By on December 20, 2008

President Bush’s radio address this morning: “Good morning. For years, America’s automakers have faced serious challenges — burdensome costs, a shrinking share of the market, and declining profits. In recent months, the global financial crisis has made these challenges even more severe. Now some U.S. auto executives say that their companies are nearing collapse — and that the only way they can buy time to restructure is with help from the Federal government.

I’m not going to name names. I’m not going to lay blame. I’m just trying to clear my name.

This is a difficult situation that involves fundamental questions about government’s proper role. On the one hand, government has a responsibility not to undermine the private enterprise system. On the other hand, government has a responsibility to safeguard the broader health and stability of our economy.

I’m sacrificing A for B.

Addressing the challenges in the auto industry requires us to balance these two responsibilities. If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. Under ordinary economic circumstances, I would say this is the price that failed companies must pay — and I would not favor intervening to prevent automakers from going out of business.

I don’t favor intervening in free markets unless I do.

But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The question is how we can best give it a chance to succeed. Some argue the wisest path is to allow the auto companies to reorganize through Chapter 11 provisions of our bankruptcy laws — and provide a Federal loan to keep them operating while they try to restructure. But given the current state of the auto industry, my economic advisors believe that bankruptcy could now lead to its disorderly collapse — sending our economy into a deeper and longer recession.

A government-aided Chapter 11 is the right thing to do. But we’re not going to do it.

A more responsible option is to give auto companies an incentive to restructure outside of bankruptcy — and a brief window in which to do it. My Administration proposed legislation to achieve this, but Congress was unable to get a bill to my desk before adjourning for the year. This means the only way to stave off a collapse of the auto industry is for the executive branch to step in. So yesterday, I announced that the Federal government will grant loans to auto companies, which will provide help to them in two ways.

This is Barack Obama’s problem now.

First, the loans will give automakers three months to put in place plans to restructure into viable companies — which we believe they are capable of doing. Second, if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success.

We believe GM and Chrysler can do what they say they’re going to do– minus the bits they say they’re going to do. But I can’t say that. Because if I did, I would be saying I don’t believe them. Which would mean this bailout makes no sense whatsoever. Anyway, like I said, this is Barack Obama’s problem now.

The terms of the loans will require the auto companies to demonstrate how they would become viable. They must pay back all their loans to the government, and show that their firms can earn a profit and achieve a positive net worth. This restructuring will require meaningful concessions from all involved in the auto industry — management, labor unions, creditors, bondholders, dealers, and suppliers. If a company fails to come up with a viable plan by March 31st, it will be required to repay its Federal loans. Taken together, these conditions send a clear message to everyone involved in American automakers: The time to make the hard decisions to become viable is now — or the only option will be bankruptcy.

Chrysler and GM must pay back the federal loans because that’s what a loan is: something you pay back. Actually, fuck it. If they can’t repay the money, they can declare bankruptcy. At that point, no one’s going to care about a measly $17.4b.

The actions I’m taking represent a step that we all wish were not necessary. But given the situation, it is the most effective and responsible way to address this challenge facing our Nation. By giving the auto companies a chance to restructure, we will shield the American people from a harsh economic blow at a vulnerable time. And we will give American workers an opportunity to show the world once again that they can meet challenges with ingenuity and determination, and emerge stronger than before.

Who’s your Daddy?

Thank you for listening.”

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16 Comments on “Editorial: Between The Lines: President Bush’s Bailout Defense...”

  • avatar
    Robert Frankfurter

    The D3 problem is only one single but fat parcel in the whole, far bigger, bleak picture.

    I spare you the boring technical financial details coming right to the point understandable even for a laymen:

    Bush approach to the self made crisis is evidently a copying of Mugabes currently faltering communistic system. Running the dollar print machine day & night on crack- resulting inescapable in recession, then depression ending in hyperinflation. Soon you will see $ 10.000 notes in your purse. Backed not with any true values like gold or any other assets but with nothing but a lame promise in a mountain of debt. The story ending soon after the $ 100.000 million note will be printed and soup kitchens blossom all over the country. Massive devaluation of the US dollar and return to the gold standard will be sold to the impoverished US public as the only solution and way out. That comes late in 2011.
    Every gram private gold in private hand will be confiscated by the (run out of all sellable assets only debts in store) government to back the new dollar- not for the first time. Americans history repeated, learn what to expect in the coming moths here:

    Bretton Woods Gold Standard

    This is sorrily a positive evaluation as it leaves out that the possible intervention of US biggest creditor, China most probably will be hastening the fall. That their holding their food still like a mule while seeing their bank accounts melt is not probable – at best.

    I take bets. Entry minimum one bottle 2000.06 Chateau LAFITE ROTHSCHILD – Pauillac (Recorked by the Chateau; VSLC) – buy today as thats now still a better investment then US bonds tomorrow.

    PS: Not only but lastly by that irresponsible action Bush cements his place as the worst US president in 200 years.

    Good night & good luck

  • avatar

    Why is everybody blaming Bush? He is just doing what the Democrat controlled Congress wants. This is a payoff to the UAW and when Obama is anointed this will be a drop in the bucket. Expect the Dem controlled Congress and Obama to try to push 10’s of billions more past a Republican Senate fillibuster.(if they can get 40 senators to vote against the payoff)

    These are soon going to be the good old days, remember them well.

    Dick Morris predicts the future.(correctly)

  • avatar

    I honestly don’t care what Bush’s reason for bailing out detroit is… JUST DO IT.

