Bush defends auto industry bailout

President George W. Bush on Saturday said offering government loans to U.S. automakers was the only option left to prevent the industry from collapsing after alternatives were ruled out or failed.

Bush on Friday announced the government would provide $17.4 billion in emergency loans to financially strapped General Motors and Chrysler LLC to prevent them from failing. Ford decided it did not immediately need similar loans.

In return, the carmakers would provide a restructuring plan by March 31 that would show they would survive, or they would be required to repay the loans.

Lawmakers from Bush’s own Republican Party criticized the plan, which can be changed by the incoming administration of Democratic President-elect Barack Obama after he takes office January 20.

"We have ended up with an agreement open to interpretation, that eliminates the sense of crisis, where taxpayer dollars are expended and we are left to hope that the next administration has the will to enforce the tough concessions necessary to make these companies viable for the long term," Sen. Bob Corker, a Tennessee Republican said.

Bush in a weekly radio address said his economic advisers warned that if the automakers filed for bankruptcy it would lead to a "disorderly collapse" of the industry and send the economy into a "deeper and longer recession."

After Congress was unable to pass legislation to bail out the auto industry, the only way to stave off a collapse was for his administration to step in, Bush said.

The automakers are capable of demonstrating by the end of March that they can restructure into viable companies, he said. If not, the loans would provide time for the carmakers to prepare for an "orderly" Chapter 11 bankruptcy process that offered a better prospect of long-term success, Bush said.

"This restructuring will require meaningful concessions from all involved in the auto industry — management, labor unions, creditors, bondholders, dealers, and suppliers," he said.

"The actions I’m taking represent a step that we all wish were not necessary," Bush said. "But given the situation, it is the most effective and responsible way to address this challenge facing our nation."


  1. Cashel Boylo

    More Banker Bailouts
    The simple truth is: GM Corp, Chrysler Corp and Ford Corp DO NOT MAKE CARS.
    Never in history has one of these bloated mismanaged money juggling corporations ever made a car.
    They are not carmakers, they are simply moneymakers. They do not make anything other than money.
    And they do not make their money by making cars.
    They are not car makers, they are defacto BANKS — and they make their money the same way all banks do – not by producing anything, but by BORROWING MONEY AND LENDING MONEY.
    And these corporations do not employ one auto-worker.
    The cars are made by their subsidiary companies, contractors and employees, providing the corporations with enormous cashflow that is in turn lent again – and again and again and yet again.
    The car maker subsidiaries of the corporations employ only a quarter-million workers. And these companies will be lucky to get one cent of any bailout. They will get only whatever may be left after the corporations have refilled all their deficient beg borrow steal and lend accounts.
    Contractor companies employ three times as many as the corporation subsidiaries – around three-quarters of a million –
    and these companies will NEVER see any sort of money from any sort of bailout.
    The corporations borrow money at low interest – by selling stocks, raising debentures, issuing bonds and borrowing from other banks. They lend the borrowed money at high interest to their subsidiaries and to their contractors and to their consumers, making exorbitant profits in the process.
    The enormous cash flow from multiple sources ebbs and flows. From time to time, there is some potentially idle money lying around – for a few seconds – then it is out in the short-term money market earning interest.
    Sometimes this money is used to buy “securities” that look attractive and reasonably liquid – backed by, say, home mortgages. Maybe bundled securities. And the money is moved out of the real economy into the new Conomy, where it well may blunder into some of the $27 trillion worth of bundled, debt-backed securities that have swamped financial markets since 2001.
    No prize for guessing who made the change in 2001.
    The reason these corporations are in trouble is not their fifty years of gross stupidity in car design and manufacture.
    The reason is that right now, these banks (aka corporations) cannot borrow money. Nothing whatsoever to do with making cars.
    They cannot borrow money because there isn’t any money.
    There never was any money.
    The so-called “legal,” “licensed,” “authorised,” “regulated” whatever banks were allowed even pre-Bush to lend ten times their capital.
    Bush, Cheney, Wolfowitz (now comically running World Bank) held this to be unnecessary restraint and allowed them to lend any amount of money they cared to lend, regardless of their capitalization or legitimate borrowing capacity.
    Money lender executives like Hank Paulson cheered enthusiastically and made many millions.
    They lent many times all the so-called “money” in existence – on security that was as non-existent as the money.
    Non-banks were way outside of the farcically “regulated” system and borrowed and lent as they wished, making up paper securities to “secure” the paper money.
    And then derivatives of derivatives, vapor money on vapor security.
    Saving the flatulent, ridiculous, anachronistic, nepotistic, feudalistic money-lending fiefdoms that own auto manufacturer subsidiaries will not save one of their subsidiaries or contractor companies or one employee job. What it will do, all it will do, is save GM Bank, Ford Bank, Chrysler Bank, their inept management and their major stockholders.
    The obvious alternative is to liquidate these corporations/banks by whatever means fits – and rescue intact the subsidiary companies and their line managements and the contractor companies that actually do make cars.
    These real carmakers can then be sensibly restructured under competent carmaker (not moneylender) management, and there just might be some future for American auto manufacture.
    Cashel Boylo