David Kirkpatrick

December 9, 2008

Inside dope on Detroit’s bailout …

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 12:56 am

… from Jonathan Cohn at the New Republic’s “The Plank” blog.

Here’s his scoop and take:

By late Monday night, a rescue for the nation’s ailing automakers was looking a lot more likely. Democratic House leaders released the draft of a new plan and White House officials, though raising some objections, indicated that agreement on a package was close. Senate Democrats remained nervous that they might not yet have the votes in their chamber, where it would take 60 votes to break a Republican filibuster. But Wall Street signalled its optimism by jumping on stocks for Ford (up 24 percent) and General Motors (up 21 percent).

I had a chance read through a draft of the proposal and then talk it over with a few people involved with the discussions. There’s still a fair amount of confusion out there–apologies if anything I am about to say turns out to be inaccurate–but the essential elements seem to be pretty straightforward.

The government will make up to $15 billion in loans available to the industry right away–enough, presumably, to keep Chrysler and General Motors from shutting their doors in the next few months. (Ford, which is in better shape financially, may not need loans at all.) By March 31, the companies would have to submit detailed restructuring plans that follow up on the outlines their executives offered in their testimony last week.

If they met that deadline and provided satisfactory plans, they could perhaps get more loans as necessary–although it’s not clear (to me or to my sources) whether that would require Congress to authorize the money. If the companies failed to submit satisfactory plans, then they couldn’t get more money and would have to pay back what they could, a move that would presumably trigger bankruptcy.

And who would decide whether the plans were “satisfactory?” Ah, that’s where it gets interesting. The Democrats had originally proposed to create an oversight board, perhaps composed of officials from various cabinet agencies including Commerce and Energy. The Bush Administration preferred to appoint a single overseer–that is, an auto “czar.”

Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: