Bailout Watch 65: Today's the Day…
Congress will approve $25b worth of federal low-cost loans under the 2007 Energy and Security Act. The funding will be included in a general bill that keeps the lights on down in DC. In other words, it’s a sure thing. And, let’s face it, a sweetheart deal. As The Detroit News reports, “The Big Three automakers, which have poor credit ratings [!!!], could save more than $100 million per $1 billion borrowed and will get as much as 25 years to repay the loans. They could also ask the Energy Department to defer repayment for up to five years.” And now, the bad news: the program won’t be expanded into a slush fush for the struggling Detroit automakers. The language continues to mandate that the money be used for retooling old factories to build fuel efficient vehicles. The good news: “…the U.S. Department of Energy will have broad latitude to determine how and which projects will qualify for loans under the program.” Let the lobbying begin! The bad news: “This is a $25 billion loan program (and) we’re going to carry out our due diligence in implementing a program this large,” Energy Department spokesman Healy Baumgardner promised. Translation: automakers aren’t likely to see any loans until spring of next year at the earliest. The consolation prize: the Volt will qualify for a $7500 federal tax credit. You know; after Uncle Sam gives GM billions to build it. Sweet!
More by Robert Farago
Comments
Join the conversation
RetardedSparks: http://www.buymyshitpile.com/
This week Congress may write a $700 billion dollar blank check so that the Treasury can overpay for the bad mortgage, auto, and credit card loans of foreign and domestic financial companies that took horribly stupid risks. Those risks initially made those companies a lot of money, but now that they are loosing money they want their losses socialized. If we are lucky the bailout will come with ownership stakes in the bailed out companies, congressional oversight of the bad loan purchase process and executive compensation caps for the bailed out companies. The funding of a $25 billion dollar loan package that was approved by Congress and the President as part of an energy bill, and that will go to rebuilding factories in the US that are owned by US shareholders pales in comparison to that financial bailout. This is not moral relativism but an example of how government should intervene (the funding of well debated legislation targeted at specific goals), and how government should not intervene (blank check legislation passed under the-sky-is-falling threats from Paulson that are similar to Bush’s Iraq war threats). Remember “you must act now” is what a used car salesman tells you before he screws you (paraphrasing a Republican Congressman). If the auto industry of any other county faced what the big three face the government’s action would be much stronger. The problem with the subsidized loans to rebuild factories is that they will not do anything to solve the real problems crushing US automakers - overreaching state dealer protection and employee legacy costs. The best thing Congress could do for the US automakers is to re-write Chapter 11 (specifically for the automakers) so that the automakers can shed their dealer and employee issues (like they could under a current Ch. 11) while guaranteeing customers that their warranties will be honored and that parts and service will remain available.
This money-for-nothing only reinforces my promise to never buy anything from F, GM, or Cry-co