What should one call loans made to applicants who, three months ago, were thought to be trying to buy more expensive cars than they could afford? How about "subprime loans"? Thus does the economy, which is suffering a fierce hangover after going on a bender of reckless borrowing, try a familiar remedy -- the hair of the dog.
The $6 billion for GMAC comes from the federal government buying $5 billion worth of preferred shares in GMAC and lending another $1 billion to GM for it to invest in GMAC. All this makes GMAC partially nationalized, so taxpayers should be able to indulge a wholesome curiosity concerning, for example, how much GMAC paid for its sponsorship of the bowl game. But GMAC will not say.
Why not? Whatever the sum is, it is hardly even a rounding error on $6 billion. In 2000, the first year of its bowl sponsorship, GMAC paid $500,000. Perhaps the sponsorship makes marketing sense, even today. But even though its pockets are bulging with public money, GMAC says, through a spokeswoman on Monday, that it does not disclose the specifics of its marketing program.
You might think that a company forfeits a right to such secrecy when it takes the public's money. You would, evidently, be mistaken. Although GMAC is now attached by an umbilical cord to the U.S. Treasury, GMAC's position is that the sponsorship price is none of the public's business.
Are there any legal inhibitions on what the executive branch can do with TARP money? Are there any legal requirements regarding what TARP recipients must disclose or explain? Perhaps not; perhaps we are operating under the Knox Principle.
Philander Chase Knox was President Theodore Roosevelt's attorney general when the United States acquired the Panama Canal Zone by unsavory means. When TR asked Knox for a defense of the acquisition, Knox is said to have replied, "Oh, Mr. President, do not let so great an achievement suffer from any taint of legality."