NPR’s Morning Edition featured a very interesting interview with Chairman Barney Frank this morning. In it he asserted that the $25 billion that the Big 3 is now seeking is definitely not enough to keep the companies going, and it will be followed by tens of billions more if the companies come up with a ‘plan’ that seems promising. Although if you listen to the interview, he gets awfully agitated at the NPR host for trying to hone in on this point:
Steve Inskeep: I want to ask you about something mentioned in that report from an economist from the University of Maryland. What makes you think the $25 billion would even be enough?
Rep. Barney Frank: We don’t think it would be enough. The way we have this structured, they will get $25 billion if the bill passes, with a lot of conditions. No dividends can be paid, no bonuses for people over $200,000, and some other things. But they would have to prepare and file by March 31 a plan that shows how they plan to get much more efficient and to get cars that can be marketed.
But let me ask you about the first thing you said, Congressman, because you said you don’t think $25 billion is enough.
Right, I’m trying to explain to you how it works.
OK.
They get $25 billion — the federal government would be in the first position to be repaid. We will come ahead of the debt holders, the shareholders, etc. They file this plan on March 31. If, on March 31, the president does not believe that this is going to get them the viability with energy efficiency cars, they have to repay the loan; they get no more money. If they can show by March 31 a plausible way to go forward, then we would consider giving more money, again, under equally stringent conditions.
So this could be $50 billion, $75 billion, $100 billion?
Well, [insurance company] AIG, which I don’t think anyone would think was as important to the American economy as the auto industry … got $40 billion just now to make it up over $100 billion. To some extent, let’s not have a white-collar/blue-collar bias in our public policy. You know, those who say, hey, go bankrupt so you can cut back on what the unions have won — the unions have already made some concessions. But, you know, we’ve had enough anti-union activity, and enough increase in income inequality in this country. I don’t want to set a precedent that bankruptcy now is a way in which you undo what gains unions have been able to hold on to.
Notice Frank is already retreating from a debate on the merits of the proposal. For him, a decision on whether or not to bail out the automakers is really a decision on whether unions are good things. And of course, given the information that Rob Bluey provides about average wages for unionized auto workers, it’s easy to see that the competitiveness of the Big 3 is not helped by the UAW.
Beyond that, is Frank willing to speak honestly about his plan for hundreds of billions in taxpayer money? How much is he willing to spend? And what does he expect the Big 3 ‘plan’ to look like, in order to convince him to loosen the purse strings. Lastly, he should stop pretending that the automakers will pay back the first $25 billion in April if their plans are found wanting. That money will be spent relatively quickly, and if more federal dollars are not forthcoming, the Big 3 won’t have any revenue with which to pay back.
On a related note, let’s remember that the real reason for all this bailout talk is that Democrats in Washington want to run a car company. They believe the team in Detroit failed at the job, and they want to take a shot themselves. If you have any doubt of that, look at Frank’s bill:
• Long-Term Restructuring Plan – Not later than 3/31/09, loan recipients must submit to Treasury acceptable restructuring plan for long-term viability and international competitiveness, including fuel efficiency standards and advanced technology vehicle manufacturing, rationalization of costs, and proposals for restructuring existing debt.
• Oversight Board
The Financial Stability Oversight Board (Oversight Board) established under EESA will provide oversight of the loan
program, and will have four additional members for purposes of the loan program (Secretaries of Energy, Labor and
Transportation and the EPA Administrator) in addition to the five existing members (Fed Chairman, Treasury
Secretary, FHFA Director, SEC Chairman, and HUD Secretary).[snip]
• Warrants – Treasury must obtain warrants from each loan recipient (or economic equivalent in the case of a privately held firm) equal to 20% of the loan or such greater percentage as may be determined by Treasury in consultation with the Oversight Board.
• Executive Compensation and Corporate Governance – All executive compensation restrictions from EESA apply to
loan recipients for the duration of the loan plus the following additional restrictions:
no bonuses to employees making more than $200,000 (which Treasury will adjust for inflation).
no golden parachutes under any circumstances.
no compensation plan that could encourage manipulation of reported earnings to enhance compensation.• Ability to Prohibit Transactions, Oversight of Financial Condition – For duration of the loan, Treasury in consultation with the Oversight Board will have the authority to review and prohibit any asset sale, investment, contract, or commitment proposed to be entered into by the recipient valued in excess of $25 million.
So Barney Frank’s plan is for the federal government to acquire a stake in the car companies, approve their operating plans going forward, and to have veto power over any business decision costing more than $25 million. He might as well appoint himself CEO.
The management in Detroit has not done a great job. Do you think Barney Frank and Barack Obama’s Cabinet are likely to do better? Because Barney Frank’s plan is to switch the latter for the former — with the taxpayer donating untold billions for the privilege to make the switch.
Bankruptcy sounds better by the day.
