By on December 12, 2008

The Washington Post reports that President Bush has signalled (from Air Force One no less) that he will “consider using funds from other sources to provide emergency aid to the nation’s Big Three car companies following the Senate’s rejection Thursday night of a Congressional bailout plan.” This is a reversal of Bush’s previous insistence that the money for Motown’s Troubled Twosome (Ford’s maintaining its low profile) must come from the Department of Energy’s $25b “retooling” loan program, and follows Congress’ abortive efforts to scarf the funds. “Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms,” the White House statement said. “However, given the current weakened state of the U.S. economy, we will consider other options if necessary — including use of the TARP program — to prevent a collapse of troubled automakers.”

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35 Comments on “Bailout Watch 284: White House Promises GM and Chrysler TARP Funds...”


  • avatar
    1996MEdition

    Man, I wish I would have bought GM stock 15 minutes ago……it was like $2.60….instantly back up to $3.70…..damn you George Bush

  • avatar
    AG

    I figured Bush would have to blink on this one. Only problem is, isn’t it a dirty little secret that the 700 billion is a drop in the bucket compared to what Wall Street really lost?

  • avatar
    Blobinski

    I am listening to the UAW chairman speak right now. Holy cow, the obfuscation and mis-direction off of the real issue is amazing. Whine and moan and even including emotional emails in the discussion. How embarassing. Even saying “The guys at Toyota even make more than us and I have the newspaper articles to prove it.” Well, the guys down south at Toyota make more a couple dollars more per hour, but the Total Cost calculation of the UAW on the Big 3 cars is more per car than anyone else. Again, misdirect misdirect misdirect. The more I listen the more disgusted I get. He is just whining. Saying that “the government uses Taxpayer dollars to subsidize the competition”. WOW.

  • avatar
    dgduris

    Dear Republicans,

    Next time, please, nominate a conservative so we can elect a conservative. Obama is going to be four-more-years of the last eight-year spending spree that has brought us to this point.

    And, while GWB has done some awfully wonderful things in the world (billions in medical aid to Aftica…)he sure never leveraged any of his well intentioned largess to gain support for anyone but the party of H. Reid an B. Fwank.

    Probably could take a lesson or two from Blogojevich on that one.

  • avatar
    gamper

    Gamper called it!!!!

    Wow that is annoying.

    To all those in the earlier thread who doubted me, picture that simpson’s kid pointing and shouting haaaa haaaa.

  • avatar

    1996MEdition :
    December 12th, 2008 at 10:17 am

    Man, I wish I would have bought GM stock 15 minutes ago……it was like $2.60….instantly back up to $3.70…..damn you George Bush

    I think you’re seeing attempts to keep the stock market from cratering completely – words are cheap. That money could have been released yesterday.

    But yes, a near 45% jump is nice money, if you buy a couple of million shares it’s really nice!

    Here’s what Dana Perino said – not exactly a commitment:

    Under normal economic conditions, we would prefer that markets determine the ultimate fate of private firms. However, given the current, weakened state of the U.S. economy, we will consider other options if necessary, including use of the TARP program to prevent a collapse of troubled auto makers. A precipitous collapse of this industry will have a severe impact on our economy. It would be irresponsible to further weaken or destabilize our economy at this time.

    I love that last sentence.

  • avatar
    no_slushbox

    1996MEdition:

    The shareholders in Ford and GM will be wiped out. The companies are not viable as they exist, and the bondholders, secured creditors, government loans and UAW and dealership liabilities will all take priority over the stockholders getting a cent when the companies finally fail or get sold off to BRIC countries.

    There is going to be a lot of volatility, but, unless you are buying newly issued post Chapter 11 shares in GM or Ford there is no hope of long term gains.

    Days like these are a good opportunity to pick up shares of viable companies like Honda on the cheap.

  • avatar
    PeteMoran

    @1996MEdition

    wHOa! Everyone’s a gambler (sorry) Wall Streeter in the USA eh? Funny stuff.

    Maybe Bush and cronies are gaming the market. What are the GM volumes like?

