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.