Congress is set to provide the "Big Three" a $15 billion loan with the money coming from the previously approved $25 billion loan to help them meet fuel-efficiency standards vs. from TARP.
The loan is designed to help GM and Chrysler avoid imminent bankruptcy, and buy both the industry and Congress time to come up with a (hopefully) more comprehensive solution.
Among issues being discussed:
- Limitations on executive pay and restrictions on how any government loans could be used. Additionally, pressure is mounting on GM to remove Rick Wagoner as CEO.
- Warrant for taxpayers that are senior to existing stakeholders to ensure any Federal loans are repaid first.
- The creation of a Federal oversight board led by a "car czar" and including the Secretaries of Treasury, Energy, Labor, Commerce, and Transportation plus the Environmental Protection Agency.
It's hard to say which is more frightening — the idea of the auto industry being run from Washington, D.C., or that experts like Economy.com's Mark Zandi say the Big Three will utilmately need $75 billion to $125 billion in order to avoid bankruptcy.
3 comments:
Thang I have to disagree with you there. I don't think the "big three" being run by Washington DC is scary at all. The CEO's had their shot and thanks to greed and incompetence they royally screwed it up. The government may not be the most efficient (as we have learned in class) but desperate times call for decisive action. And we can't do the same thing that has put us in this hole just because we would love it if capitalism was perfect and didn't need any regulation. And what you have to remember is that all these Secretaries of Treasury and Energy Departments were former CEO's or part of the private sector in one way or another, so it's not like it's just being run by a bunch of politicians.
if this $15 billion is just to hold them over until they get the bigger sum doesn't this just prolong the inevitable. not that the industry will become obsolete but that congress will bail it out. we might as well give them all of what they want now if you vow not to let them fail. i hope congress still gets all of what it demands even though i see all of their demands less likely now because they gave up this $15 billion. the auto companies could just keep holding out and just keep getting bailed out in $15 billion increments.
I disagree. They are both very scary thoughts. The government already has enough power, it is big enough as it is. Also, the experts opinions of $75 to $125 billion is likely true and is real scary.
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