Illegal Bailouts Threaten Economic Recovery

Andrew M. Grossman / April 06, 2009

Rule of law? Who needs it!

That seemed to be the message of the Obama Administration as it seeks to maneuver around restrictions imposed by Congress on bailout recipients. As the Washington Post describes, the Administration is laundering money to bailout recipients by “set[ing] up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.”

The end result of this scheming is that measures like caps on executive pay and limits on bonuses simply don’t apply to businesses receiving bailout bucks. That assumes, of course, that this maneuvering is legal. The University of Pennsylvania’s David Zaring, who worked on related issues in the Department of Justice, think not: “They are trying to create a loophole to ignore Congress, and I think the courts will think that it’s ridiculous.” (more…)