Friday, December 19, 2008

Bush Give Auto Makers $17 Billion Bailout

Just sign another IOU to the taxpayers, OK?

Bush said Friday the federal government would provide loans almost immediately to General Motors Corp. and Chrysler to prevent "an unacceptably painful blow" should the Detroit giants fail.

Bush said in normal economic circumstances he would not intervene to save the automakers but "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."

Federal intervention is necessary, he said, to give auto buyers faith in their purchases of domestic vehicles.

The loans are designed to stabilize the two automakers through March, at which time they must show they are financially viable.

"If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury," a White House statement said.

(and uh...what if they're unable to pay the loans back, genius?)

In a statement after Bush's announcement, Obama said that allowing a collapse in the auto industry would have had "devastating consequences" for the economy.

"The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it," Obama's statement said.

A senior Bush administration official briefing reporters said he expected that GM and Chrysler officials will be signing the loan papers to access the cash later Friday.

Ford Motor Co. is in a better financial position than GM and Chrysler and is not included in the loan plan.

An additional $4 billion may be available in February, the Bush administration said.

GM has warned it will fall below the minimum amount of cash it needs to continue to operate without $4 billion in federal loans before the end of the month. Privately held Chrysler said it will need $4 billion or it also will run out of cash early next year.

Financing will be drawn from the $700 billion Troubled Asset Relief Program, the fund set aside in October to bail out Wall Street firms and banks, according to the White House.

The president said Friday the plan will give the automakers a chance to show they can be viable outside a "disorderly bankruptcy," which he said would drive the U.S. into a deeper recession with effects "far beyond the auto industry."

As I've pointed out, Bush just agreed to loan $17.4 million for something that was only worth a mere $7 billion(the total valuation of all the stock of the Big Three) , and could likely have been purchased by the taxpayers outright for even less.Of course, that would have meant that the UAW would have had to renegotiate its contract more along the lines of what auto workers at Toyota, Honda and Mitsubishi are making.

It's fun to spend other people's money ain't it? Especially when you just just turn on the printing presses and make more of it.

No comments: