Big 3 Bailout Becomes Big 2 Bailout for the Short-Term

Extremely unpopular or not, Congress is determined to go through with the Big 3 Bailout. But - now - so is the White House. But it is for far less money and for just two of the automobile manufacturers. Reuters has reported that leading Democrats in Congress have negotiated a deal with White House officials to loan two of the Big 3 Detroit automarkers as much as $15 billion dollars, less than half of what the Big 3 asked for when they came before Congress on Thursday and Friday (December 4,5).

Sources told the Reuters that the money was expected to be a short-term loan until the Democrats move in in force on January 20, 2009. Advocates and opponents alike describe the deal as stopgap at best, solving nothing, and putting more pressure on the flailing American economy in the long run by demanding more loans and bailouts in the future.

Ford CEO Alan Mulally told Congress that his corporation was not in need of federal assistance at the moment.

House Speaker Nancy Pelosi, who has stridently insisted upon monies loaned to the auto companies come from the $700 billion bailout money given the U. S. Treasury in September, sidelined her efforts Friday when it became clear that the Bush administration was refusing to budge on the issue. Instead, monies approved for a $25 Energy Department loan that was set up to help auto companies meet fuel-efficiency standards, the option promoted by the White House, will be used.

Congressman John Dingell (D-MI) is optimistic, stating that it was a "good beginning." He also said that "next year we will work with President-Elect Obama for a permanent solution."

Both Speaker Pelosi and Senate Majority Leader Harry Reid said they expected a vote on the proposed measure next week.

But what is really going on here? The Bush administration's stonewalling efforts are being spun as refusing to cater to a poorly managed and self-destructive industry. What the refusal really amounts to is some type of last-minute attempt for Bush to win points with the conservative base by denying the Big 3 automakers the bailout they have asked for, perhaps to make some sort of amends for the debacle that has become the $700 billion Wall Street bailout (rescue package, revitalization, giveaway). Never an administration to show any restraint where matters of fiscal responsibility was concerned, the White House's stance seems to be purely political. Knowing that the Democrats will enter the new administration with a clear majority in both chambers of Congress, the Bush administration, after pushing and ramming through Congress - with the help of key Democrats and Republicans (some who are not coming back in January) - the equally unpopular $700 billion bailout for Wall Street financial firms that arguably have helped place the economy in its current straits through poor managerial practices, has balked at releasing a mere fraction of that amount, either as an independent measure or as part of the $700 billion bailout discretionary fund currently controlled by Treasury Secretary Henry Paulson.

At the same time, China, the European Union, and various nations around the world are considering bailouts so that their respective automobile manufacturers do not go bankrupt or collapse. And it is doubtful that the failure of any combination of those manufacturers' failures could cause the cascade of events that could potentially cost over 3 million people their jobs and shut down hundreds of ancillary and dependant companies and corporations - the dire prognosis of many industry experts, economists, and legislators should the Big 3 begin to fall.

Speaker Pelosi and others have stated that any monies given the auto industry will come with restrictive strings. And there are no guarantees that any monies forwarded will be returned in the near or even the far future.

The Big 3 may still end up in bankruptcy or completely collapse altogether.

Nothing is certain.

But to do nothing is to watch a key pillar of the American economy disintegrate. Many believe that rebuilding or regaining that pillar might never occur if the industry is left to fend for itself in the current economic crisis. It is feared that jobs lost will be resurrected in other countries during better economic times. It becomes a matter of the potential billions of dollars of tax revenues, paid wages,

The industry definitely needs restructuring and redirecting. But to let the Big 3 fail simply fail bespeaks of federal negligence. It also speaks toward betrayal of the working middle class. The Bush administration not only fought for the $700 billion Wall Street Bailout - a piece of legislation that engendered or refortified much of the anger now leveled at federal loans and bailouts - that was passed without the foresight of strict oversight (marginal and after-the-fact at best).

But that bailout money went to white collar Wall Street.

The Big 3 Bailout money will go to keeping afloat an industry nearly totally dependent upon blue collar workers. The loan asked for by all three companies, Ford, Chrysler, and General Motors - and fought against by the Bush administration - amounted to a little over one-twentieth of what was basically given to the Treasury Department. The current negotiated deal (emphasis should be placed on the "negotiated" aspect, considering that the Bush administration's proposed of taking from the Energy Department loan was the "negotiated" deal, which reads more like "refusal to negotiate") is one-forty-sixth of what Treasury Secretary Henry Paulson was given nearly complete control over. And the Big 3 Bailout, which looks to be more like the Big 2 Bailout, has had far more opposition and will have far more restraints and requirements - like producing plans for commercial viability and paying the loans back - than the $700 Billion Wall Street Bailout.

And the Bush administration is doing it under the guise of protecting the taxpayers' money, using public opinion and traditional party politics, something heretofore ignored, as their stated rationale.

Hypocritical action and demands by an administration that has shown nothing more than unabashed disdain for regulations and restrictions seems a fitting way for the Bush White House to end its tenure. But while they hand the ailing automobile industry the proverbial band-aid to meet the problem of what amounts to multiple organ failure, it should be remembered that the Bush administration led the fight for giving the finance industry an entire hospital.

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Source:

Reuters.com

NYTimes.com

Bloomberg.com

Angreybear.com