White House, Dems. Discuss Auto Bailout
Jolted by the loss of thousands of jobs, congressional Democrats and the White House reached for agreement Friday on about $15 billion in bailout loans for the beleaguered auto industry. President George W. Bush warned that at least one of the Big Three carmakers might not survive the current economic crisis.
Several officials in both parties said the breakthrough on a long-stalled bailout came after House Speaker Nancy Pelosi bowed to Bush's demand that the aid come from a fund set aside for the production of environmentally friendlier cars. The California Democrat spoke to White House chief of staff Josh Bolten during the day to signal her change in position, they added.
Congressional budget analysts have said tapping the fuel-efficiency program for a broader auto bailout would net only $7.5 billion in short-term cash but amended that to say adjustments were possible that could double that amount. Pelosi and environmentalists had opposed making use of those funds. Instead, they wanted the administration to take money from a $700 billion financial industry bailout that cleared Congress last fall.
Pelosi's office issued a statement saying legislation would come to a vote in the House next week. The Senate is also scheduled to be in session to consider steps to aid Detroit's Big Three.
"Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long-term viability and competitiveness of the American automobile industry," Pelosi's statement said.
Officials in both parties also said the legislation would include creation of a trustee or group of industry overseers to make sure the bailout funds were used by General Motors Corp., Ford Motor Co. and Chrysler LLC for their intended purpose. The funds are designed to last until March, giving the incoming Obama administration and the new Congress time to consider the issue anew.
The developments came as desperate auto executives pleaded for a second day with lawmakers for loans to help them survive, and the government reported the worst single month's job loss in 34 years.
Employers slashed 533,000 jobs in November, shooting the unemployment rate to 6.7 percent, the Labor Department reported Friday.
Separately, GM announced it will cut shifts at factories in Lordstown, Ohio, Orion Township, Mich., and Oshawa, Ontario, in February as a result of slumping auto sales. About 2,000 jobs were involved, bringing the year's total to 11,000.
At the White House, Bush declared the economy was in a recession, and he urged a gridlocked Congress to act quickly on a multibillion-dollar industry bailout - with taxpayer protections.
"We are going to have to have some give here," replied Massachusetts Rep. Barney Frank, a senior House Democrat, expressing optimism that compromise might be possible. It wasn't clear whether he was prodding Bush or Pelosi with his comments, but Republicans said there had been no lessening in Bush's refusal to tap the $700 billion financial industry bailout fund to help the automakers.
There were also fresh calls during the day for the Federal Reserve to come to the rescue of the Big Three, possibly in the form of low-cost loans. And Frank said he had talked with Tim Geithner, President-elect Barack Obama's choice for treasury secretary, a possible sign of involvement by the incoming administration.
"I am concerned about the viability of the automobile companies," a somber Bush said.
The president added, "I'm concerned about those who work for the automobile companies and their families. And likewise, I am concerned about taxpayer money being provided to those companies that may not survive." Bush did not elaborate, but executives at both GM and Chrysler have warned that their storied corporations could collapse by year's end.
For the day, at least, their appeals were overtaken by the severity of the job loss figures.
Frank said repeatedly that the unemployment statistics had quieted talk of allowing one or more of the automakers to go bankrupt.
"I think it's fair to say that the jobs report today, this disastrous jobs report, has heightened the interest in doing something." With trademark wit, he added, "If we are lucky we will come out with a bill here that nobody likes, because any bill that any individual liked couldn't pass."
Chrysler President Jim Press suggested the market for the Big Three's cars could evaporate quickly without emergency aid.
"All this talk of bankruptcy has caused our customers and our suppliers to have a lack of confidence, we've got to restore that confidence," Press said on CBS' The Early Show. "By the first quarter, we could run into difficulty paying our bills."
And President-elect Barack Obama wasn't stepping forward with an alternative. Frank, who has been dealing with both the financial bailout and the auto rescue proposal as chairman of the House Financial Services Committee, said Obama is "going to have to be more assertive than he's been."
Bush renewed his call for Congress to rewrite an existing $25 billion program intended to help the industry make more fuel-efficient vehicles. But the president did not explicitly foreclose other options, and Republican aides said the White House might be open to some sort of compromise.
