Bailout Watch 71: Dissenting Voices Lost in the Spin Cycle

by Robert Farago

September 27th, 2008 3:37 PM

bailout watch 71 dissenting voices lost in the spin cycle

As we’ve just reported, the Senate’s OK’ed a big ass appropriations bill which included $25b low-interest federal loans for Detroit [via the Department of Energy, with an initial five-year payment holiday]. While the bill passed by a convincing margin, and the lame duck President is sure to sign it, the increasingly vociferous fiscal conservatives are starting to make themselves known. Automotive News [sub] reports the dissent. “Sen. Jeff Sessions, R-Ala., warned that loans to the industry could violate international trade agreements that restrict government subsidies for private businesses. Sen. Jon Kyl of Arizona, the Republican whip, said that features of the loan program are ‘eerily familiar’ to easy-credit practices among home lenders that led to the nation’s current financial crisis.” In a pre-written acceptance speech (’cause the suits are home for the weekend), GM highlighted the loans’ non-bailout, PC nature. “Congress clearly recognizes the need to move forward at this critical time to make available this source of capital for automakers and suppliers. Authorized nearly a year ago, these direct, federal loans will support advanced technology development and implementation and will help speed the transition to cleaner, more fuel-efficient vehicles.” As would a consumer credit for consumers who bought a fuel efficient vehicle from ANY automaker.

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4 of 17 comments

Golden2husky on Sep 28, 2008
The common man is part of the problem. Who do you think was taking out the loans in the first place? Congress has a role, Wall Street has a role, but this all rests on people taking out some very risky mortgages. Once the credit faucet was opened up wide, it wasn’t just the poor and minorities who took advantage,... Which is why the credit industry is supposed to enforce proper oversight on who gets a loan and who does not. But with the rise of property values, there was too much money to be made and the industry abandoned its system of controls for short term gain. Think GM's management style and SUV only mentality as a good analogy. There will always be people who are financially irresponsible - the charge card industry thrives on it - but we have to be able to have confidence that those who can put us in this mess would have the foresight not to allow it to happen. Obviously, with so much money to be made, intelligent decisions can't be counted on. Now, we have the opposite problem. Good credit has all but dried up. When I bought my house in the mid nineties, I had to meet certain requirements to make sure my household mortgage expense did not exceed a certain percentage of my total income. I made the threshold, but had I not, the only real alternative would have been to get somebody -like my father-to be a co-owner.

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Lichtronamo on Sep 28, 2008

RF: C11 is a given for one or more of these companies, its just a matter of when. The rate at which each of them is burning cash is alarming. SO, when I used "may", it is because I'm not even sure the bailout will delay C11.

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Landcrusher on Sep 29, 2008

The money is nothing other than corporate welfare. And yes, if you own a company, insurance is great. You get to choose the plan! OTOH, the whole structure of the system of having your insurance based at your job is just stupid. The health savings accounts and the tax credits to individuals are just means to a desirable end of separating health insurance from the work place. Most people hate it when their company tells them what cell phone and service to use, yet they really want the boss to pick their health insurer? Right.

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Ricky Spanish on Sep 29, 2008

$25 billion in loans isn't going to help considering the big wall street bailout just failed - meaning nobody's going to be able to borrow money to buy ANYONE's cars. It will just delay the inevitable.

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