Illegal Lending Practices

Even Americans whose knowledge of the legislative process is limited to the "I'm Just a Bill" episode of "Schoolhouse Rock" know about the veto: If Congress approves legislation the president doesn't like, he can refuse to sign it, in which case the law can be enacted only by a two-thirds vote of each chamber. President Bush's plan to aid the auto industry relies on a more obscure maneuver: If Congress rejects a bill the president likes, he can act as if the vote went the other way.

This maneuver, unlike the veto, is illegal by definition, not to mention unconstitutional, violating the separation of powers and the rule of law. But it is business as usual for Bush, who has shown no compunction about ignoring the law when it prohibits him from doing what he considers necessary in response to what he considers an emergency.

The day after the Senate declined to approve a bill giving General Motors and Chrysler what one Republican senator aptly called "a bridge loan to nowhere," White House Press Secretary Dana Perino observed: "Congress spoke last night. They don't have the votes to do anything." Perino said the administration therefore was looking for "a short-term mechanism to help prevent a disorderly bankruptcy that we think could devastate further an already very weak economy."

In other words: Congress spoke; we have decided not to listen. A Treasury Department spokeswoman put it even more clearly than Perino did. "Because Congress failed to act," she said, "we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry."

This is the argument of every strongman, dictator and president-for-life who has ever overridden uncooperative legislators: They won't let me do what I want to do, and this is an emergency, so I'm going to do it anyway.

The one "short-term mechanism" that Perino mentioned, using money from the Troubled Asset Relief Program (TARP), is plainly at odds with the intent of Congress.

The Emergency Economic Stabilization Act, which created TARP, authorized Treasury Secretary Henry Paulson "to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution," the aim being "to restore liquidity and stability to the financial system."

Paulson already was stretching the law when he decided instead to 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 "troubled assets."

In case anyone wants to argue that G.M. and Chrysler are financial institutions because of their car loan divisions, it's worth noting that GMAC and Chrysler Financial are no longer wholly owned subsidiaries of the automakers. A consortium of investors owns a controlling interest in GMAC, while Chrysler Financial became an independent company in 2007.

At any rate, a manufacturer with a finance division clearly is not what Congress had in mind when it authorized TARP. By the same logic, all businesses that extend credit, including department stores, jewelers, cosmetic surgery practices and neighborhood bars would qualify as financial institutions eligible for TARP money.

President Bush himself, while urging Congress to approve loans to G.M. and Chrysler, repeatedly rejected suggestions that he use TARP funds for that purpose, saying the money was intended for the financial sector. Now he has reversed himself, confirming that he views the law as clay to be molded for whatever purpose is at hand.

President-elect Obama, who claims to have a less expansive view of executive power and a greater respect for the law than his predecessor, has not weighed in on the propriety of Bush's plan to help the automakers, instead urging the White House and Congress to work together on a loan package. But if Obama, under pressure to keep the nearly bankrupt carmakers afloat, resorts to unilateral action when he takes office, we will know his promises of change were empty.

Jacob Sullum is a senior editor at Reason magazine, and his work appears in the new Reason anthology "Choice" (BenBella Books). To find out more about Jacob Sullum and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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