  • avatar

    @1996

    And if you want to swing stocks vs politics, keep an eye at Talkingpointsmemo.com — they posted this at 9:48, before the WH announcement. Check the last sentence. They have various Washington insiders sending them tips.

    I don’t think it’ll be hard to explain why Senate Republicans had the final say: that’s what the Constitution and Senate rules require. How else would we have passed anything?

    I do think it’ll be hard for Senate Republicans to explain themselves.

    They were invited, repeatedly, to participate in more than a week of negotiations with a Republican White House. They declined.

    They were asked to provide an alternative bill. They refused.

    Finally, one of their members – Senator Corker of Tennessee – participated in a day-long negotiation with Senate Democrats, the UAW, and bondholders. Everyone made major concessions. Democrats gave up efficiency and emissions standards. UAW accepted major benefit cuts and agreed to reduce workers’ wages. Bondholders signed off on a serious haircut. But when Senator Corker took the deal back to the Republican Conference, they argued for two hours and ultimately rejected it.

    Why? Because they wanted the federal government to forcibly reduce the wages of American workers within the next 12 months.

    Heard this morning that President Bush may still use TARP money to rescue the automakers. He reportedly doesn’t want to end up as the next Hoover.

  • avatar
    bluecon

    Why do we keep calling this payoff to the UAW a buyout for the Big 2.8?

    If Blagojevichgate doesn’t stop the crowning, President elect BO will be handing over the money on the 21st of January. Even GM should be able to hang on that long.

    So what would be the result of giving the Big 2.8 a few billion?

    They ask for more in a month. And the month after that. And the month after that. And the money will be used for what? Bankruptcy is the only solution.

  • avatar
    bluecon

    Quote STL
    “UAW accepted major benefit cuts and agreed to reduce workers’ wages.”

    So just what where are these wage cuts?

    Maybe the UAW will give up the jobs banks and if the members are not working they will not be paid? Maybe. Thats it?

  • avatar
    ronin

    >>”…Why? Because they wanted the federal government to forcibly reduce the wages of American workers within the next 12 months…”

    Yes, that’s true. When you come begging for free money that belongs to other people, you must be prepared to pay the price. Guess they were unwilling to pay the price. Why the whining then- they thought they would get welfare for free? They thought it was their divine right to take from other, less well compensated workers? They thought it might be better to be unemployed to take a cut in pay or benefits?

    Welcome to the America everyone else has lived in (save gov workers) for the last 25 years.

  • avatar
    ronin

    Don’t understand what Treasury is going to do.

    Those funds were budgeted by Congress for a specific purpose. They are not Bush’s free money to spend or divert or throwaway on whim.

    Otherwise they could always say they need funds to build hospitals in New Orleans and then divert it to build roads in Texas or bombs in Iraq or bridges to Pluto.

    I think Treasury is blowing smoke, and will continue to ‘study’ the issue for another 5 weeks or so…

  • avatar
    bluecon

    “Don’t understand what Treasury is going to do.

    Those funds were budgeted by Congress for a specific purpose. They are not Bush’s free money to spend or divert or throwaway on whim.”
    Where you been?
    Yes they are.

  • avatar
    Blobinski

    If there is an ultimate bailout, I think there should be a required line on the window sticker of each car from the Big 2.8 that states the amount of bailout spent per car. “Government Bailout fee per vehicle – $87,500 (deferred until April 1, 2009, fee paid by all US Citizens).

  • avatar
    no_slushbox

    “I. The Troubled Asset Relief Program (TARP). . .

    b. Who can participate?

    The Act’s criteria for participation are very unclear. It states that “financial institutions” will be included in TARP if they are “established and regulated” under the laws of the United States and if they have “significant operations” in the United States. The Treasury will need to define what institutions will be included under the term “financial institution” and what will constitute “significant operations.”

    Certain institutions seem to be guaranteed participation. These include: U.S. banks, U.S. branches of a foreign bank, U.S. savings banks or credit unions, U.S. broker-dealers, U.S. insurance companies, U.S. mutual funds or other U.S. registered investment companies, tax-qualified U.S. employee retirement plans, and bank holding companies.

