by Frank James
Now that Senate Republicans have foiled the Detroit 3 bailout in a late-night vote, any hope for a bailout falls to Treasury Secretary Henry Paulson Jr.
According to lawmakers on both sides of the aisle, the Emergency Economic Stabilization Act which created the $700 billion fund known as the Troubled Asset Relief Program, or TARP, could be used for the $14 billion bridge loan to the Detroit-based automakers.
In recent weeks, Paulson has resisted the idea of using TARP funds shouldn't be used for a Detroit rescue since it was created to provide liquidity to the financial sector.
But it may prove impossible for Paulson, and by extension President Bush, to remain purists on this as fears grow that a bankruptcy by one or more of the Detroit automakers could trigger a cascade of horribles and unintended consequences that could prove a devastating blow to an already sickly economy.
Tribune Washington Bureau reporter Jim Puzzanghera provides some of the details of what happened yesterday:
Compromise talks in the Senate were led by Dodd and Sen. Bob Corker (R-Tenn.) and involved representatives of the companies and the United Auto Workers union. But attempts to craft a deal fell apart after Democrats would not agree to force the union to accept wages on par with U.S. employees of foreign automakers by a specific date.
In opposing that proposal, the UAW said it was prepared to do its part in the restructuring but not prepared to be treated unfairly.
"Unfortunately, Senate Republicans insisted that workers and retirees be singled out and treated differently from all other stakeholders," said Alan Reuther, UAW legislative director. "This is what ultimately led to the breakdown of the negotiations."
Senate Majority Leader Harry Reid (D-Nev.) said he feared the effect on the stock markets today.
"It's not going to be pretty," he said. "Millions of Americans, not only the autoworkers but people who sell cars, car dealerships, people who work on cars, are going to be directly impacted and affected."
Senate Democrats couldn't bring the measure up for a vote without the support of at least 10 Republicans. Ultimately, they were seven votes short.
A group of conservative Republican senators strongly opposed any bailout, preferring that automakers restructure through Bankruptcy Court. The White House and Democrats fear such a development could scare consumers away from American cars and cause the collapse of the companies.
Bush personally lobbied recalcitrant Senate Republicans after Vice President Dick Cheney failed to round up support Wednesday during a contentious two-hour meeting.
"If we don't do this, we will be known as the party of Herbert Hoover forever," Cheney told them, according to a Senate Republican aide, evoking the president whose inaction is widely blamed for helping trigger the Great Depression in the early 1930s.
Senate Minority Leader Mitch McConnell (R-Ky.), who has 50,000 auto-related jobs in his state, said nearly all the Republicans opposed the bill "because we thought it frankly wouldn't work."
Comments
While I am no fan of bailouts, I am less of a fan of seeing the recession getting worse or America deciding that we no longer need American made cars. It seems that the republicans basically want to destroy unions. It amazes me that they are willing to give 700 billion to their buddies on wall street but nothing for American Auto industry. A mere 15 billion to keep american workers at work. The thought that a restructured company in bankruptcy can encourage people to purchase a 25K car from them is absurd. Once again the GOP steps up to show their distaste for American workers and their love for Wall street. Shame on them. Country first my a$$.
Posted by: bill r. | December 12, 2008 7:51 AM
I have written previously on this blog that I thought Chapter 11 was the appropriate forum for the auto companies but that it appeared Congress would disagree.
When Speaker Pelosi stated "for a bill to pass all parties would have to take a haircut" to move the process along.
I accepted her statement on it's face.
It appears that the UAW did not and had no intention on giving anything up.
Shame on the UAW!
Posted by: Pat H | December 12, 2008 8:37 AM
Pat H. While American workers in the UAW make 29 per hour, the workers in Japanese auto makers make 26 per hour. You think this difference is worth sinking the American car industry? When congress passed a 700 billion for the banking industry, I didn't hear one republican ask for ANY bank worker, CEO or teller to take a wage cut.
Posted by: bill r. | December 12, 2008 8:59 AM
Give them the money and stay out of the management of the auto industry. ..........
http://thefiresidepost.com/2008/12/10/why-government-management-of-auto-companies-will-not-work/
Posted by: Ohg Rea Tone | December 12, 2008 9:37 AM
Looks like a bad day coming on Wall St., and Monday worse.
Unintended consequences of "starve the beast".
Perhaps what Grover Norquist failed to grasp is that the government itself is "too big to fail" and certainly too big to "starve".
Looks like capitalism itself is going to be the "starved beast" this time around.
Sens. Sessions & Shelby seem intent on bring to all of America the standard of living in their own states.
Posted by: ornery | December 12, 2008 9:48 AM
Actually, according to a stry in today's Tribune, Toyota workers earn an average of $30.00 an hour as compared to $29.00 for GM autoworkers. The real difference is found in the benefits, as GM has an older workforce.
And that is the message we are getting from the Republicans in Congress: anyone in the American working and middle classes has to accept a lower standard of living. Has the Free Market, then, run its course? If the next generation cannot find that its standard of living is at least equal to those preceding it, what, then, of the American dream?
If we as a nation want to have a large, sustainable middle-class, the last thing we really need to do is attack the agents who brought that about: organized labor!
Posted by: MickG | December 12, 2008 10:51 AM
OK, This is how the government is suppose to work. We, as Americans, vote for our government officials. When government works like it should, there is a vote. Just because not everyone agrees with the outcome of that vote it's how are system is designed to work. It should not be circumvented because those who favor a bailout lost in a democracy. This is clearly what is wrong with our Government today. The US Auto industry has been living on the edge of failure for many years. It is senior management of these company's inability to be creative in becoming efficient organizations. Now we are asked to save a train wreck. Do not be fooled. It's not 15 billion it will take more then 100 billion. Wait and see.
Posted by: Geo | December 12, 2008 11:01 AM
bill r., what does the "bailout" accomplish? Kicking the problem down the road a few months? This is not a question of whether or not you like American cars or workers. It is a question of should taxpayers keep companies with failed business models on life support, with no concrete plan in place for recovery. I say let them file Chapter 11. Contrary to popular belief, the can keep up day to day operations, restructure their debt with the help of a bankruptcy judge, ande hopefully emerge as a competitive company.
Posted by: Herbie H. | December 12, 2008 1:09 PM