Treasury: ‘No Decision’ Yet on Using Financial-Industry Bailout Money to Bailout Auto Industry
December 15, 2008 - 7:22 PMThe Treasury Department is reviewing information from U.S. automakers and advising the White House about the possibility of using funds from the $700 billion financial bailout, passed in October, to bail out the car giants following the failure to pass a $14 billion bill in the Senate last week.
“We continue to assess and review the information we have received from the automakers,” Treasury spokesman Brookly McLaughlin told CNSNews.com. “(We) are providing the White House with regular briefings on our thinking.
“No decisions have been made,” she said.
House Republican Leader John Boehner (R-Ohio) opposes a bailout of American automakers, with or without using part of the $700 billion in the Troubled Assets Relief Program (TARP).
“Leader Boehner is against any taxpayer-funded bailout of the auto industry, whether it uses billions of dollars from TARP or billions of dollars from another source of taxpayer funds,” Boehner spokesman Michael Steel told CNSNews.com.
“TARP money has (already) been used in a manner that is much different than how the program was described before it passed through Congress, and that’s a matter of significant concern,” Steel said.
However, Sen. Carl Levin (D-Mich.) said that the TARP was always intended to save large, troubled industries.
“It was always the intent of the TARP program to assist industries whose collapse would have a major impact on the economy, including the financial sector,” Levin said in a press release Friday. “The effort to provide emergency bridge loans to U.S. automakers is still very much alive.”
Under the Emergency Economic Stabilization Act, signed into law on Oct. 3, the Treasury may only use funds from the Troubled Assets Relief Program to aid “financial institutions.”
“The Secretary is authorized to establish the TARP to purchase troubled assets from any financial institution,” the law reads. It further says: “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.”
This means that automakers cannot receive bailout money, according to Heritage Foundation Senior Legal Analyst Andrew Grossman.
“I don’t think it’s legal,” Grossman told CNSNews.com. “If you look at the statute the way the courts look at a statute, you’ll see that the ‘financial institutions’ definition simply could not include the automakers.”
“The power-granting phrase in the (bailout) law is pretty broad,” Grossman said. “The only limiting term that is in there is ‘financial institutions.’ If you look in the definition of ‘financial institution,’ it’s not just those things (named in the law) – it’s things like those things. You don’t read it as saying it could be ‘anything.’
“It can’t possibly mean just any institution – such as an automaker – because then it wouldn’t mean anything (at all),” said Grossman. “The statute is not ambiguous on this point. There might be close cases, (but) whether an automaker is a financial institution, however, is not a close case. It isn’t.”
Treasury has spent nearly all of the first $350 billion in TARP money, leaving only $15 billion before it must return to Congress and ask for the remaining $350 billion.
The bailout plan that failed in the Senate last week called for $14 billion in emergency funding as well as an unspecified amount to finance the restructuring of U.S. automakers, suggesting that Treasury would need to request the remaining $350 billion if it tried to use TARP to prop up the auto industry.