Without Congressional Approval or Legislative Authority, Obama Plans for Government to Take Majority Interest in General Motors

June 1, 2009 - 3:53 AM
A big question Monday when President Obama announces his plan for the government to take a majority ownership interest in General Motors and to spend another $30 billion in taxpayer funds bailing out the company, will be whether the president asks Congress for legislative authority for what he is doing.

General Motors world headquarters in Detroit. GM is expected to file for bankruptcy protection on Monday, June 1, 2009, and the federal government plans to take a 60 percent ownership stake in the company. (AP Photo/Paul Sancya)

(CNSNews.com) - Without the prior approval of Congress or any legislation authorizing the act, President Obama plans to announce on Monday that the federal government will take a 60-percent ownership stake in General Motors as part of a bankruptcy and reorganization plan for the company.
 
The White House on Sunday night announced that the plan will require the federal government to provide another $30 billion of taxpayer money to General Motors, on top of the $20 billion in aid the federal government already has given the company.
 
In December, Congress failed to pass legislation authorizing a federal bailout of the auto industry.
 
Lacking legislative authority—and despite the fact that Congress had specifically declined to approve a bailout of the auto industry—President Bush went ahead and provided General Motors and Chrysler with $17.4 billion in taxpayer money.
 
Analysts James Gattuso and Andrew Grossman of the Heritage Foundation argued at the time that this was “legally wrong” because Bush took the money from the $700-billion Troubled Asset Relief Program (TARP) that was authorized specifically for purchasing assets from “financial institutions” such as banks, savings and loans, credit unions, brokerages and insurance companies. The Heritage analysts argued that auto manufacturers are not “financial institutions” as envisioned by Congress under the law.
 
Robert Reich, who served as labor secretary under President Clinton, argued that Bush’s move was unconstitutional because of the limits the Constitution places on the president’s power to spend public money. Specifically, the Constitution says, “No money shall be drawn from the treasury, but in consequence of appropriations made by law.”
 
Presented with the prospect of bailing out the auto industry, Congress had specifically declined to appropriate funds.
 
When President Obama first announced that he was moving ahead with a unilateral Executive Branch effort to restructure General Motors and Chrysler, and that he was infusing new taxpayer dollars into this effort, White House Spokesman Robert Gibbs justified the action—when asked by CNSNews.com White House correspondent Fred Lucas where President Obama got the authority—by pointing out that President Bush had acted to bail out the auto industry before Obama became president.
 
“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 said at a White House press briefing.
 
“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 said.
 
The day after Obama announced his auto-bailout move in late March, CNSNews.com asked House Majority Leader Steny Hoyer where Obama derived the legal authority to do what he was doing. Hoyer candidly said he did not know.
 
“The administration clearly believes it does have the authority to use some of the remaining TARP funds for the automobile industry,” Hoyer told Fred Lucas of CNSNews.com.
 
“I don't know, technically. I would be kidding you to mouth some words on that, because I don't know technically where that authority would be,” said Hoyer. “But my own view is that if it is perceived they don't have that authority and it is perceived by the Congress they need to have that authority, the Congress would probably be willing to give that authority. But I don't know technically the answer to that question.”
 
Enacting such authority would be difficult, however, as the failed auto bailout bill in December illustrated. That bill, which was sponsored by House Financial Services Chairman Barney Frank (D-Mass.), passed the House but could not overcome a filibuster in the Senate. Then as now, to enact legislation authorizing Obama to use taxpayer funds to bail out General Motors—or have the government take a 60 percent ownership interest in the company—would require the affirmative votes of 60 senators in overcoming a virtually certain filibuster.
 
When Obama started his phase of the auto bailout in March, he did not even consult with Sen. Chris Dodd (D-Conn.), chairman of the Senate Banking Committee, a committee that would be responsible for overseeing such legislation.
 
Dodd told Fred Lucas of CNSNews.com at that time that the administration had not consulted with him about its auto bailout plan and that he had “been reading about it in the papers basically.”

Meanwhile, House Financial Services Chairman Frank, responded to a question from CNSNews.com about Obama’s auto industry as if it were not his concern—even though he was the sponsor of the auto bailout bill that failed.

“It’s an administration situation so I’m not very well informed on it,” Frank told Fred Lucas of CNSNews.com
 
As part of his bailout plan, President Obama promised to guarantee the warranties on all new General Motors and Chrysler automobiles. When asked by CNSNews.com correspondent Fred Lucas whether the president would need legislative authority for that, Frank said, “Do the words ‘I’m not very well informed on it’ have any meaning to you? Am I speaking a language you don’t understand?”
 
“It’s not something I’m focused on,” said Frank. “The committee, which I chair, keeps me busy. I have not had a chance to look at that. I do not have an informed opinion on it. It’s not my understanding that Congress is going to get to vote on it. So I tend to focus on things that are under the jurisdiction of the committee and that we’ll have to vote on. When things are neither, I don’t have a very well-informed opinion.”
 
A big question Monday when President Obama is set to announce his plan for the government to take a majority ownership interest in General Motors and to spend another $30 billion in taxpayer funds bailing out the company, will be whether the president asks Congress this time for legislative authority for what it is doing.
 
If he does not, the question will be whether Congress insists on exercising its constitutional prerogative to consider legislation either granting or denying the President the legal power to undertake this unprecedented act of government intrusion in the marketplace.

President Obama plans to announce GM's restructuring strategy during a midday appearance at the White House.