New at Reason: Jacob Sullum on TARP, the GMAC Bailout, and the Lawlessness of the Bush Administration

The GMAC bailout, writes Jacob Sullum, highlights the lawlessness of the Bush administration, which has ignored statutory restrictions on the Troubled Asset Relief Program (TARP) and treated it as a slush fund for politically favored supplicants. Although he has strongly criticized President Bush for flouting the law, President-elect Obama has applauded the latest manifestation of that tendency. Evidently Obama opposes only the "unnecessary" abuse of executive power.

Read all about it here. 

Comments

nobody u no and a big fan of joe p boyle and mng and jennifer | January 7, 2009, 7:25am | #

misstrepresenting obamas progressive nature should be beneith you reason. you are becoming a characture of bill oreilley.

nobody u no and a big fan of joe p boyle and mng and jennifer | January 7, 2009, 7:29am | #

why is reason ignoring apples move at progressivism? dropping drm on most of their store is huge news.

Somebody you know and a big fan of capitalization, syntax, grammar, diction, and spelling | January 7, 2009, 8:29am | #

misstrepresenting obamas progressive nature should be beneith you reason. you are becoming a characture of bill oreilley.
...
why is reason ignoring apples move at progressivism? dropping drm on most of their store is huge news.

Please stop hurting me.

DD_NYC | January 7, 2009, 8:57am | #

"But by the time the Federal Reserve approved GMAC's application, Paulson had decided that G.M. and Chrysler, which make not loans but cars, nevertheless could receive $17.4 billion from TARP to tide them over until Congress approves more aid. "

Very disappointed that a Reason staff member still believes that US carmakers make their money in selling vehicles. All they ever wanted was to get you into one of their cars so they could make money on the interest. The profit from making cars and selling them is quite small, its all in the financing. Ford Motor Credit, GMAC, etc. make the overwhelming majority of the profits. Now, credit is expensive and the whole machine is broken. GE is a financial company masquerading as a industrial manufacturer, too. Most of the growth in our economy came from financial leverage (as did hedge fund growth). That party is over. GMAC becoming a "financial" company was simply paperwork. Their foray into financial services was the only way to stay afloat when they knew they couldn't compete anymore. This happened about 10 years ago.

David | January 7, 2009, 9:58am | #

Jacob,

An "illegal, illegal loan"? Say it ain't so! ;)

LurkerBold | January 7, 2009, 10:20am | #

We should just nationalize the corporations and be done with the anticitizen problems they bring.

Elemenope | January 7, 2009, 10:24am | #

We should just nationalize the corporations and be done with the anticitizen problems they bring.

Like Gordan Freeman and that fucking crowbar.

tired dog | January 7, 2009, 10:26am | #

I'll be filing for 'bank holding co. status' momentarily. Now ship my funds to this offshore acct...

We're officially a kleptocracy and soon as I set up a broadband pipe the 'American scam' emails will be flowing worldwide, I'll show those damn Nigerians how to run a proper scam.

P Brooks | January 7, 2009, 10:49am | #

Freedom is CHAOS!

Ve musst haf OHRDUHR!

J sub D | January 7, 2009, 11:16am | #

George Will's take on it.

I'm not in political lockstep with anybody, but George Will's pieces are always intelligently written and usually correct.

Martin Owens | January 7, 2009, 11:19am | #

This tendency of government to do what they please, never mind the law, is hardly specific to the presidency of GW Bush - it simply reached supercritical mass on his watch.

Money and power have been piling up in the executive branch for decades, far beyond the blueprint set out in the Constitution. The trend probably reaches back to the Income tax of 1913. But it became a self-sustaining chain reaction with the so called New Deal, which was actually the imposition of state socialism.

Big Green Monkey | January 7, 2009, 11:23am | #

So, instead of "bailing out" GM, Chrysler, and vicariously Ford, why didn't the Federal Government just buy up $18B worth of cars from the Big "Three" and give them away to poor people? They would have gotten rid of a lot of excess surplus, put "Americans behind the wheel of American cars", and "we" would have gotten a lot more out of it than we will in the end.

Of course, doing this would have shown that even when selling that many cars, The Big 2.5 don't do very well. Like was said above, they don't make cars very well, ergo don't make a lot of profit on cars. They may have been able to make decent money in this sort of arrangement, where they would have sold the government all those cars at sticker value, aka whatever price they wanted.

Hell, how many GM Volts could the federal government have bought and given out to poor people? Think of the environmental impact of that!

(Tongue firmly in cheek)

cunnivore | January 7, 2009, 11:41am | #

The profit from making cars and selling them is quite small, its all in the financing. Ford Motor Credit, GMAC, etc. make the overwhelming majority of the profits.

GM does not own GMAC.

Chrysler does not own Chrysler financial.

Ford isn't getting any bailout money.

But by all means go ahead and lecture us about something you don't know a thing about.

J sub D | January 7, 2009, 1:32pm | #

The profit from making cars and selling them is quite small, its all in the financing. Ford Motor Credit, GMAC, etc. make the overwhelming majority of the profits.

GM does not own GMAC.

Chrysler does not own Chrysler financial.

Ford isn't getting any bailout money.

But by all means go ahead and lecture us about something you don't know a thing about.

Thank you cunnivore. I pointed this out a couple of weeks ago as a reason that TARP couldn't be used for bailing out GM and Chrysler.

BTW, I think GM still owns 49% of GMAC but that is a whole fucking different company that doesn't make cars.

R C Dean | January 7, 2009, 3:41pm | #

BTW, I think GM still owns 49% of GMAC but that is a whole fucking different company that doesn't make cars.

They had to go down to 10% ownership so GMAC could qualify as a bank holding company.

Which it did, I believe, so that it wouldn't have to share any bailout money that it got with GM.

Malto Dextrin | January 7, 2009, 5:05pm | #

It's all play money at this point.
If you still think you must work and be productive to earn their "money" you're just a patsy.
Better to bribe a pol -- much more lucrative.

Richard Stands | January 7, 2009, 11:47pm | #

I found an interesting full page ad for the big 2.5 here.

Gabriel Sutherland | January 8, 2009, 12:49pm | #

GMAC didn't really do anything that American Express, Morgan Stanley or Goldman Sachs wasn't allowed to do. All three applied for bank holding company status with the Federal Reserve Board of Governors and soon thereafter were approved.

Morgan Stanley and Goldman Sachs were approved prior to the TARP bill. They didn't even have to wait for TARP. They were approved to get in line at the Fed's overnight discount window.

DK | January 11, 2009, 8:40am | #

We should have protested TARP in its entirety. All this action was, was the gold ol' boy network, bailing out their banking buddies so they could perpetuate the fraud of fiat money against America for another year or two, until those entities leave office. It's a shame America can't wake up and smell the roses and stop this nonsense. When are people going to realize that the U.S. government is writing checks its body can't case? Henry Paulson is a treasoner. He's the one who told certain congressional leaders that if they didn't vote for TARP, martial law might have to be declared. Where does he get off? Who gave him that authority? What he did telling Congress that amounted to a terroristic act. Henry Paulson reminds me of a dildo with ears ... must we tolerate this kind of behavior in the future?