Bailout Watch 239: Moody's Chief Economist "$125b, But Do It Anyway"
Sadly C-Span‘s coverage of today’s Senate Banking Committee didn’t kick off with a red carpet arrival of America’s automotive future. Similarly, a longish hearing with only the GAO General Comptroller didn’t do much to raise the pulse. It seems that TARP funds are still rhetorically on the table, and some form of oversight board will go along with any bailout. In fact, the seventies were back in a big way, as the 1979 Chrysler bailout is referenced as a model on numerous occasions. As if Chrysler’s CEO weren’t sitting there asking for more money. MarketWatch reports that Comptroller Dodaro said the Federal Reserve also has authority under current law to lend money to the Big Three, if the Fed board of governors determined that the need is urgent and that the loans would be repaid. However, the Fed has determined that it cannot lend to the companies because the loans cannot be collateralized as required.
Then we had prepared statements which ranged from surly and defensive (Gettelfinger), to contrite and reborn ( Mulally), and from wildly optimistic ( Nardelli) to wildly pessimistic (JCI Boss Keith Wandell). But the only shocker so far has come from Moody’s Chief Economist Mark Zandi, who stated that the Detroit auto firms would need $75 to $125b to avoid bankruptcy over next several years. He argues that reorganization is absoloutly necessary, but that it would be “better” if it didn’t happen in bankruptcy court, and thus he is in favor of the bridge loans. What, does this guy not pay taxes? Anyway, this issue is dominating the questioning as the hearings go on, so we’ll keep you posted as more answers come in.
Update: The Freep has excerpts from the witnesses’ statements.