If the House and Senate end up voting this week on a financial rescue plan for the car companies, there’ll be several vote switchers: those who voted one way on the $700 billion financial sector rescue plan, but will vote the opposite way on the auto industry loan.
What has changed — the principles or the circumstances?
With the House apparently set to vote on the auto industry rescue plan Wednesday night, here’s how Rep. Brad Sherman, D-Calif., a vehement critic who voted against the $700 billion Troubled Asset Relief Program (TARP), but a supporter of the car industry loan, explained his switch: “This is a better bill with a better purpose with better controls. This is a chance to preserve the automobile industry until we get a better administration and a better Congress.”
Sherman also notes the relatively small size of the auto package: “Compare the $15 billion cost of this bill to the well over $7 trillion that has been risked or invested or loaned or guaranteed by the Fed and the Treasury, and it is a reasonable investment, even without many of the provisions that I think should be in the bill.”
Among the changes Sherman would like to see in the auto industry loan: “It’s not just investments; it’s disinvestments.” He wants the bill — or a future version to be voted on next year by the new Congress — to require that disinvestment by one of the Detroit Three get approval of the so-called “car czar,” a presidential appointee who’d be authorized to monitor the Detroit firms.
More disinvesting than investing
“These companies are going to be doing more disinvesting that investing,” Sherman said. “They are going to close more plants than they are going to build. I was chagrined to see Chrysler close down a plant in Missouri when they could have instead closed down a plant in Mexico and a plant in Canada.”
Sherman would also like to see auto executives limited to $1 million total compensation, including stock options.
Why stock options? “General Motors isn’t going to sell for $3 a share five years from now; it’s either going to be $30 and up or its going to be zero. So these stock options could be very valuable.”
In contrast to Sherman, there will likely be several Republicans who voted the opposite — for the $700 billion package last October but will vote to kill the much smaller car industry loan this week.
Sen. Tom Coburn, R-Okla., voted for the TARP but is joining other fiscal conservatives in trying to torpedo the auto industry loan.
“The $700 billion was to unfreeze credit, to allow the whole economy to work,” Coburn said. “I’m not necessarily pleased with how they used the first $335 billion of that. They didn’t do it to buy mortgages, which I think would have made a big difference.”
Help the bankers, but not the auto workers?
But how, a reporter asked, could Coburn assist bankers but spurn factory workers? The TARP “wasn’t for bankers,” he insisted. “It was for anybody in this country who does commerce. If you didn’t put that money in there, we would have a credit freeze today. Instead of having 533,000 jobs gone last month we would have had 1.5 million gone.” The TARP “averted that. How do you measure something that doesn’t happen?”
As other Senate Republicans are, Coburn is alarmed by the precedent he thinks would be set by assisting Detroit car makers. “You’ve got the auto companies. Who else should be going through bankruptcy that we’re going to keep from going through bankruptcy by giving the next $350 billion of the TARP money?”
He sees the auto industry loan as a disguised cash subsidy with no chance of repayment.
“I guarantee you this will never work,” he said. “In this bill, it says in three months if you haven’t got the (re-organization) plan complete, you have to pay back the (loan) money. Where do they get the money? Since nobody is going to loan it to them, they can’t pay it back.”
Coburn noted that he owns a SUV made by General Motors. “I love my SUV, and I’m going to buy another one. This bill says ‘you’re not going to be able to build SUVs,' in essence” due to more stringent fuel economy standards. “It’s an ‘environmentally correct’ bill,” he said sardonically.
Coburn supports the firms going into “pre-packaged” Chapter 11 bankruptcy reorganization, with a federal bridge loan and federal guarantees of the car companies’ product warranties as part of the arrangement.
Coburn said the labor costs of the Detroit Three must be brought down to the level of the “transplants” — Honda, Toyota and other foreign firms with factories in the United States. He also urges that the Detroit Three shift their retired employee medical care costs on to the Medicare system.
With the Democratic leadership still trying to figure out how to round up the votes late Wednesday, it appeared that Coburn had enough Republican allies to block approval of loan.
