A bailout here, a bailout there…

The midst of a recession is no time to let a major component of the manufacturing sector, one with a large workforce, go under. Thus the consensus in Washington seems to be that Detroit’s Big Three will get some kind of bailout. But there is an impasse over how best to do it.

The Bush administration and a number of congressional Republicans want to allow the automakers to divert a previously approved $25 billion loan program to tide them over until car sales pick up.

The Democratic congressional leadership, backed by environmental groups, is opposed. They want the program to stick to its original purpose — funding the design of a new generation of fuel-efficient vehicles. But if GM, Chrysler or Ford goes under, it is not going to be building vehicles, fuel efficient or not, of any kind.

The Democrats instead want to tap the $700 billion bailout fund for the $25 billion, meaning the taxpayers’ exposure in Detroit would now be $50 billion. The bailout fund has already morphed once, from relieving financial institutions of their least salable assets to taking equity positions in banks. This latest strategy by the Treasury should be given a chance to show it can work, especially now that a special inspector general has been named for the fund.

If an exception is made for the auto industry, every other troubled sector of the economy will be lining up at Treasury’s door for a piece of the bailout. In a way that’s already happening with firms converting themselves into bank holding companies in order to qualify for federal cash.

Moreover, the bailout was specifically tailored for the financial industry. Any rescue package of the auto industry should be equally specific. In any event, time is of the essence, especially with Congress scheduled to adjourn for the rest of the year Friday. Redirecting the existing $25 billion loan is the fastest and simplest way to go.

2 Responses to "A bailout here, a bailout there…"

  1. Artbuster  November 20, 2008 at 9:35 am

    I have lived in the Detroit area my entire life. My father was the ONLY person I know on our street, while I was growing up, who did NOT work for GM. ALL the other fathers in the neighborhood did. I saw SO MUCH waste from the families of GM workers and why not? They had VERY GOOD TEACHERS. Well, the “ethic” continues with GM and the big three. After seeing the other night’s report on ABC about the big 3 wanting a 25 billion dollar bailout, but spending MILLIONS$$$$$$$ per year on “corporate” jets and travel? I say HELL NO. I came from a family that had to rely on it’s OWN resources to get along. I remember “clipping coupons” every sunday from the Sunday News inserts and buying and living “within our means”.
    I say to the big 3 and all these other companies wanting “bailout help” (AIG, FANNIE MAE, ETC…), tough cookies. YOU made YOUR beds, now it’s time to BUCKLE DOWN AND TO START “CLIPPING COUPONS”, just like a lot of us Americans did in times of economic strife.

  2. adb8917  November 20, 2008 at 11:04 am

    As a liberal, pro-union Democrat it is not difficult to reconcile the needs of the Big Three with the economic well-being of their labor force. That said, however, there’s the lesson referenced by Audubon Society President Bob Flicker in the September-October edition of their magazine: ‘While Toyota was investing in the Prius, GM was building the Hummer,’ with obvious consequences. If Congress agrees to a redirection of some of the bank bailout money, it has to come with stringent conditions on how and where it gets used, and perhaps the heads of Detroit’s leadership served up on a platter.

    Once more we’re getting the ‘too big to fail’ argument, but what stands in the offing is more for corporate zecks while working stiffs get pink slips in their Christmas stockings.

    Take a lot more off the top, please.

    ADB

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