Moe Lane
Steve Maley
Dan McLaughlin
Neil Stevens
Daniel Horowitz
Unions are bad for America
10ksnooker (Diary) Wednesday, November 19th at 5:00PM EST (link)Unions are an anachronism, once maybe they had a place in industry, but today, no place at all. You can see the type of uncompetitive results they foster, just look at the unsustainable nature of GM and Ford’s business and the quality of thier products. Chrysler is already done for.
Retirement plans and health care are not sustainable product offerings for car companies.
Let them die.
They got greedy, and overstepped their bounds. But greed is a two-way street; just look at 'Dilbert'.
Xasteius (Diary) Wednesday, November 19th at 5:09PM EST (link)nt
Don’t leave the party, hijack it back!
The only poll that counts is the one at the ballot box.
I don’t want to be Reagan. I want to be a Chance/Soros hybrid.
UAW
Hera Wednesday, November 19th at 5:10PM EST (link)Meanwhile the UAW refuses to make any concessions while leeching off the taxpayers. I’m going to warn my congressman and Senators not to vote for any bailout for the Big 3, if my representatives want to keep their jobs.The Big 3 need to file for Chapter 11 bankruptcy dump the union contracts and reorganize their companies.If there is a bailout it should come on Obama’s watch, Bush should have nothing to do with it.
Mitt Romney is right on the money...
mbecker908 (Diary) Wednesday, November 19th at 5:30PM EST (link)With an OpEd in today’s New York Times.
You really should read the whole thing, there’s too much good stuff to clip and post. The money quote is worth a note…
I’m no fan of Mitt Romney as a POTUS candidate, but there are any number of Cabinet level jobs in a Conservative Administration where he would shine.
We're screwed
havermeyer Wednesday, November 19th at 5:32PM EST (link)I work for a builder.
Another builder across town expanded too rapidly the last few years. They paid a premium for land and kept buying and developing subdivision after subdivision. They made other mistakes like hiring and promoting a lot of people into management. They’ve since laid off over 1/2 their employees and have millions (maybe $50M+)of debt they have to service on all the expansion they did.
My company is smaller. We took a more conservative approach. The owner refused to pay too much for land and actually didn’t buy any for a couple years as it was overpriced. We’re struggling too, but not nearly as bad as the competitor I’ve mentioned. We’ve laid off a few people.
My question is…Do we both deserve a bailout? Should the competitor that overreached get more of a bailout? Housing is the cause of this bailout talk and we’re in the housing industry. Shouldn’t we be able to hire back our staff and pay them, even though we’re not building nearly as many houses as we used to? Should we introduce ourselves to the next Sec of Treas and take him/her out to eat and go play some golf? Should our owner/Pres/CEO buy a jet so he can fly to DC and get some Bailout action?
Should we switch to the printing press industry? That sound you hear in the middle of the night next week is the sound of machines exploding at the mints across the country as they try and keep up with congress.
Did Bush lengthen this recession or turn it into a depression by creating this panic mode 2 months ago and opening the floodgates? People are now outraged at what has become of the bailout funds. What a bunch of rubes. What the hell did they think government was going to do with it?
If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
Unions
havermeyer Wednesday, November 19th at 5:40PM EST (link)Don’t forget the schools, Post Office just posted a $2B loss or something, here in the soon to be bankrupt CA (but global warming, yeah, let’s focus on that)we pay prison guards quite a bit, the airlines might have struggled in the past/present…
If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
I'm sorry...what?
Bookkeeper (Diary) Wednesday, November 19th at 6:06PM EST (link)That settles it: Barney Frank must not be allowed near any further economic policy. If he honestly believes that the world’s largest insurer, up to its armpits in CDOs, is not as important to the US economy as General Motors, he’s living far enough in the past to be truly dangerous.
When all else fails, simply revel in the absurdity of it all.
Forget whether AIG or GM is more important to the economy
Shaggy_Dog (Diary) Wednesday, November 19th at 6:12PM EST (link)And focus on what the point of the AIG “bailout” was – to support an orderly asset disposition of the business.
That’s the exact opposite of what Frank wants to do with his GM bailout- prop it up as is indefinately.
I've got to believe this is a big part of why the market continues to crater so bad
Shaggy_Dog (Diary) Wednesday, November 19th at 6:16PM EST (link)Down another 400 points today.
First the US Govt is taking ownership stakes in all the major financial instutions in the US.
Now it looks like they will be taking a stake in the US auto companies.
I have to believe the market collectively is looking at these actions and thinking that massive US govt ownership stakes in a wide array of companies is something that is not going to end well for the US economy.
Would you buy or sell right now if you thought we were on the brink of becoming Great Britain circa 1970?
$$$$$$$
jeanedcrusader Wednesday, November 19th at 7:30PM EST (link)That noise you just heard was me squawking like a chicken. Hundreds of Billions of Dollars????? Does the illuminati left not see that as being a teeny tiny problem???? I would say the discussion is officially closed!
