Text Of Bush's Auto Bailout Announcement
(AP Photo/Ron Edmonds)
9:01 A.M. EST
THE PRESIDENT: 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.
This is a difficult situation that involves fundamental questions about the proper role of government. 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.
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 the automakers from going out of business.
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 federal loans to keep them operating while they try to restructure under the supervision of a bankruptcy court. But given the current state of the auto industry and the economy, Chapter 11 is unlikely to work for American automakers at this time.
American consumers understand why: If you hear that a car company is suddenly going into bankruptcy, you worry that parts and servicing will not be available, and you question the value of your warranty. And with consumers hesitant to buy new cars from struggling automakers, it would be more difficult for auto companies to recover.
Additionally, the financial crisis brought the auto companies to the brink of bankruptcy much faster than they could have anticipated — and they have not made the legal and financial preparations necessary to carry out an orderly bankruptcy proceeding that could lead to a successful restructuring.
The convergence of these factors means there's too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies. My economic advisors believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis. It could send our suffering economy into a deeper and longer recession. And it would leave the next President to confront the demise of a major American industry in his first days of office.
A more responsible option is to give the auto companies an incentive to restructure outside of bankruptcy — and a brief window in which to do it. And that is why my administration worked with Congress on a bill to provide automakers with loans to stave off bankruptcy while they develop plans for viability. This legislation earned bipartisan support from majorities in both houses of Congress.
Unfortunately, despite extensive debate and agreement that we should prevent disorderly bankruptcies in the American auto industry, Congress was unable to get a bill to my desk before adjourning this year.
This means the only way to avoid a collapse of the U.S. auto industry is for the executive branch to step in. The American people want the auto companies to succeed, and so do I. So today, I'm announcing that the federal government will grant loans to auto companies under conditions similar to those Congress considered last week.
These loans will provide help in two ways. First, they 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 — and gives consumers confidence that they can continue to buy American cars.
Because Congress failed to make funds available for these loans, the plan I'm announcing today will be drawn from the financial rescue package Congress approved earlier this fall. The terms of the loans will require 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.
In particular, automakers must meet conditions that experts agree are necessary for long-term viability — including putting their retirement plans on a sustainable footing, persuading bondholders to convert their debt into capital the companies need to address immediate financial shortfalls, and making their compensation competitive with foreign automakers who have major operations in the United States. If a company fails to come up with a viable plan by March 31st, it will be required to repay its federal loans.
The automakers and unions must understand what is at stake, and make hard decisions necessary to reform. These conditions send a clear message to everyone involved in the future of American automakers: The time to make the hard decisions to become viable is now — or the only option will be bankruptcy.
The actions I'm announcing today represent a step that we 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 they can meet challenges with ingenuity and determination, and bounce back from tough times, and emerge stronger than before.
Thank you.
White House Releases Auto Bailout Plan
President Bush will soon announce his plan to rescue the automakers with an immediate $13.4 billion loan (with $4 billion more available in February), but here's a sneak peak of the plan, as released by the White House:
Purpose: The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing.
Amount: Auto manufacturers will be provided with $13.4 B in short-term financing from the TARP, with an additional $4 B available in February, contingent upon drawing down the second tranche of TARP funds.
Continue »
White House Releases Auto Bailout Plan
President Bush will soon announce his plan to rescue the automakers with an immediate $13.4 billion loan (with $4 billion more available in February), but here's a sneak peak of the plan, as released by the White House:
Purpose: The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing.
Amount: Auto manufacturers will be provided with $13.4 B in short-term financing from the TARP, with an additional $4 B available in February, contingent upon drawing down the second tranche of TARP funds.
Continue »
White House Releases Auto Bailout Plan
President Bush will soon announce his plan to rescue the automakers with an immediate $13.4 billion loan (with $4 billion more available in February), but here's a sneak peak of the plan, as released by the White House:
Purpose: The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing.
Amount: Auto manufacturers will be provided with $13.4 B in short-term financing from the TARP, with an additional $4 B available in February, contingent upon drawing down the second tranche of TARP funds.
Continue »
White House Response To Madoff Case
By CBS News White House correspondent Peter Maer:
The White House is speaking out on the way the Securities and Exchange Commission dealt with the case of money manager Bernard Madoff. In a written response to a question from CBS News, Press Secretary Dana Perino says, "It's troubling and disappointing that the SEC didn't fully examine allegations regarding wrongdoing as far back as nine years ago."
Perino notes that because of the SEC's internal investigation and litigation involving Madoff, she's unable to offer a more specific response. But she adds, "We want all the facts to come to light and prevent this from happening again."
The White House is speaking out on the way the Securities and Exchange Commission dealt with the case of money manager Bernard Madoff. In a written response to a question from CBS News, Press Secretary Dana Perino says, "It's troubling and disappointing that the SEC didn't fully examine allegations regarding wrongdoing as far back as nine years ago."
Perino notes that because of the SEC's internal investigation and litigation involving Madoff, she's unable to offer a more specific response. But she adds, "We want all the facts to come to light and prevent this from happening again."
White House Responds To Madoff Case
By CBS News White House correspondent Peter Maer:
The White House is speaking out on the way the Securities and Exchange Commission dealt with the case of money manager Bernard Madoff. In a written response to a question from CBS News, Press Secretary Dana Perino says, "It's troubling and disappointing that the SEC didn't fully examine allegations regarding wrongdoing as far back as nine years ago."
Perino notes that because of the SEC's internal investigation and litigation involving Madoff, she's unable to offer a more specific response. But she adds, "We want all the facts to come to light and prevent this from happening again."
Update 9:38 a.m. ET: Over the years, Bernard Madoff traveled in some high-power circles but in response to a CBS News inquiry, Perino says there's no record of the president having met Madoff or of Madoff attending any Bush presidential event, including fundraisers.
The White House is speaking out on the way the Securities and Exchange Commission dealt with the case of money manager Bernard Madoff. In a written response to a question from CBS News, Press Secretary Dana Perino says, "It's troubling and disappointing that the SEC didn't fully examine allegations regarding wrongdoing as far back as nine years ago."
Perino notes that because of the SEC's internal investigation and litigation involving Madoff, she's unable to offer a more specific response. But she adds, "We want all the facts to come to light and prevent this from happening again."
Update 9:38 a.m. ET: Over the years, Bernard Madoff traveled in some high-power circles but in response to a CBS News inquiry, Perino says there's no record of the president having met Madoff or of Madoff attending any Bush presidential event, including fundraisers.
GOP Senator Will Not Block Auto Bailout
(CBS)
Corker noted that this is now in the hands of the White House and that after speaking with administration officials and Secretary Paulson, he doesn't think they know what they are going to do.
Senator Sherrod Brown (D-Ohio) added that he is "optimistic" the White House will act quickly. "I don't think the White House wants bankruptcy in one of the Big 3 automakers as part of their legacy, and I know they don't want to leave this for the next President," Brown said.
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Support Grows For Using TARP Funds For Big Three
This morning, White House press secretary Dana Perino released a statement on the failure of the $14 billion auto bailout. Here's the key passage:
Now Senate Majority Leader Harry Reid has released a statement signaling that Senate Democrats support the White House's suggestion.
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(AP Photo/Lauren Victoria Burke)
Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the U.S. economy, we will consider other options if necessary – including use of the TARP program -- to prevent a collapse of troubled automakers.The TARP program – the acronym stands for the Troubled Assets Relief Program – is the $700 billion in bailout money that had been designated to help the financial industry. While the TARP funds were never designed to go to the auto industry, they may represent the last, best option for keeping General Motors and Chrysler from going bust in the short term. Consider this: When reporters asked Perino, in response to the statement, what options for saving the companies other than TARP might be on the table, the press secretary declined to answer.
Now Senate Majority Leader Harry Reid has released a statement signaling that Senate Democrats support the White House's suggestion.
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Barofsky Confirmed As Watchdog
Lost in the drama over the deal to keep the U.S. auto industry afloat was yesterday's Senate confirmation of a new inspector general to oversee the $700 billion bailout package passed by Congress earlier this year. President Bush appointed Assistant U.S. Attorney Neil Barofsky to the newly-created post within the Treasury Department last month but his nomination was being held up anonymously by a single senator, the AP reports.
Yesterday, that opposition was dropped and Barofsky was confirmed to a post from which he will watch how the bailout money is spent and report to Congress. Members of Congress have grown increasingly critical about the lack of accountability, especially after a recent GAO audit found there were no mechanisms in place to ensure that companies receiving financial help were complying with conditions placed on the assistance.
Senate Finance Chair Max Baucus said Barofsky "will have to play catch-up and work ferociously" on the nearly $350 billion already spent on the bailout and added, "I believe that he is up to the task."
