Administration Says Bank Bailout Bill Justifies What Republican Calls ‘Power Grab’ on Automakers

March 30, 2009 - 7:04 PM
The financial bailout package from last year gives the Obama administration authority to mandate a restructuring of automakers Chrysler and GM, White House Press Secretary Robert Gibbs said Monday.

President Barack Obama arrives in the Grand Foyer of the White House in Washington, Monday, March 30, 2009, to make remarks about the American automotive industry. (AP Photo/Ron Edmonds)

White House (CNSNews.com) – The financial bailout package from last year gives the Obama administration authority to mandate a restructuring of automakers Chrysler and GM, White House Press Secretary Robert Gibbs said Monday.
 
GM and Chrysler, which have received $17.4 billion in federal tax dollars from the Troubled Assets Relief Program (TARP), are required to restructure their companies in order to get more money from TARP, a $700-billion plan Congress passed specifically to help financial institutions.
 
GM’s CEO Rick Wagoner was pushed out by the administration, though Gibbs said several times there was “no quid pro quo” requiring Wagoner’s ouster in exchange for more federal money. Further, the administration is requiring Chrysler’s merger with Fiat, an Italian car-maker, as a condition for future federal funds.
 
In December, a study by the conservative Heritage Foundation suggested that allocating TARP funds to non-financial institutions, in this case auto companies, was not legal under the language of the legislation. Also, former Clinton Labor Secretary Robert Reich said money from the TARP plan should not be used for the auto firms.
 
But the issue of legality has been vetted by two administrations, Gibbs said.  
 
“I said earlier I’m not a contracts lawyer. I’m not a constitutional lawyer. The fact is I’m not a lawyer at all, though sometimes I’m sure I sound like one,” Gibbs told CNSNews.com during the White House press briefing on Monday.
 
“I think the determination has been made both by the previous administration and the current administration that this assistance is legal, and our goal is to ensure that the taxpayers in any instance when this is used feel confident that it’s being done in a transparent and accountable way,” Gibbs added.
 
Though Gibbs said the administration did not engage in a quid pro quo to oust Wagoner, Obama took indirect credit in his remarks earlier Monday, when he said plans to work with GM came in the “context” of Wagoner’s resignation.
 
“As an initial step, GM is announcing today that Rick Wagoner is stepping aside as chairman and CEO. This is not meant as a condemnation of Mr. Wagoner, who's devoted his life to this company and has had a distinguished career; rather, it's a recognition that it will take new vision and new direction to create the GM of the future,” Obama said.
 
“In this context, my administration will offer General Motors adequate working capital over the next 60 days. And during this time, my team will be working closely with GM to produce a better business plan,” he added.
 
Obama continued, “Let me be clear: the United States government has no interest or intention of running GM,” said Obama. “What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company.”
 
Sen. Bob Corker (R-Tenn.) called the firing of Wagoner “a sideshow to distract us from the fact that the administration has no progress to announce today.”
 
“With sweeping new power the White House will be deciding which plants will survive and which won't, so in essence, this administration has decided they know better than our courts and our free market process how to deal with these companies,” said Corker, who fought against the auto bailout late last year.
 
“It’s been a long time since Washington has seen the kind of kowtowing that’s about to occur among members of Congress trying to curry favor with the administration to keep plants in their states open, and it will be interesting to see if the administration makes these decisions based on a red state and blue state strategy or based on efficiency and capable, skilled workers at each plant,” said Corker.
 
“If they use the latter, our GM plant in Spring Hill, Tennessee should do very well,” he said.
 
Gibbs declined to talk about the specifics of what White House officials said to Wagoner.
 
The manner in which it was done came as a surprise to James Gattuso, a regulatory expert at the Heritage Foundation, who co-wrote the report questioning the legality of using TARP funds for the auto bailout.
 
“It surprised me particularly that it wasn’t hidden,” Gattuso told CNSNews.com. “The White House said that this was because the White House asked him to leave. Instead of soft-peddling it, they bragged about it. That tells you how far down the road of government intrusion we’ve gone.”
 
Gattuso also found it overly “specific and intrusive” to require a merger between Fiat and Chrysler. Further, he said the new strings attached to receiving the TARP money “doesn’t make it any more legal.”
 
However, Gattuso found at least one part of Obama’s speech encouraging.
 
“There are signs the administration is talking seriously about bankruptcy,” Gattuso said. “The question is why continue to use TARP money? Why not go straight to bankruptcy?”
 
Obama also said the bankruptcy option – considered unthinkable by many congressional Democrats – is an option.

“That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger,” Obama said.
“What I am talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so they can get back on their feet and onto a path to success – a tool that we can use, even as workers are staying on the job building cars that are being sold,” he said.
On Monday, the president also announced new tax incentives to encourage Americans to buy U.S. cars and trucks.

The president said the IRS is launching a campaign to alert consumers of a new tax benefit for auto purchases made this year, which allows consumers “to deduct the cost of any sales and excise taxes. This provision could save families hundreds of dollars and lead to as many as 100,000 new car sales.”
 
Concerning the overall proposal, Corker said: “This is a major power grab by the White House on the heels of another power grab from Secretary Geithner who asked last week for the freedom to decide on his own which companies are ‘systemically’ important to our country and worthy of taxpayer investment and which are not.”
 
“This is a marked departure from the past, truly breathtaking, and should send a chill through all Americans who believe in free enterprise,” said Corker. “I worry that in one fell swoop we’ve lost our moral high ground throughout the global community as it relates to chastising other countries that use strong-arm tactics to invade on private property rights.”