Post-Partisan: Unexpected and Early

Background:

Though the Senate rejected related automaker bailout legislation Thursday night, GM and Chrysler want to tap funds from October's Trouble Asset Relief Program (TARP) law for short-term loans.

The law:

• TARP Section 101 authorizes the Treasury Secretary "to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution."



• Section 3(5) of TARP defines "financial institution"--in relevant part--to mean (emphasis added):

  [A]ny 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 . . . , and having significant operations in the United States.

• And "troubled assets" are defined--in relevant part--in TARP Section 3(9) as:
  

  (A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and
  
  (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability. . .

Question: When is an automaker a "financial institution"?

Answers:

• When Vice President Cheney invokes the ghost of Herbert Hoover.



• When the wiggle room of "including, but not limited to" morphs a manufacturer into a masters-of-the-universe financial firm (Andrew Grossman's analysis on the Heritage Foundation blog being overly narrow).



• When folks forget that General Motors no longer controls its former finance arm GMAC, now holding only a minority stake.



• When pro-Detroit policymakers seize on the fact that the 51 percent owner of GMAC also controls Chrysler, eliding that GMAC tried to become a bank, but so far has not qualified.



• When automaker debt is "troubled" and called a crucial condition precedent to restored residential and commercial mortgage stability.



• And, most importantly, when President Bush says so, to prevent "precipitous collapse" and "an immediate failure" of the Big-3.

Outcome:

Inspecting the books will take a few days. But an auto bailout through TARP is close to a done deal. Bush caving confirms that the era of big and interventionist Republican government will be second (to the war on terror) as the President's most consequential legacy.