-equity-cx_cg_1210markets30.html

GMAC is not a GM subsidiary.

Jordan|12.19.08 @ 6:08PM|#

It would be hilarious if GMAC took this money and told GM to fuck off.

|12.19.08 @ 6:50PM|#

Emphasis mine...

Bush is routing the funding through their financing agencies, making the use of TARP money for the auto bailout perfectly consistent with the law.

GMAC is not a wholly owned subsidiary of GM.

The only things about GMAC that seem to be GM's are a minority stake in the company and the name--there's a GM in GMAC.

|12.19.08 @ 7:07PM|#

I don't know anything about the legal structure of the automakers' finance agencies, or how Paulson intends to handle the money.

I'm just reporting what I saw, which is that the adminstration has stated that they are going to go through their finance agencies in order to satisfy the requirements of TARP.

I've been looking around, but it doesn't appear that they've released any details of what that actually means.