Obama Needs Congressional Approval

Obama Needs Congressional Approval
to Guarantee Auto Warranties, Says Democrat Budget Chair

Wednesday, April 01, 2009
By Fred Lucas, Staff Writer




Rep. John Spratt (D.-S.C.)Capitol Hill (CNSNews.com) – Members of Congress from both parties, including the chairman of the House Budget Committee, told CNSNews.com on Wednesday that President Obama’s plan to guarantee the warranties on all General Motors and Chrysler automobiles while the companies undergo government-supervised restructuring—a program that could cost taxpayers $10 billion per year—needs legislative authorization.

“I would think that for a government officer to extend a warranty that will create a liability for the government, an act of law would be required,” House Budget Chairman John Spratt (D-S.C.) told CNSNews.com. “If I were the beneficiary of the warranty, I would certainly want to know the entity that extended it to me had legal authority to grant it.”

Securing congressional approval for the plan might not be easy. When Congress tried to approve the initial auto industry bailout at the end of last year, it passed in the House, but stalled in the Senate, where 60 votes were needed to end debate on the issue, and it only received 52.

President Obama announced Monday that starting on that day the federal government would guarantee the warranties on all new Chrysler and General Motors cars.

“If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always. Your warranty will be safe. In fact, it will be safer than it’s ever been because starting today, the United States government will stand behind your warranty,” Obama said at the White House Monday when he announced his plan for dealing with the two auto makers.

The Warranty Commitment Program outlined by the administration would establish reserve funds that include 125 percent of the projected costs for servicing all Chrysler and all GM warranties for cars sold during the course of the restructuring program. Under the plan, the auto manufacturers will put up 15 percent of the projected costs, and the federal government will put up 110 percent.

House Majority Leader Steny Hoyer (D-Md.) told CNSNews.com Tuesday that he did not know where President Obama got the authority to undertake the entire auto bailout plan, a plan which requires a restructuring by GM, the merger of Chrysler with Fiat and a commitment by the auto makers to produce more fuel-efficient vehicles in order to get additional federal money from the Troubled Assets Relief Program (TARP). The two car makers have already received $17.4 billion in loans from TARP.

The administration may be acting under the broad authority of the Budget and Accounting Act of 1921, Spratt told CNSNews.com Wednesday. But, he stressed if it is not backed by some legislation, it should be.

“You asked me something on which I am absolutely cold. I don't know a damn thing about it other than what I learned years ago doing procurement work in the Pentagon,” Spratt said. “I would think as a matter of principle, this ought to be backed by legislative action. But I also think there will be some legislation to implement whatever the plan is.”

Treasury Department spokesman Isaac Baker could not be reached for comment after several phone calls Wednesday.

The administration has never offered a cost projection of the warranty guarantee. But the trade publication Warranty Week on March 19 said that in 2007 GM paid $4.46 billion in warranties and Chrysler paid $6.1 billion in warranties.

“You can see quickly that 110 percent of $10 billion is a significant amount of taxpayer money,” said Ernest Istook, a former House member from Oklahoma and distinguished fellow at the Heritage Foundation who wrote a report on the cost of the warranty program to be released Thursday.

“Guaranteeing warranties is a very expensive proposition,” Istook told CNSNews.com. “You’ve noticed the administration has not put a dollar figure on it.”

Such a potentially large amount of government funds should be debated in Congress before it is added to government liability, said Rep. Patrick McHenry (R-N.C.).

“That is the concern about having government ownership in private enterprise,” McHenry told CNSNews.com. “It raises so many concerns, many we have never seen as a government. This policy should be debated fully and the funds should be authorized only under full congressional procedure.”

Istook said the legal authority of the administration to embark on the auto plan is a question that needs to be asked of the entire bailout system.

“It’s on a par with other things,” Istook said. “The money they are using comes from the $700 billion bailout passed by Congress. The administration claims a blank check.”

The actual TARP language approved by Congress only authorized the secretary of the treasury to spend the money purchasing “troubled assets” from financial institutions.

The TARP law specifically says, “The Secretary is authorized to establish the Troubled Asset Relief Program (or ‘TARP’) to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution, on such terms and conditions as are determined by the Secretary, and in accordance with this Act and the policies and procedures developed and published by the Secretary.”

The law does not include auto companies under the category of “financial institution.” The law says the following: “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.”

House Education an Labor Chairman George Miller (D-Calif.) did not know whether the administration needs congressional authorization to guarantee warranties.

