Conservatives: TARP Is Unconstitutional

Conservatives are arguing that the $700 billion federal bailout plan is unconstitutional because it violates principles that limit the amount of power lawmakers can delegate to the executive branch.

They also maintain that the Troubled Assets Relief Program (TARP) has illegally grown beyond its original intent to bail out the financial services industry to include a bailout of the auto industry.

Robert Levy, chairman of the Cato Institute, told The New York Times that the delegation of power to the executive branch was appropriate if Congress laid down “an intelligible principle” providing clear guidelines for an agency or regulator.

“There’s no intelligible principle that I could discern,” he said.

The conservative FreedomWorks Foundation — whose chairman is former Republican House Majority Leader Dick Armey — says it plans to file a lawsuit against the bailout program.

A memorandum distributed by the group on Thursday maintained that “when Congress delegates so much authority to the executive branch with so few rules to guide its discretion, Congress unconstitutionally transfers its lawmaking power to the executive.”

The sheer size of the bailout takes it beyond other delegations of authority by Congress that have been found constitutional, according to the memorandum.

Some conservatives also believe the auto industry bailout violated the Emergency Economic Stabilization Act of 2008, which created TARP.

When the Act was passed in October, Section 102 dictated that it was specifically designed to rescue “financial institutions.”

Then on Dec. 11, the Senate struck down a deal to provide U.S. automakers with $14 billion in bridge loans.

But the administration made an end run around the Senate action when President Bush used executive authority to allocate TARP funds for the automaker bailout.

That can be seen as a violation of Article 1, Section 9 of the Constitution, which states: “No money shall be drawn from the treasury, but in consequence of appropriations made by law.”

Wayne T. Brough, FreedomWorks’ vice president for research, acknowledged that the $700 billion allocated for TARP was likely to have been spent before a challenge could make its way through the courts.

But further economic interventions were likely, he told The Times, and when they occur “it’s important that you can point to something and say, ‘Hey, guys, what you did last time was wrong.’”