Treasury Helps Companies Skirt Bailout Rules

By Kevin Spak,  Newser Staff
Posted Apr 4, 2009 9:12 AM CDT
Treasury Helps Companies Skirt Bailout Rules
President Obama and Treasury Secretary Timothy Geithner, during the Plenary Session at the G20 Summit at the ExCel centre in London, Thursday April 2, 2009.   (AP Photo/Anthony Devlin/PA)

The Obama administration has devised a maybe-legal method of avoiding Congress’ restrictions on companies that accept bailout funds, including limits on executive pay and a requirement that taxpayers get an ownership stake in the firms, the Washington Post reports. To sidestep the restrictions, the administration has created special entities to act as middlemen between the government and the firms it aims to help.

Administration officials say it's necessary to encourage firms to participate. But some doubt the legality of the administration’s strategy. “They are trying to create a loophole to ignore Congress,” said one former Justice Department attorney. “I think the courts will think that it’s ridiculous.” So far, Capitol Hill has taken little notice of the moves, but the Chairman of the House Oversight Committee says he’s looking into it. (Read more Obama administration stories.)

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