Absent an agreement, the Senate appeared likely to convene next week for a series of votes on various alternatives, all of which would be doomed to failure. Any measure would require a 60-vote majority, an impossibility barring an agreement that involves both parties.
Nardelli, GM chief executive Rick Wagoner and Ford CEO Alan Mulally all drove to Washington this week with detailed plans describing how their companies would use loans to make their industry more competitive in the long run, material that congressional leaders had demanded as a condition for considering a bailout bill.
Repentant after a botched first crack at bailout pleas, the companies' executives said they were willing to overhaul their companies and own up to past errors.
"We made mistakes, which we're learning from," GM chief Rick Wagoner said. Ford CEO Alan Mulally also acknowledged big missteps, saying his company's approach once was "If you build it, they will come."
United Auto Workers union President Ron Gettelfinger, aligned with the industry in pressing for the aid, told senators that any kind of bankruptcy, even a prepackaged one, was not "a viable option." Gettelfinger said consumers would not buy autos from bankrupt companies, no matter the terms of the arrangement.
He also warned that without action by Congress: "I believe we could lose General Motors by the end of this month."
It wasn't enough for some skeptics.
"I don't know how they're going to make it," Sen. Richard C. Shelby, R-Ala., said of the auto makers.
Shelby said Chapter 11 bankruptcy was their way to stay in business. Asked Friday morning on CBS whether there was anything the auto executives could say to change his mind about government aid, Shelby said: "Absolutely not."
© 2009 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report. Several officials in both parties said the breakthrough on a long-stalled bailout came after House Speaker Nancy Pelosi bowed to Bush's demand that the aid come from a fund set aside for the production of environmentally friendlier cars. The California Democrat spoke to White House chief of staff Josh Bolten during the day to signal her change in position, they added.
Congressional budget analysts have said tapping the fuel-efficiency program for a broader auto bailout would net only $7.5 billion in short-term cash but amended that to say adjustments were possible that could double that amount. Pelosi and environmentalists had opposed making use of those funds. Instead, they wanted the administration to take money from a $700 billion financial industry bailout that cleared Congress last fall.
Pelosi's office issued a statement saying legislation would come to a vote in the House next week. The Senate is also scheduled to be in session to consider steps to aid Detroit's Big Three.
"Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long-term viability and competitiveness of the American automobile industry," Pelosi's statement said.
Officials in both parties also said the legislation would include creation of a trustee or group of industry overseers to make sure the bailout funds were used by General Motors Corp., Ford Motor Co. and Chrysler LLC for their intended purpose. The funds are designed to last until March, giving the incoming Obama administration and the new Congress time to consider the issue anew.
The developments came as desperate auto executives pleaded for a second day with lawmakers for loans to help them survive, and the government reported the worst single month's job loss in 34 years.
Employers slashed 533,000 jobs in November, shooting the unemployment rate to 6.7 percent, the Labor Department reported Friday.
Separately, GM announced it will cut shifts at factories in Lordstown, Ohio, Orion Township, Mich., and Oshawa, Ontario, in February as a result of slumping auto sales. About 2,000 jobs were involved, bringing the year's total to 11,000.
At the White House, Bush declared the economy was in a recession, and he urged a gridlocked Congress to act quickly on a multibillion-dollar industry bailout - with taxpayer protections.
"We are going to have to have some give here," replied Massachusetts Rep. Barney Frank, a senior House Democrat, expressing optimism that compromise might be possible. It wasn't clear whether he was prodding Bush or Pelosi with his comments, but Republicans said there had been no lessening in Bush's refusal to tap the $700 billion financial industry bailout fund to help the automakers.
There were also fresh calls during the day for the Federal Reserve to come to the rescue of the Big Three, possibly in the form of low-cost loans. And Frank said he had talked with Tim Geithner, President-elect Barack Obama's choice for treasury secretary, a possible sign of involvement by the incoming administration.
"I am concerned about the viability of the automobile companies," a somber Bush said.
