Why America needs the Free Enterprise Act (Sen. Mike Johanns)
The announcement that the government would provide $30 billion dollars more in TARP funds to General Motors in exchange for a 60 percent ownership interest in the company is unprecedented and almost unbelievable.
Who ever imagined the taxpayers would wake up Monday morning and find out a deal was cut behind closed doors to make them majority owners of General Motors? If you add all of the government aid GM has or will receive, the taxpayers, with zero input, have invested $50 billion dollars in a high risk bankrupt company. That’s almost one million dollars per job retained by GM.
Sadly, there is no longer a dividing line between these private companies and the government.
The government is now running or deeply involved in major industrial sectors of the economy: housing, banking, insurance, and automobiles. This is extremely troublesome and marks a fundamental shift in the way business is conducted in America.
I believe this is the wrong approach and I am adamantly opposed to it. Some of my colleagues disagree with me. They believe the government should bail out the autos. Right now, none of us – whether for it or against it – has any say in whether the action goes forward. The legislative branch has effectively given the executive branch a free pass to do as it wishes with seven hundred billion dollars.
TARP has become a license for government to experiment with private business. How do you think the original TARP vote would have gone back in September if members knew then what they know now? Remember, TARP was first presented as a toxic asset purchasing program to revive financial markets and to get credit flowing to consumers. That is what Congress approved. That’s all Congress approved. Then it became a blank check for failing banks; and the struggling insurance giant AIG; and the floundering housing market.
Despite a December vote by Congress that rejected a bailout of the auto industry, TARP is now being used to bankroll the auto industry. How could anyone have predicted that an original plan to buy up toxic assets would be warped and twisted into the revolving slush fund it is today? People would have looked at me in disbelief if I had said – just a few months ago – that TARP funds would be used to buy General Motors. All this is happening without Congressional approval.
The Free Enterprise Act would fix that. It’s simple and straightforward. It says any release of TARP funds that results in the government owning common or preferred stock will be allowed only if there is prior Congressional approval.
Congress must reclaim its voice and duty to provide proper oversight of TARP. Let me be frank. I was not in the Senate when the first TARP vote occurred nor was I in office yet for the vote against providing emergency funds to the automobile industry. I was present in January and voted to disapprove President Bush’s request to release the second tranche of TARP. I did not agree with the way the first half of TARP was used, and I did not have faith that the second half would be spent in a more responsible manner, or that taxpayers would be fully protected.
It passed anyway, and now the Administration has a blank check – actually, a stack of blank checks – to use TARP as a revolving fund for risky experiments in nationalizing private enterprise.
As of right now, there are no checks and balances planned before we dole out $30 billion more to GM. My bill would ensure that Congress provides the oversight we were elected to deliver. It asks only for a simple majority, applying the regular rules of the Senate. But it makes a very significant statement: that Congress has not fallen asleep at the switch.
Cross-posted from The Heritage Foundation.
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