White House Bails Out Auto Bailout
Detroit turns to Bush after Congress fails to act.
After the Senate failed to agree on terms for the rescue of General Motors (GM) and Chrysler, Detroit asked the Bush Administration to jump in and play savior. Over the weekend, White House officials pored over the 2 automakers' books, trying to figure out how much cash the Treasury Department would need to cough up to keep them alive.
According to the Wall Street Journal, estimates for the total amount vary from $10 billion to as much as $40 billion, but no one can seem to agree on how best to spend the money - any of it. GM, Chrysler and Ford (F) have been asking for money for months, to no avail. Ford, for it's part, claims it doesn't need an emergency loan - but still likes to remind lawmakers just how bad things would get if GM or Chrysler were to fail.
Since the $25 billion allocated earlier in the year for renewable energy investments appears too politically costly to touch, the money has to come from somewhere. While Congress, the United Auto Workers, and the Big 3's top brass slog it out on Capitol Hill over the terms of a potential bailout, bean counters are scurrying around Washington scrounging up the cash. That's a tall order, since all but a paltry $15 or so billion is left of the first tranche of the $700 billion financial system bailout.
If Treasury wants to tap TARP, it needs to ask Congress to release the rest of the money. And if there were ever a day to keep the television locked on C-SPAN, this will be it. Watching irate senators and appalled members of the House rail at Treasury Department officials and their smug Federal Reserve cohorts who've been begging for more money like spoiled teenagers asking for bigger allowances would be better than even the best reality TV.
Access to the money, however, would require plans for a host of prickly topics, such foreclosure prevention and federal aid to struggling municipalities. The immediacy of the problem -- GM and Chrysler both say they won't make 2009 without a cash infusion -- eliminates the possibility of designing programs to effectively use the rest of the bailout money.
The Fed, up to this point, has been reluctant to get involved. Chairman Ben Bernanke claims car-makers are outside his realm, and that the Fed doesn't want to overstep its bounds. Such a claim borders on the absurd, since Bernanke's stated vision is to protect the economy by any means necessary. His supposed fear of politicizing the "apolitical" Fed is akin to closing the barn door a few months after the horses left.
In previous government-sponsored bailouts, such as AIG (AIG) and Citigroup (C), taxpayers received warrants for ownership of the companies the government deemed worthy of propping up. Now that state-owned companies are bleeding into the broader economy, the Great American Socialist Experiment can finally begin in earnest.
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