The president added, "I'm concerned about those who work for the automobile companies and their families. And likewise, I am concerned about taxpayer money being provided to those companies that may not survive." Bush did not elaborate, but executives at both GM and Chrysler have warned that their storied corporations could collapse by year's end.
The chief executives of GM, Ford and Chrysler, testified for a second day before Congress in support of their plea for a $34 billion bailout in the form of loans. "We believe this is the least costly alternative," Chrysler chief executive Bob Nardelli said.Web Exclusive: GM Dealers Feel Pinch
For the day, at least, their appeals were overtaken by the severity of the job loss figures.
Frank said repeatedly that the unemployment statistics had quieted talk of allowing one or more of the automakers to go bankrupt.
"I think it's fair to say that the jobs report today, this disastrous jobs report, has heightened the interest in doing something." With trademark wit, he added, "If we are lucky we will come out with a bill here that nobody likes, because any bill that any individual liked couldn't pass."
Chrysler President Jim Press suggested the market for the Big Three's cars could evaporate quickly without emergency aid.
"All this talk of bankruptcy has caused our customers and our suppliers to have a lack of confidence, we've got to restore that confidence," Press said on CBS' The Early Show. "By the first quarter, we could run into difficulty paying our bills."
And President-elect Barack Obama wasn't stepping forward with an alternative. Frank, who has been dealing with both the financial bailout and the auto rescue proposal as chairman of the House Financial Services Committee, said Obama is "going to have to be more assertive than he's been."
Bush renewed his call for Congress to rewrite an existing $25 billion program intended to help the industry make more fuel-efficient vehicles. But the president did not explicitly foreclose other options, and Republican aides said the White House might be open to some sort of compromise.
Absent an agreement, the Senate appeared likely to convene next week for a series of votes on various alternatives, all of which would be doomed to failure. Any measure would require a 60-vote majority, an impossibility barring an agreement that involves both parties.
Nardelli, GM chief executive Rick Wagoner and Ford CEO Alan Mulally all drove to Washington this week with detailed plans describing how their companies would use loans to make their industry more competitive in the long run, material that congressional leaders had demanded as a condition for considering a bailout bill.
Repentant after a botched first crack at bailout pleas, the companies' executives said they were willing to overhaul their companies and own up to past errors.
"We made mistakes, which we're learning from," GM chief Rick Wagoner said. Ford CEO Alan Mulally also acknowledged big missteps, saying his company's approach once was "If you build it, they will come."
United Auto Workers union President Ron Gettelfinger, aligned with the industry in pressing for the aid, told senators that any kind of bankruptcy, even a prepackaged one, was not "a viable option." Gettelfinger said consumers would not buy autos from bankrupt companies, no matter the terms of the arrangement.
He also warned that without action by Congress: "I believe we could lose General Motors by the end of this month."
It wasn't enough for some skeptics.
"I don't know how they're going to make it," Sen. Richard C. Shelby, R-Ala., said of the auto makers.
Shelby said Chapter 11 bankruptcy was their way to stay in business. Asked Friday morning on CBS whether there was anything the auto executives could say to change his mind about government aid, Shelby said: "Absolutely not."
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This should not be allowed. If the Big 3 declare Chapter 11, they will not disappear (of course!)
Instead, they will be able to reorganize and get out from the crippling contracts which are making success impossible. Just like Delta and countless other large corporations have done.
Then, and only then, should funds be set aside to help the Big Three along a brighter path - more fuel efficient, reliable vehicles that the rest of the world is offering.
The Big 3 have paid a heavy price for their arrogance, product configuration by lobbyist, and other poor decisions. The American taxpayer should not suffer these fools.
Through ''fractional reserve lending'', the Federal Reserve can either turn tax-money or treasury bonds into ''reserves'' to be loaned out at 10 times the reserve amount.
That means when you multiply 10 x 700 billion and then add the reserve itself you get the 7.5 trillion that the real cost of the bailout is.
WE ARE RUNNING OUR ECONOMY EXCLUSIVLEY OFF A PRINTING PRESS!!!!
WE HAVE LITERALY ANOTHER POSSIBLE MONTH BEFORE EVERYTHING WILL COMPLETELY BLOW OUT!!!!
Then you should be happy, because McSame was also.