This Weekend's Contemplation - A Bail-Out with Strings - Now You're Talkin'
It is about time that strings were attached to any discussion of a bail-out. Text in bold is my emphasis. From Market Watch:
Any federal bailouts of the auto industry, of strapped state governments or of homeowners should come with significant changes in the way business is done, top national and state officials said Sunday.
President-elect Barack Obama said that the auto industry needs federal help, but any rescue should come only if the industry makes major changes, according to the summary of an interview with CBS News' "60 Minutes" to air later Sunday.
Any assistance to the Big Three automakers -- General Motors, Ford, and Chrysler -- should be "a bridge loan to somewhere, as opposed to a bridge loan to nowhere," Obama said.
Obama said any assistance should be conditioned on "labor, management, suppliers, lenders -- all of the stakeholders -- coming together with a plan: What does a sustainable U.S. auto industry look like?"
In a lame-duck session later this week, Congress will look at providing additional money to the automakers beyond the $25 billion already authorized to help them build more efficient vehicles.
It's far from clear, however, whether Congress will approve any additional aid before the new Congress takes over in January.
Sen. Richard Shelby, R-Ala., the ranking Republican on the Senate Banking Committee, remained adamantly opposed to any federal bailout of the auto industry. In comments on two Sunday talk shows, Shelby said federal aid would be "money wasted."
On the CBS program "Face the Nation," Shelby said he wouldn't support a bailout under any conditions.
"I wouldn't support it anyway, but I can tell you what, the management has got to go," Shelby said.
On NBC's "Meet the Press," Shelby said the automakers should file for bankruptcy if they can't make it on their own.
"We all agree that they need to make fundamental changes," said Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee. "The question is how much pain can the rest of the economy take while those changes are being implemented?" Frank spoke on "Face the Nation."
Sen. Carl Levin, D-Mich., said a bailout is urgently needed, because 3 million jobs could be lost if the Big Three shut down operations. He said the auto industry should be allowed to tap into the $700 billion bailout fund for banks. (This is just a scare tactic. These jobs would not go away immediately because the companies would not go away immediately, especially in bankruptcy.)
Corporate management should be replaced if necessary to win approval of the bailout, Levin said on "Meet the Press."
The Bush administration opposes opening up the $700 billion Troubled Asset Relief Program to the automakers, however. Instead, the administration has proposed speeding up approval of the $25 billion "green fund."
In his interview on "60 Minutes," Obama also said Washington should do more to help homeowners facing foreclosure.
"We've got to ... set up a negotiation between banks and borrowers so that people can stay in their homes. That is going to have an impact on the economy as a whole," Obama said.
In an interview on the ABC program "This Week With George Stephanopoulos," California Gov. Arnold Schwarzenegger said that even state and local governments need to "prove that we have our fiscal house in order" to deserve federal money that may come in the next stimulus package.
"Anyone that wants to go and think that they don't have to shift down and make changes -- if it is states, if it is local government, if it is the auto industry, or any other industry, as far as that goes -- they're living in a dream world or in a fantasy world," Schwarzenegger said.
"You've got to recognize that this is the time, now, to renegotiate and to work in a different way," the California Republican said.
Schwarzenegger has advocated steep spending cuts and tax increases to close an $11 billion budget shortfall in his state's budget.
"I hate taxes," Schwarzenegger said. "But there are certain times when you have to forget about the ideology, and ... fix problems."