    Whether hedge funds, as virtually unregulated institutions, will be included depends on the discretion of the Treasury, but it seems unlikely. Hedge funds (partnerships in which experienced investors pool their money to make complex, and often risky, investments using advanced investment strategies) have recently become politically unpopular in the U.S. as a result of their perceived role in creating the crisis. This perception of hedge funds makes it difficult for the Treasury to allow them to participate in a taxpayer-funded bailout program.”

    http://www.uiowa.edu/ifdebook/issues/bailouts/eesa.shtml

    GMAC has failed to qualify for TARP funds because it has not been able to qualify to become an FDIC insured bank holding company. For GM to qualify is going far beyond even the very loose limits of the Act. GM, especially with GMAC as a separate entity, is in no way a financial institution.

  • avatar
    1996MEdition

    The stock thing was a joke……wouldn’t dare it, lost enough in 401K and “bonus” options through Delphi.

    The stock volatility is interesting though….seems like a lot of people are hanging on every word on the bailout.

  • avatar
    rkeep820

    How can GM qualify for TARP if even GMAC can’t?

    The $$$ will come from the White House Emergency Fund. Not TARP.

  • avatar

    Isn’t the source slightly moot? The government doesn’t have a lot of different sources to tap money from. At any rate, Dana Perino said they’d consider TARP as a source, but would act, somehow.
    …we will consider other options if necessary, including use of the TARP program to prevent a collapse of troubled auto makers.

    Looks like they’re setting up a last white knight to the rescue act for Bush. And they’ll probably just create a car czar financial institution they’ll channel the money to, before it’s redistributed to the car companies. No way to fix a pol in place.

  • avatar
    Pch101

    Why do we keep calling this payoff to the UAW a buyout for the Big 2.8?

    You’ve missed it. The real winners are the bondholders, as they will continue to get their interest payments, thanks to government subsidies.

    The Republican proposal included a requirement that the bondholders accept 30 cents on the dollar. Sounds nice, but the recent market price for the bonds was below 30 cents, so anyone who bought them recently would make a nice profit with this deal.

  • avatar
    CarnotCycle

    I was watching Keith Olbermann on MSNBC last night and it was funny to see him and his ilk twist and turn about the plight of American union workers being eviscerated by Evil Republicans. I wonder what model of BMW or Lexus Olbermann drives?

  • avatar
    geeber

    If Olbermann had a clue, he’d realize that a lot of the “corporate welfare” he and his companions wail about is driven by a desire to “save jobs.”

  • avatar

    The Dow is only down less than 70 points as I type this. Maybe there’s hope… then again, there’s still 4 hours left in the day…

  • avatar

    Every single one of the economists and financial experts that testified at the congressional hearings said that the legislation wasn’t needed, that the Fed, Energy Plan and TARP already had enough authority to aid the automakers without additional legislation. Bush did the right thing, though, and prior to acting in an executive capacity, he let congress take a swing at it. They whiffed, now GWB will direct his treasury secretary to provide the loans.

    The legislation allows it and while the Fed is independent, Treasury is not. They work at the pleasure of the chief executive. GWB will tell Paulson to make the funds available. Paulson has two choices, loan the money or quit his job.

  • avatar
    jolo

    Now that the congress does not get to dictate policy for the bailouot money, what will the debt2 have to do to get the money? Will there be provisions of some sort put on them? Will there be a car czar? No golden parachutes? Those were congress’ stipulations.

    The government already said they would not let them go under. The debt3 do not have to agree to anything because they are going to get their way in the long run. This has all been scripted and will continue to be so until it gets to the point where one of them has no choice but to go under. But then more money will be thrown at them and everything will be fine in debt3 world.

  • avatar
    menno

    I have a real “solution” for Detroit Inc and all of the Washington politicians currently twisting in the breeze.

    Most politicians are way more wealthy than the vast majority of their constituents.

