MONEY AND WORK

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December 24, 2008

TRAPPED UNDER THE TARP

Robert Reich - What's happened to democracy? GM and Chrysler say they desperately need money to avoid bankruptcy in the next few weeks. Treasury Secretary Hank Paulson now says the Big Three "will get the money as quickly as we can prudently do it." But didn't Congress just vote down that money?

Don't get me wrong. I'm among those who think there's good reason to give the automakers a $14 billion bridge loan to stave off immediate bankruptcy until they come up with a restructuring plan (although the plan ought to demand real sacrifices from every stakeholder). But I have to tell you, I'm deeply troubled by the administration's likely decision to give it to them when last week Congress said they can't have it.

Call me old-fashioned but I believe in the democratic process. Under our Constitution, Congress is in charge of appropriating taxpayer money. If Congress explicitly decides not to appropriate it for a certain purpose, where does the White House get the right to do so anyway by pulling the money out of another bag?

That other bag, by the way - called the Troubled Assets Relief Program, or TARP for short - was enacted to rescue Wall Street, not the automobile industry. Personally, I think there's more reason to rescue big automakers than big Wall Street banks, but what I want isn't the issue. It's what our representatives voted for. When they voted for TARP, at the start of October, they didn't say to the President: Here's a $700 billion slush fund to use as you wish. They said: Here's $700 billion for Wall Street.

If TARP is a slush fund, everything's arbitrary. We're no longer a nation of laws; we're a nation of Treasury and White House officials with hundreds of billions of dollars of taxpayer money to dispense as they see fit. Why rescue autos and not, say, the newspaper industry, which is heading for oblivion. Better yet, why not rescue state and local governments? They're running short about $100 billion this year and as a result are slashing public services, including the nation's schools.

Even as it is, TARP is shrouded in secrecy. The Treasury has burned through $335 billion so far, and no one knows exactly how or by what criteria. Why, for example, did it set tough conditions on AIG while giving Citigroup the sweetest deal imaginable?

The dictionary meaning of a "tarp" is something used to cover things up, which is exactly we've got.

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