Yesterday, that opposition was dropped and Barofsky was confirmed to a post from which he will watch how the bailout money is spent and report to Congress. Members of Congress have grown increasingly critical about the lack of accountability, especially after a recent GAO audit found there were no mechanisms in place to ensure that companies receiving financial help were complying with conditions placed on the assistance.
Senate Finance Chair Max Baucus said Barofsky "will have to play catch-up and work ferociously" on the nearly $350 billion already spent on the bailout and added, "I believe that he is up to the task."
On The Prowl For Stock Tips? Listen To Obama
(CBS)
Traveling up and down the Northeast Corridor recently reminded me of yet another stark contrast between New York City and Washington DC (where I have the privilege of residing).
At New York cocktail parties, you hear what people -- including campaign donors, hopeful Obama fans, mollified Clintonites, and well read know-it-alls -- hope the new Administration will do about the economy. At holiday parties here in DC, you find out what Obama & Co. will do.
Continue »
Car Czars On The Way?
Democrats in Congress are working on a bill that would provide the troubled U.S. automotive industry at least $15 billion in emergency loans and give the federal government power to "manage a massive restructuring" of the Big Three auto manufacturers, the Washington Post reports. The legislation under consideration would create a seven-member "auto board" that would consist of cabinet members with a chairperson appointed by the president.
And there could be some changes at the top of the auto companies as part of the deal. Appearing on CBS News' "Face the Nation" yesterday morning, Senate Banking Committee Chairman Chris Dodd said new leadership of the car companies might be needed, particularly at General Motors where he said the company's chairman Rick Wagoner "has to move on." "I think you have got to consider new leadership," Dodd said on the program. "If you're going to really restructure this, you have got to bring in a new team to do this, in my view."
GM is reportedly in the most dire need of emergency aid and Michigan Governor Jennifer Granholm told the "Early Show" that "if General Motors doesn't get this loan by the end of this month, it is 'game over.'"
And there could be some changes at the top of the auto companies as part of the deal. Appearing on CBS News' "Face the Nation" yesterday morning, Senate Banking Committee Chairman Chris Dodd said new leadership of the car companies might be needed, particularly at General Motors where he said the company's chairman Rick Wagoner "has to move on." "I think you have got to consider new leadership," Dodd said on the program. "If you're going to really restructure this, you have got to bring in a new team to do this, in my view."
GM is reportedly in the most dire need of emergency aid and Michigan Governor Jennifer Granholm told the "Early Show" that "if General Motors doesn't get this loan by the end of this month, it is 'game over.'"
Obama Responds To Jobs Report
President-elect Barack Obama warned that economic times may get worse before they get better in a statement issued today. Obama was responding to the latest government report showing that the economy lost 533,000 jobs in the month of November, the largest jump in 34 years. Here's the full statement from the president-elect:
The 533,000 jobs lost last month, the worst job loss in 34 years, is more than a dramatic reflection of the growing economic crisis we face. Each of those lost jobs represents a personal crisis for a family somewhere in America. Our economy has already lost nearly 2 million jobs during this recession, which is why we need an Economic Recovery Plan that will save or create at least 2.5 million more jobs over two years while we act decisively to maintain the flows of credit on which so many American families and American businesses depend.
There are no quick or easy fixes to this crisis, which has been many years in the making, and it's likely to get worse before it gets better. But now is the time to respond with urgent resolve to put people back to work and get our economy moving again. At the same time, this painful crisis also provides us with an opportunity to transform our economy to improve the lives of ordinary people by rebuilding roads and modernizing schools for our children, investing in clean energy solutions to break our dependence on imported oil, and making an early down payment on the long-term reforms that will grow and strengthen our economy for all Americans for years to come.
Bill Gates Urges More Spending
(AP)
In an speech at George Washington University, Gates urged President-elect Obama not to drop his campaign pledge to double the amount of foreign assistance by the end of his first term and warned that recent improvements in education could be at risk with cuts in funding, the Post reports. "In a crisis, there is always a risk that you take your eyes off the future and you sacrifice long-term investments for short-term gains," Gates said. "You have to seek both. … We should have a bigger goal than getting the economy growing again. I think we should expand the number of people who are contributing to the economy and benefiting from it."
Gates reiterated his message in an interview with CNN, saying that while an economic stimulus is needed, investments in technologies for the future are needed as well. "The key point I'd make," he said, "is that in addition to that stimulus, you've got to fund the kind of scientific work and educational investments that could really have us be a much better country as we emerge from the recession."
