The Politics of The Auto Maker Bailout

The politics of the multi-billion dollar bailout that US auto maker CEOs Wagoner, Mulally and Nardelli are requesting on their return visit to Capitol Hill today are getting quite interesting.

This morning's festivities began with doddering Chris Dodd's (D-CT) inaccurate, myopic and generally stupid opening remarks. I know that Dodd is a grafter and totally corrupt, since he took special favors in the form of sweetheart loans from now-defunct Countrywide Finance. He was a 'friend of Angelo,' calling each day to shepherd his and his wife's special loan through processing, then claiming to never have known about the special deal he received.

Mind you, he chaired the panel that regulated this failed institution.

It remains to be seen what kind of graft Comrade Chris expects from the US auto makers. Maybe a free Volt from GM, or hybrid Eclipse from Ford? How about a special share of Cerebrus' profits if he directs a fire hose of cash toward Chrysler?

But until this morning, I don't think I fully realized how dumb Dodd is. He actually began his remarks by attempting to portray Bernanke's and Paulson's rescue of the US banking system as favoritism. Announcing that he had invited both financial mavens to testify this morning, Dodd actually thinks everyone else is as stupid as he is about what Paulson and Bernanke would have to say about the auto maker case.

The answer is, nothing. Ah, that would be Commerce Secretary Carlos M. Gutierrez, Chris. Do you have his phone number? I thought not.

In any case, Dodd went on to excoriate the Fed and Treasury over saving the nation's banking system, which is a hybrid of the Federal government and various chartered, heavily regulated national banks, while not jumping in to rescue a totally different type of company- industrial firms engaged in the manufacture of cars and trucks.

It's almost comical to see Dodd struggle to force his completely incorrect views on a sceptical nation. If he really can't understand why the nation's banking system is a qualitatively different case than a few already-failed vehicle producers, he needs to find another line of 'work.'

Immediately after doddering Dodd's remarks, Republican Senator Richard Shelby of Alabama provided a stunning contrast with his introductory comments. Shelby noted that the auto makers had already been failing prior to the financial crisis of this year, and, even now, are touting excessively optimistic sales and profit targets. Shelby observed that they have no Plan B if those plans are wrong, other than to return to Washington for more money.

However, this isn't the entire story on the auto maker's desired bailout. I've alluded to this in these posts here and here. In the former linked post, written in mid-November, within a day of the last visit of the auto makers' CEOs to the Hill, I noted,

""It's official. The Democratic Congress and its new partner, the inexperienced President-elect from Illinois, are going to ram a GM rescue bill through Congress ASAP.

This may be a record for the shortest time period in which a newly-elected President ran away from his most prominent campaign promises and morphed into someone else entirely.

"Trouble is, current President, George W. Bush, and the Congressional GOP members, aren't playing ball.

Boo Hoo!

Looks like GM is going to actually have to try to run its business until January 21st, 2009, without Federal aid. How shocking!Treasury Secretary Paulson has announced, long and loud, that the TARP will not be used to lend to GM for ordinary operations. President Bush isn't budging on the issue, either. No executive orders or special spending actions will be coming from him.

It seems, too, that most business press and a groundswell of ordinary American opinion is against selective aid to GM without a bankruptcy filing and, probably, the head of Rick Wagoner as the price for any Federal help."

Yes, that's the rub. Anything that Frisco Nan and Harry Reid pass can, and likely will be vetoed by the President....that is, the current, sitting President. The one who currently sits in the Oval Office. Not the one doing all the photo ops from Chicago.

And today's Congressional Republicans are already smarter and more positively disposed than their brethren of just a few months ago.

Look for Eric Cantor and Paul Ryan to brace House Minority Leader John Boehner, forcing him to withhold support for any Democratic bailout of the Detroit auto makers which does not first require their filing Chapter 11. Look for Senate Minority Leader Mitch McConnell to do the same, while President Bush cites Republican Congressional preference for a bill that includes that requirement.

Bush, Boehner and McConnell, standing in front of the White House, will make an effective team as the President gives his full support to the Republican leaders' version of a bill to help auto workers, via a DIP loan to those auto makers which file for bankruptcy, while steadfastly refusing to engage in corporate welfare and government picking winners and losers in the free market.

Citing the banking system as a vital national interest which had to be protected, Bush will draw a distinction between prior aid to the financial sector, and the Democrats' attempt to ladle out billions to failed US companies.

That veto is key. The Illinois rookie, regardless of what he has the press believing, is powerless until 12:01PM on January 20, 2009. Until that moment, anything Congress passes must be signed by President Bush.

GM's Wagoner has shot himself in the foot by insisting that, without Federal aid, his company will go bankrupt by the end of this month.

If that is not an invitation for the Republicans to push him into Chapter 11 to get access to a DIP loan, what is?

Moreover, public sentiment is broadly against a straight bailout of Detroit, sans bankruptcy filings.

This is one case in which American-style government comes to our rescue. Between 47 and 48 states don't rely on unionized labor working in GM, Ford or Chrysler factories to sustain their economies. This mass of American voters and workers realize that they are being asked to pay tax dollars to fund UAW benefits for current and retired workers which far exceed what they, themselves, enjoy.

That's why Frisco Nan, Harry Reid and even the New Messiah from Illinois have seriously miscalculated this issue. Americans are against a non-bankruptcy bailout of GM, Ford or Chrysler.

I believe that, if somehow, a bailout is effected without the bankruptcy requirement, you could see the President-elect's honeymoon cut to only a few months, and the Democrats lose either or both the House and Senate in 2010.

This is becoming a highly visible issue. And one on which most Americans' gut instincts are correct- that UAW members do not deserve a bailout, via GM, Ford and Chrysler, in order to preserve benefits that few others in the country enjoy.