Below The Beltway

As suspected, it now seems quite apparent that the Bush Administration will use TARP funds, originally designated to shore up the financial system, to bailout the Big Three auto companies:

WASHINGTON — President Bush and the Treasury Department signaled on Friday that they would consider dipping into the $700 billion bailout program for financial institutions to aid the Big Three car companies, after Republican senators refused to support a compromise proposal to rescue the automakers.

“Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms,” Dana Perino, Mr. Bush’s spokeswoman, said in a carefully nuanced statement released minutes before the financial markets opened in New York. “However, given the current weakened state of the U.S. economy, we will consider other options if necessary — including use of the TARP program — to prevent a collapse of troubled automakers.”

The Treasury Department promptly indicated that it would provide short-term relief to the automakers. “Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry,” a Treasury spokeswoman, Brookly McLaughlin, said.

TARP is the Troubled Assets Relief Program, the official name of the Treasury’s financial rescue program, originally intended to assist banks. Referring to the carmakers, the White House statement said, “A precipitous collapse of this industry would have a severe impact on our economy,” and added, “It would be irresponsible to further weaken and destabilize our economy at this time.”

The statement indicated that Mr. Bush was prepared to capitulate on his biggest objection to Democratic proposals for staving off imminent bankruptcy filings at General Motors and Chrysler and possibly Ford Motor Company in the future. Mr. Bush had insisted that the Treasury program be reserved for financial institutions, and argued that the TARP legislation did not include the necessary conditions to apply it to the auto companies.

In its statement, the White House appeared resigned to using the Treasury program after all, though it warned that the car companies and unions had to make “meaningful concessions” to make the companies viable. At the moment, the Treasury has committed about $335 billion of the first $350 billion that Congress has authorized.

The reaction from those elements of the blogosphere that have been campaigning, valiantly, against the new bailout culture is, as you might expect, rather vitriolic.

Ed Morrissey:

Without a doubt, the Bush administration will look at the markets and panic — again — into cutting big loans to automakers. If that doesn’t happen by the closing bell today, it will happen before the markets open again on Monday. At this point, though, the Bush administration is history, not the future, and they can answer for their ridiculous economic policies over last two months when the automakers demand even more subsidies to continue doing exactly what led them into near-bankruptcy in March.

Michelle Malkin:

The Bush administration apparently didn’t understand the message last night.

No means no.

Bruce McQuain:

The “worst option” is undermining the supposed “will of the people” which said, last night, that the deal is dead. If TARP funds are used, the businesses are propped up with no required changes and the same failed business model continues burning through billions and billions of dollars. Of course, if the administration carries through on this, it won’t even be their own billions they burn through this time.

This is a travesty and a sham. It points out what is becoming increasingly evident to those who observe the process of government in this country – if they can’t get what they want through the legal framework allowed by the Constitution, they’ll find a way around it. And that marks a country in serious and evident decline.

Of course, there is one conservative blogger who seems to feel sorry for Bush:

I’m a little angry at President Bush for caving in on this issue, but at the same time I can’t help but pity him. He is a good man, he has thus far refused to lower himself to the level of his most vicious critics, and I truly believe that he has a compassionate heart for this nation. Few things are more exasperating than seeing a good man smeared as an evil-doer, or more wretched than watching that same man sign a deal with the Devil in order to save himself.

No, sorry, I can’t agree with that. The past eight years have shown, and this final move would only serve to confirm, that far from being a “good” man, George W. Bush is a man entirely without principle when it comes to governing. He may talk the rhetoric of small government, but he never believed in it, and, as a result, he never governed by it.

Which is why I agree with James Joyner when he notes, Republicans really don’t have grounds to complain at this point:

Republicans who’ve defended Bush’s bypassing legal niceties to advance his policy preferences elsewhere aren’t in the ideal position to criticize

Indeed.

As far as those legal niceties go though, there seems to be a fairly strong argument that
giving TARP money to the Big Three is illegal:

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?

Given them a few hours and I’m sure that’s exactly the argument they’ll make.

Further details on the legal issues surrounding the use of TARP funds for the Big Three can be found here.