Auto Bailout Hits the Skids
It seemed inevitable that Congress would do something for the car companies. No matter how badly the Big Three's CEOs botched the public relations, a Democratic-dominated Congress and an exhausted Republican administration were likely not going to let the Big Three go down the tubes, at least not yet -- and not before forking over billions in taxpayer funding. Still, the tide of public opinion may have turned, and the Republican tolerance for bailout evaporated, just in time to stop the bailout in its tracks.
The big "break" for the Big Three came last Friday when the unemployment figures showed an astounding loss of more than 530,000 jobs. Without regard to the long-term prospects of these particular companies, Congress was not willing to add to our short-term economic woes.
Now some Republicans, chief among them the savvy Sen. Bob Corker of Tennessee, warned this was foolhardy. Unless labor costs and debt were sliced and unless real restructuring was undertaken, they cautioned, the companies would be back for more -- as much as $125 billion by one estimation. The public seemed to agree and opposed the bailout by a significant margin.
But Speaker Nancy Pelosi was the first to buckle, relenting from her demand that bailout money not come from a previously authorized fund for the Big Three's conversion to green technology. Then President-elect Obama got into the act on Meet The Press, suggesting that some bailout with conditions attached was the way to go.
By Monday night a draft bill was in the works and by Tuesday details emerged. In exchange for the $14 billion in loans, there would be a car czar installed, limits imposed on executive (but not union) compensation, and warrants taken by the government in the recipient companies to "protect" the taxpayers. Then everyone would be back, presumably for even more loans, in a few months.