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Reading H.R. 1424 aka TARP

When Bush Press Secretary Dana Perino announced yesterday that the administration would consider using TARP to bail out the auto industry more than a few bloggers began asking nettlesome questions such as "Can Treasury actually do that?" or "Can this be done under the existing legislation?" and "Has anyone actually read TARP?"

The Government Accountability Office seems to have conditionally blessed a bailout which can be done under TARP:

"The decision to use TARP funds would mark a shift in the White House's position that the $700 billion should be used only to stabilize the financial sector. However, the head of the Government Accountability Office testified last week that the wording of the legislation was flexible enough to authorize loans to the auto industry."

However, the GAO still refers to Social Security as a "trust fund" so it is with a grain of salt that we should let their opinion go unchallenged. At the risk of suffering an acute case of MEGO ( My Eyes Glaze Over) I read H. R. 1424 looking for any basis (flexible wording) that Treasury could claim for using what otherwise appears to be an explicit appropriation (and folks, it's a whale of an appropriation) meant only for the financial industry.

There doesn't appear to be any language in the legislation that would allow Paulson or later, Timothy Geithner, to use these funds for an auto bailout but I'm obviously no expert. It does occur to me though that an expert won't be needed to make this TARP contortion actually happen. All that is required is a Congress that looks the other way while another piece of legislation gets sliced and diced after the vote for the sake of political expediency.

HughS



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Comments (5)

It appears that "Government... (Below threshold)
Bob:

It appears that "Government Accountability Office" is a misnomer, as there appears to be very little accountability under TARP's "flexibility."

Any way to fund the automak... (Below threshold)
John S:

Any way to fund the automakers and specifically exclude the UAW? As long as we're spending government funds illegally, why not go all out.

I don't think we are unable... (Below threshold)
CT:

I don't think we are unable to find flexible wording for lack of knowledge. I do not think it is there, and while I respect the GAO, I would have to disagree with their reading. But I certainly agree that it will not be difficult for Congress to turn a blind eye. This, unfortunately, goes beyond legislative language - the blind eye syndrome is indicative of the lack of understanding rife within the political system.

I don't think we are unable... (Below threshold)
CT:

I don't think we are unable to find flexible wording for lack of knowledge. I do not think it is there, and while I respect the GAO, I would have to disagree with their reading. But I certainly agree that it will not be difficult for Congress to turn a blind eye. This, unfortunately, goes beyond legislative language - the blind eye syndrome is indicative of the lack of understanding rife within the political system. http://deltahedged.com/

Flexibility means really st... (Below threshold)
JH:

Flexibility means really stretching to fit whims.
I can see how government officials might twist to fit their more personal agenda, such as (from HR 1424)
SEC. 2. PURPOSES.
The purposes of this Act are--
(1) to immediately provide authority and facilities that
the Secretary of the Treasury can use to restore liquidity and
stability to the financial system of the United States; and
(2) to ensure that such authority and such facilities are
used in a manner that--
(A) protects home values, college funds, retirement
accounts, and life savings;
(B) preserves homeownership and promotes jobs and
economic growth;

(C) maximizes overall returns to the taxpayers of the
United States; and
(D) provides public accountability for the exercise of
such authority.

Maybe"
Twist "financial system" to also mean "economy" and that use would "preserve and protect jobs and economic growth".

Unfortunately, I don't see how the subsequent supporting language and direction provides for the use of funds to the auto (or any) industry other than financial markets. It can be used to prevent disruption of the financial markets. So, this could be twisted to mean that it includes "disruption" of credit markets that are not making new car loans....who knows




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