So basically, bailout the UAW?
Erick Brockway (Diary) Wednesday, November 19th at 8:35PM EST (link)Sounds like what The Barney is saying when you boil it all down.
Be cheaper to pay the thugs protection money and get it over with.
Note to lefties;
“Don’t be afraid to see what you see.” -Ronald Reagan
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Dem's accusing Big 3 of going to continue same failed policies
JLenardDetroit (Diary) Thursday, November 20th at 2:05AM EST (link)Why should they give the Big-3 more money to continue same failed policies!?!? REALLY??? That from a Democrat. Yet, we are supposed to just keep giving more and more money to Democrats to run our country into the ground by following the same Failed Liberal agenda. Shame they can be this bold as to pull this crap as most Americans don’t see the direct comparison.
Regards from NoMoTown (the MOTORlessCITY)
“Liberals, looking to do for? America what they’ve done for? Detroit! which is DESTROY IT!”
“I think, therefore I am Conservative”
“Conservative by choice, Republican by necessity”
“You can lead a Liberal to the Truth/Facts, but you cannot make them THINK!”
“Romney [No, not my first choice] does NOT have a MORMON problem. He has a, far too many Americans; these days; are MORONS problem!”
Follow @JLenardDetroit
(RS:Help) (JLD) (Hollyweird) (Brain-deads) (SPIN-cycle) (Obamaocare) (Party of kNOw) (Conservatism) (TEApeats) (respectful) (message) (Warning: Children Will Die!!)
Heil “O” Hell No Obamao is NOT MY PRESIDENT! “No U won’t”
I want “O” to FAIL (here, here, & whole Diary (Ofail) here, is why)
“The first Liberal was Satan” – a Rush caller (other Quotes)
Big 3, Federal Govt, and MSM usual Liberal line (hypocritically) + Supply Side economy
JLenardDetroit (Diary) Thursday, November 20th at 3:56AM EST (link)CNN parades story on hourly basis and brings it up in each and every “Editorial” type program. What…
The SHAME of the Big 3 automakers CEO’s flying into DC via private Jet.
EXCUSE ME? Where are these stories when it comes to the Lear-jet Liberals? When Enviro-Terrorist supporters insist we all ride Buses and Trains, while they are chauffeured around in Limos or Luxury sedans. They expect to Sell us into the Solar Cell, while they have none on their HUGE/spacious homes. Ed Begley Jr. the one notable exception.
Like that stopped clock, they can be accidentally right if you look at it the exact moment at which it is frozen!!! But, yes I know it is silly of me to expect them (MSM) to be consistent.
SUPPLY SIDE: Amazing how Liberals acknowledge “Supply Side” (Trickle down in their terms) when the DOWN SIDE and PAIN is what will trickle down to communities, workers, the economy as a whole, when those demonized Companies, the Rich, whatever, don’t have the money to provide the jobs. And again, the masses are too stupid to grasp the connection/point!!!
The Big 3 have made pathetic product, which is NOT a direct result of Govt interference. However, Govt regulations are certainly a big degree of some costs that have over the years brought us to this point. Like the CRA and Democrats role in Mortgage meltdown (and it being the largest factor in our current SLOW DOWN) they won’t go into any of that. Relaxing CAFE and the like won’t be considered as a stop-gap to help. Same with when we had Gas price tragedy due to Govt restrictions (Dem’s anti-Oil agenda) when we could have eased BLEND requirements which would have eased refinery issues and helped keep prices down.
These are the same problems… the same discussions… the same FAILED responses (more Govt interference, though I’m not saying there shouldn’t be some regulation)… Decade after decade after decade and PEOPLE NEVER LEARN. They just don’t care, as long as they can pull the JackAss lever at election time and pawn the hassle off onto Govt despite it not being in their (or their children’s) interest in the long-term.
Regards from NoMoTown (the MOTORlessCITY)
“Liberals, looking to do for? America what they’ve done for? Detroit! which is DESTROY IT!”
“I think, therefore I am Conservative”
“Conservative by choice, Republican by necessity”
“You can lead a Liberal to the Truth/Facts, but you cannot make them THINK!”
“Romney [No, not my first choice] does NOT have a MORMON problem. He has a, far too many Americans; these days; are MORONS problem!”
Follow @JLenardDetroit
(RS:Help) (JLD) (Hollyweird) (Brain-deads) (SPIN-cycle) (Obamaocare) (Party of kNOw) (Conservatism) (TEApeats) (respectful) (message) (Warning: Children Will Die!!)
Heil “O” Hell No Obamao is NOT MY PRESIDENT! “No U won’t”
I want “O” to FAIL (here, here, & whole Diary (Ofail) here, is why)
“The first Liberal was Satan” – a Rush caller (other Quotes)