If the TARP is given to Detroit, as I think is plausibly permitted by the statute (though others disagree), there may well be litigation over it. This is because, unlike those ad hoc section 13 bailouts by the Fed, the government’s implementation of the TARP is clearly reviewable under the Administrative Procedure Act. So there is a cause of action out there, and a presumption that the court will not shy away from review.
Who might sue? Creditors could, ranging from bondholders to vendors, as they would be made worse off if the US takes a preferred position in exchange for its equity, as the TARP appears to mandate, and as Treasury has done so far. That seems like pretty clear injury … but these creditors, who are many, multifarious, and may include some bloody minded lunch-truck operators with distribution deals or whatever (a subordinated bondholder would have a clearer claim of injury), will for the most part welcome government assistance to keep their debtors afloat to repay another day. Shareholders, even if diluted, would probably feel the same way.
What about competitors, though? Perhaps Honda would prefer not to compete against a combination of Ford and the American taxpayer? Competitors have generally been found to be injured when the government helps someone out by regulation, and, crucially, within the “zone of interests” covered by the statute – that’s ADSPO v. Camp, though the zone of interests test hardly repays logical contemplation. The general issue would be whether the competitors, though injured in fact, have “interests … so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress intended to permit the suit.” That’s Clarke v. SIA. (Here’s a good backgrounder.)
No one really knows what this means, but given case after case of standing found for competitors, including, most recently, the 5-4 NCUA v. First Nat’l Bank case (it’s the conservatives who tend to find standing in these cases, and the Court has gotten more conservative since NCUA), my preliminary view is that Honda or Toyota would meet this test. The strange thing about standing here is that, as a substantive matter, the foreign automakers would be arguing that the purpose and plain language of the TARP has nothing to do with bailing out the auto industry, and so therefore that Treasury illegally acted when it did so – in other words that, under the plain language of the statute, automakers and their interests are, in fact, “marginally related” at best to what Congress intended. But if the TARP can be used to bail out industry more generally (and auto makers in particular, either through their financing arm or whatever), the idea would be that any participant in an industry eligible for bailout funds would be within the zone of interests to dispute how those funds were distributed.
Strange. But standing law is always strange.
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