“They’re using the Treasury or the TARP funds for this, so I assume they are making that a condition of going forward with the TARP funds,” Miller told CNSNews.com. “I don’t know that there is any explicit legislative authority, but I don’t know that it’s beyond their existing authority in terms of how they are allocating and conditioning the funds.”

Rep. Heath Schuler (D-N.C.) supports guaranteeing the warranties, and does not know if congressional action is necessary. But he said he would like for Congress to be involved.

“As always, as a member of Congress, we’d like to have our say so, without a doubt we’d like to have our say so,” Schuler told CNSNews.com.






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moriarity at 04:18 AM - April 03, 2009
Orator.....I certainly agree in principle with you. However I disagree that the ignorant masses will not knowingly accept Socialism. They will, they have, and they are. They're simply too damn stupid to understand the consequences.

bigbro1a at 03:47 PM - April 02, 2009
Just what kind of idiot is Obama? How can the government take control of a private company? What is next, is he going to take control of Wal-Mart, or maybe Home Depot? Maybe Jack-In-The-Box or that mom & pop store down the street. Next thing you know we will need "the mark" to buy anything or go any where. First of all he needs to stop pointing the finger at Bush and admit that he does not know what he is doing. I for one do not care who's at fault here. I just want it fixed. We are becoming a socialist country because too many people let their emotions get in the way when they went to the polls to vote. If you asked most people that voted for Obama I would say that the majority of them did not even know what he stood for or what his platform was.

NoParty at 03:08 PM - April 02, 2009
My guess is that won't even slow him down....the other day a Democratic Senator said if Obama needs approval for something, they would give it to him. Not that they would look into the economic viability of it, nor judge if it were legal, or Constitutional, ...just if he wants Congress to give him the OK, they will. I do not want to be responsible for warranties of any Company, let alone one that produces linferior vehicles, and has a Union that bleeds them dry. It takes a lot of nerve to even suggest the rest of us should go further into debt and continue a foolish bail out. Giving Government warranties on GM Cars is simply giving carte blanche OK's to corruption and fraud regarding repairs, etc. Where do they come up with these wasteful ideas?

JOHNNY MAC at 03:05 PM - April 02, 2009
OBAMA JUST DIGS OUR GRAVE DEEPER AND DEEPER. AND THERE IS NO ONE IN THE CONGRESS TO REALLY PUT A CHECK ON OBAMA. JUST DUTIFUL DUPES.

peggy41 at 02:47 PM - April 02, 2009
With the Democratic majority Obama has in the House and Senate, he knows he can promise whatever he wants and they will back it. So if car warranty gaurantees require Congressional approval I'm afraid he will get it. Was it a Constitutional violation for him to fire Waggoner? I don't know but if it was no one is speaking out. I know he didn't say, "You're fired." But the alternative (no more gov money if you stay) is the same thing. I want my country back!!

ontime at 01:12 PM - April 02, 2009
This guy Schuler must be smoking whacky weed with the MSM folks, so far this gang in the politburo will break any Constitutional or state law necessary to make that dream of socialism come true. The idea that the Black Knight in shinning armor needs the say so of anyone is now a ludicris point, he has all your money, so why would he need a gun?

obamanation at 01:04 PM - April 02, 2009
ANYONE who buys a vehicle from GM or Chrysler is an idiot. Do you really trust the government with the warranty for your new car? What stupidity. They mismanage everything they get involved with. They can't even deliver the mail in a timely manner. Can you imagine taking your car for warranty service only for it to take several weeks to repair it and get it back still not working? That is the future of any new car warranty coming from DC.

orator at 01:30 AM - April 02, 2009
No, he does not need Congressional approval to go ahead with his plan. Buddy, somebody way higher than "the Messiah" is pulling the strings. It might behoove you to get out of Congress NOW. The sledgehammer is coming and I pity all who will be in the way. Neither you nor any other Democrat has the cojones to call "the Messiah" and get him so stop. It's beyond your control. Back in 1936 a man named Norman Thomas made the following comment after his defeat for the Presidency: "The American people will never knowingly adopt Socialism. But under the name of 'liberalism' they will adopt every fragment of the Socialist program, until one day America will be a Socialist nation, without knowing how it happened." After that he goes on to say that the Democratic Party is "our" (meaning the Socialists) greatest hope for running this country. That scares the piss out of me.