    Only these scumbag “toyota republicans” down south are stupid enough to allow America to lose all of its manufacturing abilities. Obviously the scum are being paid off to do so.

    Guess what people…if you don’t want the bailout, MOVE OUT OF SOCIALIST AMERICA.

    go to Canda or Mexico or something. Who cares.

  • avatar

    Goodness, this topic draws some strongly-worded comments. Bush’s address this morning struck me as a pretty accurate description of the choices he had. This situation is an illustration of the old adage that a president’s options are often either bad or worse. You may not agree with the choice he made, but a lot of people do, most notably the president-elect and the majority party in Congress.

    It’s said politics is the art of the possible. It wasn’t possible a few years ago to prevent the subprime fiasco, and a crisis was necessary to build critical mass for fundamental restructuring of Detroit.

  • avatar

    F all of them.

    The UAW has cost too much.

    American cars: too many of them and too poorly designed and built. Of course, there are amusement parking lots full of them (they used to park T-Birds in the Cedar Point lots when I lived up there).

    Dealers, they don’t give a $h!# about you. They don’t need to. There are so many of them. (Christ, they’re like locust!)

    Who cares?

    Consumers care!

    Consumers want to be …cared for!

    Consumers are tired of bending over for Mr. Goodwrench (and Colbert!) and the ChryCo dealer.

    I am tired of taking my ex’s company Pontiac for service so she doesn’t get f’d by the dealer…because they think they can.

    It’s over!

    You have cared about yourselves – only. You don’t give a $#!* about your customers and haven’t since – well – ever.

    You bastards better hope that O’Bama hearts Fidel so you have some place to sell the crap that’s choking the Cedar Point lot and every other lot full of crap that make’s my dad’s 1974 Alfa POS look to be built like a 1970 Mercedes …or a 2008 Subaru.

    It’s a tough world. Get in the game! Get on your bicycles!

  • avatar

    So uhhhh when is Alfa returning to the US? I forgot.

  • avatar

    If you are going to claim ownership of other people’s income then at least be polite about it.

  • avatar

    Guess what people…if you don’t want the bailout, MOVE OUT OF SOCIALIST AMERICA.

    go to Canda or Mexico or something. Who cares.

    If all of us that wanted nothing to do with this bailout(61%) leave and become Mexicans and Canadians who is going to pay your pay check. No tax dollars from us(because we will be paying taxes in Mexico to excape the bailout) means no paycheck for you.

    Try not to forget you are living off OUR backs now. What was that saying about not biting the hand that feeds.

  • avatar
    Martin B

    I think it’s safe to say that Rick Wagoner won’t be getting a Christmas card from the Bushes this year. W must be cursing Rick for putting him in this position so late in his presidency.

    They say the first step to recovery is to admit there’s a problem. Detroit have finally done it, after selling off everything they could to keep going just one more month. If they’d done this a year ago, there’d be a bit of fat on the bones to work with. Now the emaciated body of the U.S. auto industry is on life support, and there are few options left.

    On balance, I believe Bush did the right thing by giving them the money, even if it disappears down a black hole. Come March, the economic picture will be much clearer. It might be that you need GM to make paraffin stoves for the soup kitchens rather than gas-sipping vehicles. In times of uncertainty, it’s wise to to to keep your options open as long as possible.

  • avatar

    In discussing the possible alternative courses of action, one really viable course of action- the most obvious one- was for some reason excluded:

    Do nothing. It’s not your money. It’s not in your job description. It’s not in your authority.

  • avatar

    I just got this on my “Quotes of the day” widget:

    When a stupid man is doing something he is ashamed of, he always declares that it is his duty.
    – George Bernard Shaw

    Very appropriate, eh?

  • avatar
    Robert Frankfurter

    Very appropriate – and what about the medical definition of insanity?

    “Trying the same failed method by the same means over and over expecting a different outcome.”

  • avatar

    From George Will on the new American dictatorship.

    “Congress’s marginalization was brutally underscored when, after lawmakers did not authorize $14 billion for General Motors and Chrysler, the executive branch said, in effect: Congress’s opinions are mildly interesting, so we will listen very nicely — then go out and do precisely what we want.

    On Friday the president gave the two automakers access to money Congress explicitly did not authorize. More money — up to $17.4 billion — than had been debated, thereby calling to mind Winston Churchill on naval appropriations: “The Admiralty had demanded six ships: the economists offered four: and we finally compromised on eight.” ”

  • avatar

    I just got this on my “Quotes of the day” widget:

    When a stupid man is doing something he is ashamed of, he always declares that it is his duty.
    – George Bernard Shaw

    Very appropriate, eh?

    I like this one better:

    “When the government robs peter to pay paul he can always count on the support of paul”
    – George Bernard Shaw

    GBS was a socialist

  • avatar

    I do not think socialism is a black and white thing. Its ok to help each other out, by any means necessary IMO. I want folks to have a place to live and food to eat. Its important to me to look at the Moral, Ethical and Logical of all these and choose what I feel is the best thing to do. Capitalism for money’s sake it pretty empty. Ignoring that people need is a bit sad for me. Although I think whats most important is that people are willing to help themselves. In this economic climate though it is perhaps a bit more difficult. Also I think a Americans have a lot of growing up to do, and nothing makes an impact on change like suffering. I dunno, I think people that might loose their jobs need to be contacted.

  • avatar

    Where is the Congressional uproar? The disapproval? The Bush bashing? Our President just walked all over the legislative branch AND the Constitution with a single stroke.

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