Tuesday, September 30, 2008

A bailout Congress can pass!

Auto Bailout Passes: Big Three to Get Big Check from Uncle Sam

Congress members working through the weekend provided $25 billion in aid to the struggling U.S. auto industry. The money will come in the form of loans to help U.S. manufacturers produce more fuel-efficient vehicles...

The Senate voted 78 to 12 to pass a broad, must-pass spending bill that includes $7.5 billion to start the loan program. The House passed the bill earlier in the week...
Foreign auto makers operating in the US are generally excluded from getting any of these loans by a provision in the law that makes them available only to firms with production plants that are more than 20 years old.

But don't call this a "bailout" for GM, Ford and Chrysler, heavens no!
Chrysler Vice Chairman Jim Press told ABC, "It's not a bailout. It's a good investment between industry and government."
Though by that standard the government's $85 billion loan to AIG at 11% interest, secured by the right to purchase 80% of AIG's stock ... and its taking stock ownership of Fannie and Freddie in exchange for guaranteeing all their debt ... and, yes, the proposed purchase of up to $700 billion of mortgage backed securities from the financial industry, were all investments, not bailouts, too.

Then again...
Economics Professor Peter Morici of the University of Maryland said "Oh, I'd call it a bailout. They are having increasing difficulty borrowing money in the private credit markets because there's a high risk of default. In that environment, giving them a government loan is a bailout".
But Congress always has some kind of problem with bailouts. This time it's that taxpayers' money is not going out fast enough...
Still, the loans may not come as quickly as the Big Three want ... Congress members are already criticizing that aspect of the plan. Sen. Debbie Stabenow (D-Mich.) told reporters, "It's absolutely unacceptable for them to take six months or longer to implement this program and make capital available."

If presidential politics are any indication, the domestic auto industry might be able to count on more federal help. At an appearance in Detroit on Sunday, the AP notes, Democratic nominee Barack Obama touted his support for the loans. In response, prominent John McCain supporter Sen. Joseph Lieberman (I-Conn.) replied, "that McCain not only supports the $25 billion loan package for automakers approved by Congress on Saturday, but also has proposed a $300 million prize for development of a battery powerful enough to run a car."

They're competing with one another over who wants to give Detroit more money. On that front, the Big Three couldn't be happier. [US News]
Though it'll be kind of ironic if after the un-bailed out financial system collapses nobody can get a car loan.