Editorial: Bailout Watch 258: House Call

editorial bailout watch 258 house call

As yesterday’s Senate hearings wound down, it was hard not to be impressed with how pragmatic the conversation had become. By DC standards, at any rate. But any hope that the second day of testimony would build on the previous day’s momentum was misguided. Far from picking up on the previous day’s progress, the House Financial Services Committee testimony and questioning returned the conversation to step one, in a flurry of irrelevant posturing and evasive non-answers. Backsliding and tangential wanderings notwithstanding, we did learn a little more from today’s hearings.

When Rep Barney Frank gaveled the House Financial Services Committee to order, he began by noting that consensus that had been reached on the need for reorganization, changes in product mix and union concessions. This positive start was followed by immediate disappointment. Frank spent the rest of his opening statement explaining that bankruptcy wasn’t an option, and that the financial bailout made it somehow morally impossible to turn Detroit down.

Following Frank’s opening salvo, Pennsylvania Democrat Paul Kanjorski highlighted Moody’s Money Man Mark Zandy’s estimate of a $75b-$125b total bailout price tag. “We need a solution, not a first payment,” Kanjorski said. He matched Frank rhetoric for rhetoric: a Detroit bailout would bring lines of businesses to DC’s demanding the same congressional favors. The divide between the speakers– from members of the same party, no less– showed just the distance traveled from yesterday’s apparent consensus.

Not that the witnesses were worried about the re-do. Rather than preparing new statements reflecting the previous day’s debates, all three executives and their UAW compadre recycled the exact same statements they’d made before the Senate the day previous. The folksy one-liners, such as Mullaly’s invitation to “come over and kick the tires” and Gettelfinger’s “bridge to a brighter future” bon mot, were repeated with the same insincerity.

But why would the supplicants remind the lower house of congress that their more distinguished colleagues had all but damned Detroit to a four-month crash reorganization? By returning to their opening bid, they allowed the committee members to break the discursive trajectory, and head in their most favored directions. This being the house of representatives, the oportunity was not ignored.

A particularly egregious example: the opening statement by Rep Donald Manzullo (R-IL). His suggestion that automaker plans should include a request for an auto demand stimulus would do nothing to address the core issues: short-term cash infusion and long-term reorganization. Luckily, his remarks were easy to ignore, thanks to his insistence that workers in his district built “the world’s finest compact autos, the Caliber, Patriot and Compass.”

Rep Ron Klein (D-FLA) raised the specter of American Leyland, arguing that research and development for The Big 2.8 should be brought “physically under one roof,” so the American taxpayer would “understand that they were getting something tangible.” Of course, rather than referencing the failed British state conglomerate, Klein introduced his proposal as Ye Olde Manhattan Project. Knowing it would never happen, the plan was enthusiastically endorsed by all three CEOs. GM’s Wagoner insisted that this kind of collaboration and government support is “why the leaders in battery technology are in Japan and Korea.”

On a more substantive front, several representatives were less-than-enthusiastic about GMAC and Chrysler Financial’s plans to attain bank holding company status to “liberate” Troubled Asset Relief (TARP) funds. As we’ve pointed out previously, Detroit has largely survived thus far by creating a “subprime auto loan” market which is no longer sustainable. Yes, well, Toyota and Volkswagen have lenders with bank status, so these concerns disappeared in another blinding flash of relativism.

But for every Spencer Bachus and Barney Frank arguing for expediting bank status, there was a Manzullo saying “you’re there to make cars, not run a banking operation.”

Rep Thaddeus McCotter made a run at the Bob Corker award, by proclaiming a “solomonic” [sic] compromise. Unlike Corker’s far-reaching, pragmatic proposal, McCotter simply suggested splitting the expense between TARP and the section 136 (D.O.E. retooling) money.

The man the DetN likened to Winston Churchill (although they don’t share an antipathy to passive construction and misplaced prepositions) pronounced that “opposition in Congress is not to the idea of helping the automakers but rather to where the money would come from.”

