TARP for Automakers - Not Legally Permissible

GMAC's name is 'GMAC Financial Services', they could buy GMACs made pizzas if they wanted to and they would upstream or loan back to GM
the bank holding requirement I believe was a POLICY not a requirement, banks are regulated by the fed after all, they just wanted to have more control on the financial instutitions going forward

 

Dont short bernanke and paulsons ability to bailout companies out. the TARP can buy a JPM bond and JPM would then lend the money to GM. TARP could use funds to create a collateral which the Fed would use as security to lend to the autos invoking the Federal Reserve Act. There have millions of options because the autos dont need 'capital' they just need some liquidity

 

People are starting to pick up on this . . .

TARP: Now A Slush Fund for Detroit?
Posted December 12th, 2008 at 10.25am in Entrepreneurship.
With the Senate’s rejection of a bailout for Detroit’s ailing automakers, there now comes word that President Bush is actively considering using funds allocated by Congress for the Trouble Asset Relief Program (TARP) to prop up the automakers for the time being. Such action would be wrong legally, wrong economically, and counterproductive to turning around these troubled businesses. And by opening the door to such open-ended use of taxpayer money for virtually unlimited uses, a unilateral decision to employ TARP funds would jeopardize George W. Bush’s legacy as a friend of the taxpayer.

Until now, the Bush administration has resisted repurposing TARP funds for industrial policy, though this morning comes word that the Treasury may have reversed course. TARP, administration officials have said, was intended to shore up the stability of the financial markets and stave off economic collapse, not to inject capital into failing non-financial businesses. Moreover, only $15 billion remains of the initial $350 billion in TARP funds disbursed by Congress.

More problematic, Treasury lacks the statutory authority to direct TARP dollars to the automakers. While the statute, passed by Congress in October, grants the secretary extremely broad discretion to decide how to employ the funds, it clearly limits the recipients to “financial institutions.” And the definition of that term is quite clear:

FINANCIAL INSTITUTION- The term ‘financial institution’ means any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company, established and regulated under the laws of the United States or any State, territory, or possession of the United States, the District of Columbia, Commonwealth of Puerto Rico, Commonwealth of Northern Mariana Islands, Guam, American Samoa, or the United States Virgin Islands, and having significant operations in the United States, but excluding any central bank of, or institution owned by, a foreign government.

This doesn’t leave much room for interpretation.

In this case, due to the enumeration of included institutions in the statute, the term “any institution” is necessarily defined, in part, by the list that follow it: “bank, savings association, credit union, security broker or dealer, or insurance company.” An automaker is unlike any of these things, being a manufacturer of goods, not a financial intermediary.

It is a closer, but still not close, question as to whether the automakers’ financing arms, such as GMAC qualify. GMAC is not a bank, having failed so far to attain such status. It and other such financing arms are, to be sure, more like banks than the divisions responsible for stamping sheets of steel into auto bodies. But providing customer financing is a function that many non-financial institutions, from department stores to bars and taverns, engage in regularly. If merely offering loans or other financing to customers would transform a manufacturer, wholesaler, or retailer into a “financial institution,” then any business in the nation would qualify for TARP funding. This is an absurd result, one that would render Congress’s attempt to limit the pool of “financial institutions” a nullity, mere surplusage without meaning. This interpretation, then, must be rejected.

Even if the Administration were inclined to do so, it simply lacks the power under the statute passed by Congress to tap TARP funds to prop up auto manufacturers. This makes sense: why else would have Congress spent the past month taking testimony from auto executives and then crafting politically contentious bailout legislation if the whole thing was unnecessary, because it had already passed the bailout back in October?

The Administration must reject calls for it to trample the law, and accomplish an end-run around our representative democracy, by moving forward with a bailout. Giving in would be both unprincipled and, ultimately, illegal.

Worst of all, it would be counterproductive. Reorganization in bankruptcy continues to represent the best chance for General Motors and Chrysler to survive and prosper.

 

Just like DAAL said... they can give a non-recourse infusion to JPM and get JPM to loan that to GM. No breaking of rules.

I'm sure some of JPM's attorneys can figure out how to segregate those liabilities from the rest of the book.

 

Once again, Daal ( and Scriabinop23 ) are the only ones that turn their brains on ( or have a brain for that matter ) when it comes to posting on ET.

Thanks again guys for the good read.
Have a great Weekend!

 

GM has GMAC
Ford and For Financial


Both fall under the above definition. Money will just flow into the finance arms and through to the auto pieces. You're not cleaver.

 

If bailout doesn't work out, I hope it does with all my heart, then US people may find themselves in a very similar situation to pre-WWII Germans, heads will roll & perhaps they will be Jewish once again, I don't mean it in an anitisemetic way, just look at who is running the Fed & Wall Street, mostly Jewish people.

 

So JPM makes a bullshit loan to GM and TARP immediately buys a bullshit loan from JPM.

Mission: Accomplished.

There is no real oversight on any of this - all the definitions are loose enough that Paulson and Bernanke are essentially unconstrained in their choice of actions.

 

Yep.
And in similar fashion the FED was able to use a rarely used law on the books going back to the Great Depression to "help" facilitate the JPM / Bear Stearns buyout.

The language is broad enough for Bernanke to drive a truck through!

 

What a freaking nutbag.