Congressman Lamar Smith, Twenty First Congressional
District of Texas
(WASHINGTON) - Today President Bush announced a $17.4 billion rescue package for the Detroit auto makers that allows them to avoid bankruptcy. The money will come from the Troubled Asset Relief Program (TARP). Earlier this week, Congressman Lamar Smith joined other House Republicans in signing a letter to the President opposing the use of TARP funds for an auto bailout.
The letter stated:
“The Emergency Economic Stabilization Act was intended to provide stability to the nation’s lending system—not to provide a taxpayer-funded capital infusion to favored businesses… Congress never voted for a federal bailout of the automobile industry, and the only way for TARP funds to be diverted to domestic automakers is with explicit congressional approval.
“No one wants the ‘Big Three’ to fail, and we are not proposing it. But the federal government cannot undo decades of mismanagement, so we are faced with a decision about how to deal with it. Exercising options already afforded them by law, under a Chapter 11 reorganization for example, the American automobile industry can make the necessary reforms and could soon return to profitability.
“A federal bailout of the automobile industry, on the other hand, would put taxpayer money at risk, shield the companies from making the reforms necessary to restore competitiveness again, and set a costly precedent that the federal government will bailout other failing companies and industries.”
When Smith voted against the House Democrat auto rescue proposal he said that never-ending bailouts are not the answer, adding “Any funds for government spending must first be taken out of the economy in the form of taxes or borrowing. The American people should not be forced to make an unsecured loan that may never be repaid.”
The full text of the letter to President Bush follows:
December 15, 2008
Dear Mr. President:
We are writing to express our concerns over the possibility of funding from the Troubled Asset Relief Program (TARP) being used to bail out the “Big Three” auto manufacturers. The Emergency Economic Stabilization Act was intended to provide stability to the nation’s lending system—not to provide a taxpayer-funded capital infusion to favored businesses. The legislation allows the $700 billion to be used for leveraging “financial institutions,” which auto manufacturers surely are not. Congress never voted for a federal bailout of the automobile industry, and the only way for TARP funds to be diverted to domestic automakers is with explicit congressional approval.
No one wants the “Big Three” to fail, and we are not proposing it. But the federal government cannot undo decades of mismanagement, so we are faced with a decision about how to deal with it. Exercising options already afforded them by law, under a Chapter 11 reorganization for example, the American automobile industry can make the necessary reforms and could soon return to profitability. A federal bailout of the automobile industry, on the other hand, would put taxpayer money at risk, shield the companies from making the reforms necessary to restore competitiveness again, and set a costly precedent that the federal government will bailout other failing companies and industries.
Tempting as it is to step in with a federal bailout, American taxpayers cannot afford to save every company facing financial peril. Last year’s federal deficit was the highest nominal deficit in U.S. history, and many economists believe this year’s deficit will exceed $1 trillion.
For the long-term stability of our nation and our automotive manufacturers, we urge you to not expand the use of TARP money to bailout American auto manufacturers.