The fact that only $7b of the 136 money is currently available didn’t give McCotter pause. Nor will it stop Congress. In an earlier exchange, Frank swept aside concerns that rash action on debotr seniority could undermine the entire basis of America’s credit system. “We wrote the bankruptcy laws,” Frank snapped. “We can change them.”

Probably the only common thread from yesterday’s hearing was a deep contempt for Chrysler. At this point it seems fair to stick a fork in a certain well-cooked three-headed dog. Nardelli faced yet more contempt on the “if it’s such a great plan why don’t you get your Mr. Moneybags owners to put up the damn money?” front. His answer, “they haven’t shared that with me,” convinced no one.

Rep Kanjorski got all three failed automakers to agree that they could survive 90 days on $14b worth of “bridge bridge” loans, with Chrysler getting $4b, GM getting $10b and Ford getting nothing. This will allow a government brokered agreement. The Congress recognized that extracting the major concessions needed from all the automakers’ stakeholders (where did I put my Buffy?) to create a mega-bailout ain’tgonnahappen.com.

Expect these funds to be appropriated fairly quickly, with a government oversight board assigned to guiding major reforms. Based on the evidence of today’s hearing, there are no guarantees that a coherent vision for the industry will emerge in only three months. And so it goes.

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  • TaurusGT500 TaurusGT500 on Dec 06, 2008

    The Senate hearing partially restored my faith in politics, in that were a number of reasonably sharp senators, especially Mr. Corker. The Congressional hearings on the other hand were an endless parade of arrogant, lightweight, empty-suited dunderheads. It was an epiphany however. ...a life changing event. I've determined if some of these knuckleheads can wreak havoc in the halls of Congress, so can I. In fact I'm announcing here on TTAC that I've decided to quit my job and run for Congress. First, I have to relocate to either Berkely Ca or some trailer park in Alabama. (Haven't decided which yet; have consultants determining where the stupidest constituents are). The hallmark of my platform will be that I'm going to streamline the ongoing transfer of wealth in America. My plan is to do away with the myriad programs, bureaucracies, and red tape it currently takes to move massive amounts of money from the "haves" to the "have nots". I will issue an official Bureau of Engraving and Printing printing press to every citizen over the age of 18. (Illegal aliens get one per family; residents of the Grosse Pointes, Hyanis Port, West Palm et al, none). Voila! Federal bureaucracy streamlined. Credit crisis solved. Everyone just prints what they need - honor system of course. Brilliant if I say so myself!

  • Twonius Twonius on Dec 07, 2008

    Thing is they're still going to have to "liquidate" more than 1/3rd of their workforces to stay afloat, quickly. So even if they do get a bailout, it's not like everything will be ok again.

  • Sgeffe From everything I’ve heard, this stuff was circling the drain before 2020, and the WuFlu was the fatal hit to the jugular!As has been noted, what will all of the purveyors of canapés, shrimp cocktail, and rent-a-bartenders ever do?And can someone please explain why the only place I can put a paragraph break in this commenting system is in the top comment, and not a reply? I think that’s why the comments on here are way down! (At least on an iPhone.)
  • Sckid213 Now would be a good time for a REAL NAME for a new Acura model. This would be like if Caddy named the Lyriq "Allante." Why bring back bad memories.
  • ToolGuy Have you seen Honda's latest business plan? Neither has Honda.
  • Jbawden My wife has a model 3 performance, its plenty fast, and while looks are subjective, I think it's nice looking. But, I stand solidly behind my comment that these are soulless appliances. Unprecedented performance cannot overcome what was lost when we remove ICE motivation. For the record I think BEV are great, I've owned one for almost 2 years, but let's stop drinking the unicorn kool-aid and pretending BEV are just as engaging as what they are replacing.
  • Dwford The first all new Dodge in 8-10 years and it's a quick rebadge of an Alfa Romeo. And the people at Stellantis are mad at US??? They aren't serious about restoring Dodge or Chrysler.