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May 22, 2009

Did Treasury bend the rules by giving TARP funds to Chrysler?

Posted by Usha Rodrigues

White & Case says so in a May 19 filing on behalf of an Indiana pension fund, arguing Chrysler is not a financial institution. A taste:

TARP authorizes the purchase of troubled assets from financial institutions. The clear and unambiguous language of the statute defines financial institutions to be “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 . . . and having significant operations in the United States but excluding any central bank

of, or institution owned by, a foreign government.” 12 U.S.C. § 5202(5). Chrysler is not any of these things, and no “determination” by the Treasury Department can make it one. Indeed, that is why the Treasury Department originally determined that Chrysler and the automobile industry “fell outside” the scope of TARP. It is only after Congress declined to adopt legislation authorizing an auto bailout that the Treasury Department reversed course and adopted its current interpretation of the statute.

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