Bailout Watch 119: Launch the Whaleboats!
Jesus, can I stop blogging now? Apparently not. Bloomberg reports that “Michigan lawmakers are asking Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to use their authority to ‘promote liquidity in the U.S. auto industry,’ according to a draft letter they plan to send tomorrow. The letter will ask the Fed and Treasury chiefs to use their authority under the Emergency Economic Stabilization Act [EESA] to help the ailing U.S. automakers.” Question: how do you define sensible? “The auto industry is facing unprecedented struggles, and it deserves a partnership from Washington,” Representative Joseph Knollenberg, a Michigan Republican, said in a statement. “I’ve fought for this kind of sensible assistance for years, and I hope we can make it a reality now.” In all likelihood, immediate “relief” will probably take the form of a federal buyout bad car loans. “Treasury Assistant Secretary Kevin Fromer, in a letter to Knollenberg earlier this month, confirmed that the EESA money could be used to buy car loans and mortgages held by auto-finance companies such as GMAC, Chrysler Financial and Ford Motor Credit.”
More by Robert Farago
Comments
Join the conversation
Agreeing to buy auto loans is a huge mistake. Rescue packages should exclude depreciating assets for the most obvious of reasons. While housing might take a decade or more to recover, it will do so--or that will be the least of America's post-apocalyptic worries.
Buy bad auto loans to people that could not afford the cars, from a private equity firm, in the naive hope that said firm will make more bad auto loans to people that cannot afford the cars? Brilliant. Much better than investing in infrastructure or paying down the federal debt. Why have Americans live within their means with “Oh my god” a used car when we can continue the cycle of predatory lending, repossessions, wage garnishments, bankruptcies and government bailouts. Sure people will be miserable and the Chinese will own us – but it will make our GDP look like its growing! Also, "The auto industry is facing unprecedented struggles"? Please. The honorable representative from state (I recommend we give its statehood to Puerto Rico and make it a non-voting territory) of Michigan can [earmuffs] fuck himself with a fork. The airlines have been through this a number of times, the domestic passenger railroad system went through this, and to be right on point - the British auto industry went through this. This so-called Republican favors the American Leyland approach, but Chapter 11 reorganization is truly best. Hopefully nothing too drastic occurs before the election, and the winner will give Detroit’s whining the proper lack of priority afterward.
Interesting twist. It is all becoming clear. Cerberus is out to "sell" Chrysler Motors to GM in trade for the remaining GMAC financing they don't already own. That would mean Cerberus keeping Chrysler Financing as well. Seems like a good deal for GM as they would get Chryslers stash of cash and get rid of their hemoraging cash flow that is GMAC. But why would Cerberus want GMAC (not to mention Chrysler Financial)? Well, if the Honorable Representitive has his way, the US Gov will come in and buy all those failing loans. What was a loss is now a profit. It's all starting to make sense... Kurt.