White House & GWB Announced Federal Aid Low Interest Loans to Auto Industry … Free Markets Be Damned
Pick your poison … the auto makers regulating and keeping their books or the federal government attempting to do the same. Does anyone have any confidence in either to do the right thing and look out after “We the People”?
DEFINE VIABILITY! If anyone thought these companies were viable wouldn’t they be investing in them? For the UAW and Big Three to define “viability” they might as well define what “is” is.
The deal is contingent on the companies’ showing that they are financially viable by March 31
This morning President George W. Bush announced that the federal government with bail out Detroit’s auto industry and “enable” them to continue staying in business until the next administration. The key word here is “enable”. All this effectively does is pass the buck an enable the status quo. In other words we, the tax payer, will be facing this same issue again next year when the Big Three come back to Washington, DC with their collective hats in hand for more money from the Obama Administration. In the end, the auto makers get yet another opportunity to get their business in order at the expense of the American tax payers, “We the People”.
Bankruptcy was not an option according to President Bush, yet delaying the inevitable and having tax payers foot the bill for corporate mis-management, a poor business plan, and excessive union contracts some how are ok.
To the Rescue: Bush to Give Low-Interest Loans to Carmakers; Obama Team Agrees to Bush’s Strategy
Obama agrees with bailing out a state and a union that he and Democrats are beholden to, what a shock.
A senior administration official told The Associated Press that the low-interest loans will be drawn from the $700 billion Wall Street rescue fund.
Of the $17.4 billion, $13.4 billion will be doled out in the next two months with another $4 billion to be added later. The loans will be called back if the companies are not viable by March 31, the official said, speaking on condition of anonymity because of the sensitivity of the issue.
The White House expects General Motors and Chrysler to take advantage of the loans Friday.
The plan requires those companies to provide warrants for non-voting stock and to accept limits on executive compensation, including the elimination of perks like private jets.
It must be nice to know that one has such dominion over others that if you are part of the Big Three you can hold the rest of the non-union tax payers of America hostage because you are too important to fail and never have to clean up your act and run a business properly.
“If the right outcome is reorganization or bankruptcy, then isn’t it better to get there through an orderly process?” Paulson asked.
Paulson said President Bush wants to avoid bankruptcy — “if it can be avoided.” But Paulson said the No. 1 priority was getting U.S. automakers back on a viable path. Part of that effort, he said, would require all sides making sacrifices to boost competitiveness with foreign carmakers.
“It’s difficult to do such things outside of reorganization,” he said. “But sometimes that can be successfully done.”
“When you look at the size of this industry and look at all those that it touches in terms of suppliers and dealers … it would seem to be an imprudent risk to take,” he said.
UPDATE I: Auto Makers to Get $17.4 Billion
“Under ordinary economic circumstances, I would say ‘this is the price that failed companies must pay’ and I would not favor intervening to prevent the auto makers from going out of business,” the president said. “But these are not ordinary circumstances.”
The deal would extend $13.4 billion in loans to General Motors Corp. and Chrysler LLC in December and January, with another $4 billion likely available in February. It also would provide the government with non-voting warrants, although the exact amount was unclear immediately.
The deal is contingent on the companies’ showing that they are financially viable by March 31. If they aren’t, the loans will be called and all funds must be returned, officials said.
UPDATE II: The bail out low interest loans are supposed to come at great cost and tough terms
Swamp Politics reminds us that the low interest bridge loans are supposed to come with tough terms on business and unions. Do we believe this to be true or will all of this be non-binding? What are the odds that all of the conditions with change in the next Administration? It’s not as though unions and The Big Three are a core constituency of Obama and Dems.
But the president made it clear that the bridge loans were coming with tough terms. He said the automakers needed to submit workable plans for restructuring by March 31 and that if they didn’t the federal government would require its loans to be repaid immediately.
In addition, he said his administration expected all the auto industry players — management, creditors, dealers, workers and bondholders — to make significant concessions in order to make the rescue work.
Posted December 19, 2008 by Scared Monkeys
Business, Economy, Government, WTF | 13 comments
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13 Responses to “White House & GWB Announced Federal Aid Low Interest Loans to Auto Industry … Free Markets Be Damned”
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so Bush is a marxist/communist/socialist??
(I know, there is a big difference between those 3, but you yanks don’t seem to know that)
I really do not agree with all these bail outs. Where do you draw the line? How many companies are going to get bailed out? I don’t see how this is going to help the economy. Spend spend spend That is one of the things about Bush that I don’t agree with (he spends like a liberal)
I wonder who defines what a ‘workable plan’ is ….