    If they think the 2.8 is worth bailing out with our money, how about they put 50% of their net worth towards the goal – with no strings attached – as a gift, as an act of good faith?

    Then Mr. Bush can telephone all of his friends in the oil industry (which until recently was making more money per hour than GM used to make per year in it’s heyday – and I might not even be exaggerating for effect here) and tell – don’t ask – them to kick in a few hundred billion. Mere pocket change for them.

    Then the UAW get their telephone call. In order for all of this to happen, wages are cut 30%, the jobs bank evaporates 5 minutes ago and the tons of freebies (including viagara which ends up on the black market anyway) get pared down to nominal (read: normal for the rest of the working stiffs out there). In other words, the UAW get a big hair cut.

    Next call, the board and execs of Mercedes Benz. Since they declared the net worth of 20.1% of Chrysler to be “zero” awhile back, GWB can make them an offer they can’t refuse; we’ll send you $1 nice and fresh, in an envelope, as a token and you send us 20.1% of Chrysler to be repatriated and turned into 350 million mini-shares to be mailed to every US citizen. Or we pull all of our troops (and money) out of NATO tomorrow.

    Final call, the boards and executives at GM and Chrysler to indicate that they will either succeed for fail, but this is the last handout/bailout/help short of Chapter 7 bankruptcy and that Chapter 11 bankruptcy is out of the question if the monies are accepted. Do or die. Oh yeah, you guys just got a $1 per year wage until and if your companies start pulling a real profit and paying back these LOANS with interest. Then telephone Ford and make the offer without forcing them to take it – but it’s a case of “say yes or no, but do it now.”

    Not one red cent of taxpayer monies are needed. Detroit survives, in order to see if it can reinvent itself, no animals are harmed in making this picture…

    Naturally, none of it will happen.

    Did anyone else notice that today is the intro date for the remake of the movie entitled “The Day The Earth Stood Still” ? Yeah I know, I have a bizarre mind…

  • avatar
    1996MEdition

    Doesn’t Obama have some surplus campaign funds? WOuldn’t those help the D3?

  • avatar
    Old Guy Ben

    Denninger lays the outcome at the feet of the UAW.

    Tonight the UAW decided to destroy the United States auto industry, refusing labor cost parity on an immediate basis as the price of a bridge loan for the auto industry.

    Labor cost parity should have happened fifteen years ago.

    Tonight, it was the last straw, and the game of chicken that the UAW played with the American economy turned into a head-on collision at 140 mph.

    Mr. Gettlefinger, this is your responsibility. GM will file bankruptcy within days if not hours. Your employees will lose their jobs. Ford will survive, but all auto production in the United States will be non-union within 12 months.

    Time will tell if he’s right, but so far he’s called most of the mess we’re in right now correctly.

  • avatar
    philipwitak

    “…isn’t it a dirty little secret that the 700 billion is a drop in the bucket compared to what Wall Street really lost?”
    AG / December 12th, 2008 at 10:19 am

    certainly seems so to me – otherwise, all of the banks and other financial institutions with losses on and off their balance sheets would have already come clean about the actual figures involved and the economy would be moving closer, and much more quickly, towards recovery.

  • avatar

    As I understand how America works, the US Senate has no authority to compel Americans to work for less money. They certainly don’t have the moral authority to allow foreign entities to set standards for paying Americans who don’t work for them.

    I’m no fan of the UAW but this is a reverse tariff that benefits only Toyota & Honda.

    That so-called conservative senators from the South supported this makes me want to rethink voting Republican.

    If you live in the industrial Midwest, boycott the South. If you can still afford to vacation someplace warm, go to Puerto Rico or the US Virgin Islands instead. The people there don’t hate us and they speak better English.

  • avatar
    no_slushbox

    Ronnie Schreiber:

    If you believe in the government putting failed manufacturers on welfare to satisfy special interests then you never should have been voting Republican.

    As a condition of giving money away to insolvent companies the US Senate can demand pretty much anything it wants, or simply refuse to give away the money.

    For those opposed to the bailout the Michigan boycott will be relatively easy, no offense to Mackinac Island.

