What Happened to the Automakers Bailout?

Remember when the U.S. financial services sector was in its darkest hour?  My Lord, Congress, the President, Hank Paulson, Ben Bernanke and candidates for county commissioner all called for a bailout – nearly a trillion dollars worth.  Inside of a week Barney Frank and Chris Dodd marshalled the troops on Capitol Hill and we had ourselves a big bill.  Even being defeated in the House on its first go-round couldn’t stop the $700 billion love offering to the likes of Bank of America, JP Morgan Chase, Goldman Sachs and Wells Fargo.

Our government – Democrats, Republicans – executive and legislative branch – fell over themselves to deliver for Wall Street.  John McCain even suspended his presidential campaign for about 12 hours.

The Wall Street/Main Street construct has been used so much as to become trite.  Well, here goes another one.  Washington, Main Street needs some help now.  It’s called keeping the Big Three U.S. automakers solvent in the worst economy since the 1930s. 

Forget about the entitled UAW-represented autoworker for a moment and think about that machine shop you drive by on your way to work every day.  Think for a moment about the truck driver living next door.  Ask yourself what’s going to happen to your cousin Bob who works at the Chevy dealership and his 75 co-workers. Read more

Video: Face the Nation – Senators Chris Dodd, Jeff Sessions – Will Auto Bailout Work? | December 7

Bailout Deal Bullet Points & Coverage – Sunday A.M.

Bush Administration and Congressional officials came to terms on the proposed $700 billion Wall Street bailout early Sunday morning reports the New York Times, Washington Post, and other media outlets. Find clips of the stories this morning after the bullet points of the deal’s terms. The media are reporting that Congressional staff worked through the early morning hours of Sunday and will continue to work until the deal is in bill form. Votes in both houses of Congress are expected late Sunday or early Monday.

Highpoints of Bailout Deal

• The $700 billion would not be released in its entirety at once. Funds would be made available to Treasury in a first installment of $250 billion, a second installment of $100 billion, and a final installment of $350 billion. Congress would have the right of refusal at each step of the process.
• Pay limits will be put in place for executives of companies who make use of the government bailout.
• A Congressional oversight panel will be empowered to oversee Administration and Treasury implementation of the bailout.
• In some cases, the federal government will receive an equity stake in companies participating in the bailout.
• Conflict-of-interest rules will be implemented for firms who contract to help Treasury run the bailout.

Bailout News

• Breakthrough reached in negotiations on bailout – New York Times
• Lawmakers reach tentative deal on bailout – Washington Post
• Lawmakers reach deal on bailout – Wall Street Journal
• U.S. reaches outline bailout deal – Financial Times
• U.S. Congress reaches tentative deal on bailout – Xinhua

U.S. Senate Committee on Banking, Housing & Urban Affairs – Witness Testimony – Paulson, Bernanke, Cox, Dodd – U.S. Financial Crisis – $700 Billion Wall Street Bailout

Below are links to prepared remarks by Senate Banking Chairman Chris Dodd, D-CT, Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, and SEC Chairman Chris Cox.  Opening remarks actually delivered before the committee were abbreviated, what follows is the testimony prepared for delivery which will be inserted into the Congressional Record.

• Prepared Remarks of U.S. Senator Christopher Dodd, D-CT
• Prepared Remarks of U.S. Treasury Secretary Henry Paulson
• Prepared Remarks of U.S. Federal Reserve Chairman Ben Bernanke
• Prepared Remarks of U.S. Securities and Exchange Commission Chairman Chris Cox

Congress Should Consider Saying ‘No’ to Paulson’s Plan

For those of us who don’t spend our professional lives steeped in the news and nomenclature of Wall Street and 21st Century financial markets, there is a huge learning curve to get around in even beginning to understand the depths of this current economic crisis.

From the president to the Cabinet secretaries, to the Congressional representatives, to those who would be president, we are hearing the steady refrain that we must do something now, this week.  Practically breathless from their dire warnings they are also sending a mixed message about the proposed action – a $700 billion U.S. government purchase of what seems to be nearly worthless paper. 

The mixed message is this: On one hand we have a financial system on life support because there was no oversight or accountability.  On the other hand we are supposed to surrender nearly a trillion dollars to U.S. Treasury Secretary Henry Paulson with no oversight or accountability.  Something doesn’t compute.

There’s more.  The public is supposed trust that Paulson will do the right thing, make all the right moves, by his little old self.  This country doesn’t have $700 billion for Paulson’s plan, so what we will do is sell U.S. Treasury bonds to China, Malaysia, the United Arab Emirates, Russia, and all the other friendly foreign powers who are owning us a little more every day.  Under Paulson’s plan, he will not only be able to buy the worthless paper of American companies, but also the worthless paper of foreign companies.  The public might want to ask how much the European Central Bank is chipping in to save the U.S. financial sector?

And, of course, it’s all got to be done right this minute.  Here’s an exchange from the The News Hour tonight.  Margaret Warner was interviewing Chairman Chris Dodd, D-CT, of the Senate Banking Committee and Sen. Jon Kyl, R-AZ, of the Senate Finance Committee:

MARGARET WARNER: Quick final word, Senator Dodd, Senator Kyl, does this have to be done this week?  

SEN. CHRIS DODD: Well, it should be done soon. And, again, I think speed is important. But I want to emphasize to you getting it right — we’re going to live with this for decades to come now, so we better do it right, as well.

MARGARET WARNER: Do you think it has to be done this week, Senator Kyl?

SEN. JON KYL: I do. I agree with Chris; it’s got to be done right. But this is one of those things where there is an emergency. And the kind of time that we would ordinarily put into one of these things is not available to us now.

So I think, by the end of the week or early part of next week, we’d better have it done or the market is going to react in a pretty negative way.

Dodd describes the action Congress is poised to take on behalf of Wall Street as something that will have affects for “decades to come.”  Kyl says, “… there is an emergency.”  Is there no middle ground here?  In an emergency, can’t you make a temporary repair to the ship and get it into the shipyard where careful, longer-lasting repairs can be made — where it will acutally be fixed.  Is spending $700 billion from one Friday to the next our only option?

What I wonder tonight is could this be one more set of politicians cramming something (ie. Iraq War) down our throats with fear tactics?  Much has been said about dire consequences without much light shed on just what those negative outcomes would be.  Some have said that because this is essentially a crisis of capital, or liquidity, a meltdown would mean even less capital in the economy.  So, what.  We don’t produce real goods anymore, our growth has been in the financial sector, and we now know that that growth was bogus.  Let the markets take out the trash and let’s start a new game with better rules.