On March 30, 2009, the president of the United States told an anxious nation: “Let me be clear: The United States government has no interest in running G.M.” If only he were telling the truth.One way you could tell Barack Obama was being less than honest was that the day before, he had fired General Motors Chief Executive Officer Rick Wagoner. This unprecedented hostile takeover of a former American manufacturing giant signaled that the basic social contract between U.S. government and private business was being ripped up on live television. The fact that Obama followed his unpersuasive declaration of disinterest with a stern lecture about G.M.’s product lines (“They must ask themselves: have they consolidated enough unprofitable brands?”) only confirmed the suspicion: Not only will this White House seize any company it deems to pose a “systemic risk” to the economy, but it will do so without regard to restraint, to the law, or to basic economic principles. All while dissembling enough to keep its most loyal political supporters distracted from the fact that robbing taxpayers to pay failed corporate executives is almost the definition of economic unfairness. Now that the U.S. government is indeed running G.M., after having divvied up failing Chrysler between itself, Canada, the United Auto Workers, and Fiat, it’s worth stepping back and taking measure of this almost unthinkable chain of events. After decades of Europe and most of the West enjoying the fruits of selling off state ownership in private industry, the U.S. is going on a nationalization bender. An inventory of the steps that led us here leads to three inescapable conclusions: This bailout is illegal, illiberal, and ill-fated.Illegal: The auto bailout makes a mockery of the rule of law.The last time the federal government bailed out Chrysler, Jimmy Carter’s administration reached a deal with the carmaker in August 1979, but the agreement did not take effect until Congress approved implementing legislation that December. The Constitution, after all, gives exclusive power of the purse to Congress. This time around, George W. Bush dispensed with the legal niceties, loaning more than $13 billion in taxpayer money to Chrysler and General Motors without any statutory authority.Although he ran on a promise to repudiate Bush’s sweeping view of executive power and respect the constitutional role of the legislative branch, Barack Obama applauded his predecessor’s illegal loans. Since taking office he has followed Bush’s pattern, expanding the bailout without seeking congressional approval. The president’s high-handed personal involvement in the pending merger between Chrysler and Fiat, a deal that flouts well-established bankruptcy principles by forcing secured creditors to the back of the line, confirms that when it comes to industrial meddling Obama is no more committed to the rule of law than Bush was. The new administration continues to subsidize Chrysler and G.M. (and even the companies that sell them parts) with money that Congress allocated last fall to the Troubled Asset Relief Program (TARP). As the program’s name suggests, the Treasury Department was supposed to use that money to buy mortgage-backed securities and other “toxic” assets from financial institutions, with the aim of making them more stable and encouraging more lending. There is not a word in the Emergency Economic Stabilization Act, the law that created TARP, about automobile manufacturers.Some bailout supporters claim that G.M. and Chrysler qualify as financial institutions because they loan money to car buyers. The people who make this argumenttend to overlook the fact that Chrysler’s finance division became an independen t company in 2007 and that GMAC, formerly a G.M. subsidiary, was mostly owned by Cerberus Capital Management when Bush approved the automaker loans. In any case, this rationale would make any business that extends credit, including department stores, jewelers, appliance dealers, and plastic surgeons, eligible for TARP money.The Bush administration, recognizing what a stretch it was to describe loaning money to car manufacturers as purchasing troubled assets from financial institutions, strongly resisted using TARP to bail out automakers—right up to the moment when Congress declined to appropriate funds for that purpose. Now Obama is using loans that never should have been made as a pretext to reshape the auto industry. For those who are inclined to forget that Congress never authorized the bailout (a group that seems to include most members of Congress), here is a review of how Bush and Obama trampled the Constitution in their rush to save American automakers from the consequences of their own bad business decisions.October 3, 2008:President Bush signs the Emergency Economic Stabilization Act of 2008, which creates TARP,allocates $700 billion for it, and authorizes the treasury secretary “to purchase…troubled assets from any financial institution,” the aim being “to restore liquidity and stability to the financial system.” As examples of financial institutions, the law mentions banks, savings associations, credit unions, security brokers or dealers, and insurance companies.November 8, 2008:House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) send Treasury Secretary Henry Paulson a letter urging him to “review the feasibility of invoking the authority Congress provided you under the Emergency Economic Stabilization Act…for the purpose of providing temporary assistance to the automobile industry during the current financial crisis.” The Democratic leaders argue that “a healthy automobile manufacturing sector is essential to the restoration of financial market stability.” The Treasury Department’s response: “We continue to work on a strategy that most effectively deploys the remaining TARP funds to strengthen the financial system and get lending going again.” Deputy White House Press Secretary Tony Fratto likewise says that TARP money “should be used to strengthen the financial system and get lending going again,” not to assist automakers.November 12, 2008:Regarding a TARP-funded automaker bailout, Fratto says, “We do not welcome efforts to weaken the Treasury program. The Treasury program is working to deal with the financial crisis, and that is what it ought to continue doing.” Paulson says the rest of the TARP money should be used solely “to deal with the financial industry.”November 17, 2008:White House Press Secretary Dana Perino rejects a Senate proposal to allocate $25 billion from TARP to the automakers, saying it would “raid” the program “of funds needed to stabilize our financial system.”November 20, 2008:GMAC, once the financial subsidiary of General Motors but now mostly owned by Cerberus Capital Management, announces that it has asked the