  • avatar

    no_slushbox,

    When an ideological conservative like Thaddeus McCotter (who will be the next governor of Michigan) supports a bailout, it’s not because the UAW is giving him money – the UAW has given McCotter’s opponents. He supports a bailout because the supply chain is strategically vital.

    Wage and price controls have never worked. Not under FDR and not under Nixon.

    Meanwhile, the president of the SEIU, the largest public employee union in the country, had material knowledge that Blagojovich was playing eBay with a US Senate seat and did they turn him in? No, the SEIU official, when Blago solicited a bribe, replied, on tape, “put that flag up and see where it goes.”

    That’s at most a hair’s breadth away from participating in a criminal conspiracy.

  • avatar
    no_slushbox

    Ronnie Schreiber:

    Thaddeus McCotter supports the bailout because he puts helping his rich supporters in Michigan stay rich even if it comes at the expense of US taxpayers and his principles.

    Claiming the bailout has anything to do with national security is a lie that the Republicans opposing the bailout did not fall for. There is no longer any overlap.

    Companies like Rolls Royce and SAAB have sold off their automotive units to foreigners because they want to focus on high-tech, profitable defense instead of low tech, money losing cars.

    Do you really think a war between the US and China or Russia is going to come down to who has the most light military vehicles? Not since Hiroshima and Nagasaki.

    The best engineers go into defense, and the auto industry gets what’s left over. The lack of a defense industry is probably part of why Japan makes the best cars.

    “Wage and price controls have never worked. Not under FDR and not under Nixon.”

    Neither has bailing out failed automakers: http://en.wikipedia.org/wiki/British_Leyland

  • avatar
    PeteMoran

    Bloomberg are reporting Wagoner and Cerberus’ Stephen Feinberg in private talks with Bush and officials.

    If Feinberg has direct access to Bush in this situation, it’s done.

    This gets sillier by the minute.

  • avatar

    Thaddeus McCotter supports the bailout because he puts helping his rich supporters in Michigan stay rich even if it comes at the expense of US taxpayers and his principles.

    McCotter’s district is mostly middle class, though there are some more affluent folks on the north and west ends of the district.

    Looking at Opensecrets.org, the only “rich supporters” that I can find is the Thompson Foundation, set up by retired entrepreneur Bob Thompson and his wife Ellen. To get an idea of just how selfish they are, here’s some info on them and their foundation:

    When Bob developed heart problems, he decided to sell the business to Oldcastle Materials in 1999. Thompson shared nearly one-third of the $461 million sale with his employees. He gave bonuses up to $1 million to those loyal employees who had been with the company for years, and set up annuity accounts for others who are still years away from retirement. Bob stayed on at the office to help the transition go smoothly and to continue to counsel and train existing team members to take his place. That same year, Bob and Ellen Thompson founded the Thompson Foundation with $100 million from the sale of the Thompson-McCully Company.

    The Thompson Foundation’s mission is to help low-income people rise out of poverty and become self-sufficient. The Thompson Foundation has already:

    * Established 1,000 Detroit private school scholarships for Detroit inner city kids, 500 scholarships at Schoolcraft Junior College in Livonia, 100 Michigan Tech University undergraduate engineering scholarships, and 20 Michigan State University graduate scholarships;
    * Granted funds to dozens of other programs like food banks, guidance centers, and job placement and training facilities.

    Real greedy types, eh?

    Top 5 Contributors, Thad McCotter 2007-2008
    Thompson Foundation $10,200
    Air Line Pilots Assn $10,000
    American Crystal Sugar $10,000
    American Dental Assn $10,000
    Bricklayers Union $10,000

    Top 5 Contributors, Richard Shelby 2003-2008
    Citigroup Inc $91,200
    PricewaterhouseCoopers $68,250
    JPMorgan Chase & Co $66,500
    Southern Co $62,250
    Collazo Enterprises $61,000

    Looks like Citigroup and JP Morgan got their money’s worth. BTW, Shelby’s slush campaign fund has over $13 million on hand.

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