Tuesday, December 23, 2008
The problem, as several have noted, is that automakers are not (obviously) "financial institutions" under the TARP, and they therefore do not (obviously) qualify for a TARP bailout. Eric Posner at the Volokh Conspiracy surveys the landscape here; Randy Picker at the U. Chicago Law School Faculty Blog posts, with links, here and here.
TARP defines "financial institutions" this way:
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 . . . .
Automakers not included. (And note that the White House effort targets GM, not GMAC, which might have put the program more obviously within TARP limits.)
Add to this that Congress declined to pass a bailout bill for automakers. This alone, of course, says nothing about Treasury's authority under TARP, but it strongly suggests Congressional intent not to bailout the automakers.
So where does the White House get authority to use TARP funds to bailout automakers? Here's perhaps a clue, from VP Cheney's interview with Chris Wallace on Sunday:
These aren't normal circumstances. We're in the midst of the worst financial crisis in recent memory. I think it's a good package. I think, you know, we talk about the Congress being critical. They had ample opportunity to deal with this issue and they failed. The president had no choice but to step in.
If Cheney's comments reflect the administration's legal analysis--admittedly a significant "if"--all this talk about whether the automakers fit the definition of "financial institution" is irrelevant: The administration bailed them out using emergency, "Schmittian" powers--see Rick Hills's post last week on PrawfsBlawg--and simply used the TARP for cover. Hills, summarizing Vermeule:
There is no point in searching for a "legal" answer -- in the sense of parsing the text or legislative history for either a formal or purposive answer to the question. Instead, one simply has to decide which decision-maker has the power to decide when the rule runs out -- that is, determine the shape of the "exception," in Schmitt's term.
But the Schmittian approach doesn't fit well here, where the administration had to rely upon a Congressionally authorized funding program (because Congress, not the executive, has the power of the purse). We've seen this administration stretch its own inherent Article II powers in reponse to an emergency, but here we have the administration playing fast and loose with Congressional action in an area--spending--that's exclusively within Congress's bailiwick.
And finally--and paradoxically--the administration's automaker bailout seems to lend credence to the claim that the TARP runs afoul of the nondelegation doctrine: If TARP can be so stretched, it seems there are no Congressional standards in the bill at all. If that's so, Congress improperly delegated lawmaking authority. It seems as though the administration has created its own Constitutional Catch-22: Any reliance on TARP creates a nondelegation problem.
But even if the administration's action violates the Constitution, it's not clear that there's a judicial remedy. As some have asked: Who would have standing to challenge the automaker bailout, anyway?