CNSNews.com - White House Says Bank Bailout Law Gives it the Power to Take Ownership of General Motors

CNSNews.com - White House Says Bank Bailout Law Gives it the Power to Take Ownership of General Motors

White House Press Secretary Robert Gibbs (AP Photo)

White House (CNSNews.com) - The $700-billion financial industry bailout legislation approved by Congress last fall gave the Obama administration all the authority it needed to take ownership of General Motors this week, White House Press Secretary Robert Gibbs told CNSNews.com.


On Monday, President Barack Obama announced the federal government was granting another $30.1 billion in aid to GM and taking ownership of 60 percent of the automaker as it enters bankruptcy.

When asked by CNSNews.com to explain “why specifically the government should be able” to take “control of 60 percent of a company” and put $30 billion in it “without direct congressional authorization,” Gibbs said the following:

“Well, I think the money is based on the Troubled Asset Relief [Program], and is related to money that was approved in the prior administration through that program to deal with, as they had in the past administration, they were dealing with loans to cover--basically to bridge the operating costs,” he said.

“Obviously, you know the history of this,” said Gibbs, “the companies sought additional money, and the president believed that their restructuring plans weren't sufficient enough to meet the requirements of viability--and he's asked them to go back. We've seen one company emerge from bankruptcy with a buyer and another company there now.”

When then asked to explain whether Congress ever imagined that TARP, which was designed for the financial industry, would allow the government to take control of 60 percent of an auto company, Gibbs said: “I can't speak to what people in Congress believed in terms of their motivations back in September or October when this was being debated.

“But look, I can assure you the president shares any trepidation and reluctance to do this,” said Gibbs. “As I said yesterday, if the president wanted to run an auto company, he could have saved himself two years running for president.”

Congress approved and President Bush signed the law creating the $700 billion Troubled Assets Relief Program (TARP) last fall. The legislation specifically said the money could be used only for financial institutions such as banks, insurance firms and credit unions.

In December, the Bush administration provided a $13.4 billion bridge loan to GM and a $4 billion loan to Chrysler after Congress rejected auto bailout legislation. The Bush administration used money from the TARP funds to make the loans to GM and Chrysler.

In March, President Obama expanded the bailout to also include a government guarantee on the warranties for new cars sold by the two companies. He also forced the removal of GM CEO Rick Wagoner.

Legal critics from both the right and left have questioned whether it was lawful to apply TARP money to the auto companies because Congress had authorized that the $700 billion be spent specifically on financial institutions.

Former Clinton Labor Secretary Robert Reich also had said it would be unconstitutional for the Bush administration to spend money bailing out the auto makers when Congress had not appropriated money for that purpose.