Reminds me of the provisions in 49 state constitutions (I believe that Vermont is the sole exception) that by law, the state budget has to be balanced.
Of course, one can make a budget that incorporates any assumptions one wants to. In my case, I’m projecting that next year, I will offer for sale my photograph on the Internet, and expect that, at, say, $50 a copy, I will take in some $17 million ….
‘Tain’t likely, McGee.’ Anyone who would pay a nickel for it would be crazy.
Anyway, on this issue of loans to the Big Three, there are enough pros and cons to take us forever.
One thing I would ask, though … why is it that financial companies can get handouts willy-nilly (AIG got a lot more than the Big Three put together), but when it comes to industrial companies, they don’t deserve it?
As it is, we can’t cut the prime rate any more … it’s already been brought down to zero. This means, of course, that the value of the dollar falls proportionately.
At some point, inflation is going to come roaring back. Will the Fed be able to take effective action at the appropriate time?
Take a look at what we see around us now … what do you think?
All I can say is ‘Hold on if George has a plan,it’s very likely to fail.
The phrase “We the people” will now have to be replaced in the Constitution to “We the Screwed”.
What Bush has done (with the urging of Paulson and Barack Hussein Obama) is illegal. TARP funds were for “financial institutions”.
There is no way this will be all that the automakers get. This is just the beginning. Auto Czar should give you all a great hint as to where we are headed.
so now finally in his last month his own party realizes that he might not have been such a great President after all.
i wonder what’s left to screw up in the coming weeks.
worst President since James Buchanan.
and again, someone from Illinois has to clean up the mess.
#3 Richard: “One thing I would ask, though … why is it that financial companies can get handouts willy-nilly (AIG got a lot more than the Big Three put together), but when it comes to industrial companies, they don’t deserve it?”
What it comes down to is utility. We can have an economy without automakers…but we can’t have one without financial institutions.
That’s why it makes sense to bail out the financial institutions (at least as originally proposed). imo.
#6 That’s hilarious…..Yeah….like anyone from Illinois is going to clean anything up.
I don’t agree with what Bush is doing with this auto bailout plan but I still think he’s a good President. Doesn’t matter what President Bush does you libs always find something to bitch about. When he does something right, it’s not his idea, when something goes wrong, it’s all his fault. No President is ever going to make all the right decisions. Let’s wait & see how your boy does before you start bragging about how he’s going to clean things up. He didn’t clean Chicago up, so what makes you think he can clean up this mess?
Oh please Michelle…GWB, the President with the lowest approval rating in the history of approval ratings, will be forever known for the shoes:
Lol. Classic. There’s the legacy.
Pretty much sums up the last 8yrs of President Bush, imo.
SM: Actually yoyo the universal reaction for the most part was just the opposite for sane people. This usless POS would have been shot in the head or hung had it not been for the USA ridding Iraq of Saddam. Even more comical that this POS would ask GWB for a pardon.
#6 Stick around if you really want to see screwed. Not to be out done, Biden announced today that Obama will need at least $700 billion as a “stimulus” package (IE another handout paid by the taxpayers) just to get started.
Also, please don’t forget who asked Bush to bail out the automakers. That would be Barack Hussein Obama.
Yoyo Muffintop (#7) … Possibly, but the bailout for GM and Chrysler (Ford apparently said it didn’t need money, at least not now) was some $17 billion.
In contrast, AIG alone got over $100 billion. And the government has cut its key lending rate to just about zero and has signaled its intention to infuse money into the economy like there’s no tomorrow.
(I hope that’s not the case.)
So I don’t know …. It’s also said that the government can pull the plug by March and get its money back if things don’t work out. But others are saying that the terms of the loan are too onerous for the companies to succeed.
All I know is, there have been a lot of scandals in the financial community lately. I’m not at all confident that the bailout billions will be used wisely.
By the way, the Fed also underwrote $2 billion of bonds for John Deere Co. … putting it in that business as well.
Meanwhile, bank after bank (and related financial institutions) are lining up trying to get themselves declared as bank holding companies.
That way, for some reason, they become eligible to wallow in the federal bailout company of the privileged.
aren’t the banks using the taxmoney for the cleanup of their balances instead of using it to lend it (and get the financial market up and running again) (here in EU too)..
also read that some banks are still paying out bonusses