Wednesday, 17 December 2008

Liberal Lending Standards

Over at Reason, Jacob Sullum draws attention to a curious Clinton-esque strategy now appropriated by the Bush administration - legalistic stretching of the term, 'financial institution':
"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"...

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.""
As Sullum points out,
"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 overriden 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.""
This tactic reminded me of a previous occasion on which a similarly duplicitous subterfuge was used to undermine individual privacy, as documented in Judge Andrew Napolitano's A Nation of Sheep:
"Since the 1970s, the FBI has had the ability to gain access to records from financial institutions through use of self-written search warrants or National Security Letters already mentioned in terrorism and espionage investigations. But the IAA [Intelligence Authorisation Act] for 2004 has redefined the scope of the term 'financial institutions' to include not only banks; credit card companies; and finance corporations; but also stock brokers; investment bankers; loan companies; currency exchange agencies; any issuer, redeemer or cashier of traveler's cheques, cheques, and money orders; travel agencies; insurance companies; jewelers; pawn shops; Western Union and other businesses that transmit funds; casinos; real estate agents; car dealerships; phone companies; FedEx; and even the post office!"
More on the illegality of using TARP to bailout automotive manufacturers by Mike Rappaport here and here.

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