Federal Reserve Board for permission to become a bank holding company, largely so it can qualify for TARP money.November 30, 2008:Perino says any assistance to automakers “should come from funds already appropriated in the program specifically intended to assist automakers,” referring to a separate $25 billion loan program aimed at encouraging the development of fuel-efficient cars.December 11, 2008:Despite strong pressure from the White House to approve a bill authorizing aid to automakers, the legislation fails in the Senate, falling eight votes shy of the 60 needed to end debate.December 12, 2008:Perino says, “Congress spoke last night. They don’t have the votes to do anything.” She announces that the administration is therefore looking for “a short-term mechanism to help prevent a disorderly bankruptcy that we think could devastate further an already very weak economy.” A Treasury Department spokeswoman explains that “because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry.”December 19, 2008:The Bush administration announces that it will use TARP money for $13.4 billion in loans to Chrysler and General Motors. “While the purpose of [TARP] and the enabling legislation is to stabilize our financial sector,” Paulson says, “the authority allows us to take this action. Absent congressional action, no other authorities existed to stave off a disorderly bankruptcy of one or more auto companies.” President-elect Barack Obama applauds the decision, calling it “a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers.”December 24, 2008:The Federal Reserve Board approves GMAC’s application to become a bank and thereby “gain access to billions of dollars in government aid” under TARP, The New York Times reports. As a condition of the approval, G.M. has to reduce its stake in GMAC from 49 percent to less than 10 percent. The Treasury Department says helping GMAC is part of “a broader program to assist the domestic automotive industry in becoming financially viable.”January 2, 2009:Chrysler Financial reports that it has received $4 billion in TARP money.March 19, 2009:To “help stabilize a critical component of the American auto industry during the difficult period of restructuring that lies ahead,” the Treasury Department announces that it will use $5 billion in TARP funds for loans to car part manufacturers.March 29, 2009:President Obama fires General Motors CEO Rick Wagoner.March 30, 2009:Obama gives a speech in which he unilaterally promises government-backed warranties for buyers of G.M. or Chrysler cars; urges both companies to start “manufacturing the fuel-efficient cars and trucks that will carry us towards an energy-independent future”; says G.M. needs to make sure it has “consolidated enough unprofitable brands”; and tells Chrysler it has to arrange a merger with Fiat by April 30 to continue receiving TARP money, promising another $6 billion in loans if the deal is successful.March 31, 2009:Asked what law gives Obama the authority to intervene so extensively in the auto industry, House Majority Leader Steny Hoyer (D-Md.) tells CNSnews. com, “The administration clearly believes it does have the authority to use some of the remaining TARP funds for the automobile industry. I would be kidding you to mouth some words on that, because I don’t know technically where that authority would be.April 1, 2009:Regarding Obama’s warranty offer, House Budget Committee Chairman John Spratt (D-S.C.) tells CNSnews.com, “I would think that for a government officer to extend a warranty that will create a liability for the government, an act of law would be required. If I were the beneficiary of the warranty, I would certainly want to know the entity that extended it to me had legal authority to grant it.”April 2, 2009:House Financial Services Committee Chairman Barney Frank (D-Mass.), whose panel is supposed to oversee TARP, tells CNSnews.com he is “not very well informed” about the president’s restructuring plans for the automakers and does not think Congress willvote on them. Frank’s counterpart in the Senate, Christopher Dodd (D-Conn.), says he “wasn’t consulted at all on the process,” adding, “I’ve been reading about it in the papers, basically.April 30, 2009:Complaining that recalcitrant creditors (whom he dubs “speculators” and “holdouts”) have blocked the merger between Chrysler and Fiat, Obama says Chrysler now has no choice but bankruptcy.May 3, 2009:Chrysler asks the U.S. Bankruptcy Court for the Southern District of New York to let it sell most of its assets to New Chrysler, a company created and owned by Fiat, the United Auto Workers, and the U.S. and Canadian governments. Contrary to the U.S. Bankruptcy Code, the plan favors unsecured creditors such as the union over secured creditors such as Chrysler bondholders.May 4, 2009:Secured creditors object to the merger plan, which they describe as the “patently illegal” result of “a tainted sales process dominated by the United States government” that “strips the Chrysler senior lenders of the protections of [the Bankruptcy Code] and improperly attempts to extinguish their property rights without their consent,” thereby violating the Fifth Amendment. Noting that the Obama administration is “relying on purported authority provided by TARP” to impose the merger, they say it cannot “retroactively alter existing liens of property” even “assuming that TARP provides the Treasury Department with authority to provide funding” to Chrysler.June 1, 2009:In a deal orchestrated by the Obama administration, General Motors files for the second largest bankruptcy in U.S. history. Taxpayers are on the hook for another $30 billion, in exchange for owning 60 percent of the new company. Obama says, “We are acting as reluctant shareholders.” Members of Congress who stood by as two presidents snatched the power of the purse and illegally diverted funds to the automaker bailout are outraged by bankruptcy-driven plans to shut down an estimated 2,400 G.M. and Chrysler dealerships.In December 2007, Barack Obama proudly told The Boston Globe, “I reject the view…that the president may do whatever he deems necessary to protect national security.” A year later, he welcomed George W. Bush’s unauthorized loans to Chrysler and General Motors because he deemed them “necessary” to protect economic security. And as president he has not even bothered to ask a Congress firmly controlled by his own party to approve his taxpayer-funded reorganization of the auto industry. Obama supporters who argued that he would help restore the balance among the three branches of the federal government have a choice to make: They can condemn this abuse of executive power, or they can admit that it was just Bush’s policies, and not his unconstitutional methods of implementing them, to which they objected all along.