If The Administration Does This …..

…. It (”Bank bailout funds could be used for Detroit”) will be One. Final. Giant. Unforgivable. Betrayal.

Michelle Malkin: “No Means No.”

Not just “no.” He** no.

UPDATE: Great catch at Heritage (HT MM) — A bailout from TARP would be illegal.

It’s a sign of how bad things have gotten that I still fear that Bush and Paulson may raid TARP anyway and dare someone to do something about it.

UPDATE 2: Some are speculating that the following from the original financial institution bailout bill could be construed to mean “anyone on earth who is seeking a bailout”:

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.

Possibly, but it seems that if your outfit isn’t exactly one of the “but not limited to” entities described in the law, then you revert to a common-law or some other legal definition of “financial institution,” which would ordinarily not include an auto manufacturer.

The investorwords.com definition doesn’t provide a lot of cover:

Institution which collects funds from the public and places them in financial assets, such as deposits, loans, and bonds, rather than tangible property.

Again, you still wonder if legal considerations will stop these people. And make no mistake, any engineered “workaround,” if it occurs, has as much potential to do damage to the rule of law and to inhibit entrepreneurs and businesspeople from taking risks as Barack Obama’s reckless support of the sit-in at the closed-down Chicago window and door factory. Why try to do something better than an entrenched competitor if, when you’re successful and they’re in trouble, the government comes in and bails them out? (This is also an underutilized argument against things like tax abatements, industrial revenue bonds, and other favors given to existing, usually larger businesses that start-ups and smaller businesses seldom have access to. Nobody should have access to them.)

Uncle Sam could lend the money to GMAC and whatever Chrysler calls its credit outfit, but I think the government (i.e., US taxpayers) would possibly lose all control over how the money is used and any ability to attach conditions on the auto companies themselves, and would have a hard time getting a senior position in any bankruptcy.

Uncle Sam could engineer a takeover of the lending arms with TARP money (i.e., nationalize them), and probably do a legal deal with the automakers. It’s a really, really bad idea, but it seems they could do it.