Bush gives Detroit $17.4 BILLION Christmas present

I'll bet you didn't think you'd be giving such an extravagant gift this year, eh? Well, thanks to President Bush, you and your children better dig deep, because $17.4 billion dollars of your money is going to incompetent American automakers and the union that helped make them the failures they are. Merry Christmas, Detroit.

The government will offer up to $17.4 billion in loans to the ailing U.S. automakers and expects General Motors and Chrysler LLC to access the money immediately, a senior administration official said on Friday.

Some $13.4 billion will be made available in December and January from the $700 billion fund that was originally designed to rescue struggling financial institutions, but the loans would be called back if the automakers cannot prove they are viable by March 31, the official said.

Viability would be mean that the companies must have a positive net present value, which doesn’t necessarily mean immediate profitability but would require them to reach that point relatively soon, the official said.

We've known this was coming. Bush has been talking about illegally bailing out the Big Three automakers using the TARP funds which are reserved by law for financial institutions only. Now he's doing it, along with some nebulous conditions that will undoubtedly be ignored.

I found several things wrong with Bush's speech this morning:

"Because Congress failed to make funds available for these loans, the plan I'm announcing today will be drawn from the financial rescue package Congress approved earlier this fall. The terms of the loans will require auto companies to demonstrate how they would become viable.

They must pay back all their loans to the government and show that their firms can earn a profit and achieve a positive net worth. This restructuring will require meaningful concessions from all involved in the auto industry -- management, labor unions, creditors, bond holders, dealers, and suppliers.

In particular, automakers must meet conditions that experts agree are necessary for long-term viability, including putting their retirement plans on a sustainable footing, persuading bond holders to convert their debt into capital that companies need to address immediate financial shortfalls, and making their compensation competitive with foreign automakers who have major operations in the United States.

If a company fails to come up with a viable plan by March 31st, it would be required to repay its federal loans. The automakers and unions must understand what is at stake and make hard decisions necessary to reform."

First and foremost, the conditions Bush lists are very similar to what the Big Three would have to do under Chapter 11 bankruptcy, only without first stealing $17.4 billion dollars of our money.

Second, what happens if/when the automakers can't get their act together and have to declare bankruptcy? If they can't pay their creditors, what makes Bush think they'll pay back the government?

And third, since they're being given an enormous influx of taxpayer dollars, what makes him think a cash-emboldened UAW will be willing to make concessions they've heretofore refused to make under the looming spectre of financial insolvency?

Last, and perhaps most important, if the companies DO come up with a viable plan by March 31st, does that mean they aren't required to repay their federal loans?

This whole thing stinks to high heaven, and it reminds me of the scene in The Dark Knight where the Joker stacks a gigantic pile of money he stole from Gotham City's gangsters and sets it on fire. Only today, Bush is allowing the Big Three to do it with our tax dollars.

And here...we...go!



For what it's worth, Ford has declined to take your money. So if you're looking to buy an American car, you might consider throwing your business their way rather than to the GM, Chrysler and UAW piglets suckling at the government's teat.
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UPDATE
As usual, Ed Morrissey puts things in more constructive terms:

"We’re all coughing up enough money for a down payment on a new car from every family in America, only without actually getting the car. And even if we’d used that money to buy a new GM, Ford, or Chrysler instead of it being a loan, none of the three would have shown a profit from the sales anyway. They’re losing money on every car they sell, and neither management nor labor shows much interest in changing those calculations. They just want a Governmentus ex machina to rescue them from their own folly without having to sacrifice anything … and George Bush just gave it to them."

Hugh Hewitt provides an optimistic appraisal of Bush's actions:

"This seems to me to be a much preferred approach that cedes the long-term issue to the new administration, and the president-elect will be able to factor assistance to the car companies into his legislative program for the new year. Lame duck presidents and lame-duck Congresses should do as little as possible to limit a new president's agenda, fresh as he is from a solid win and a shift to the left in the Congress. Senate Republicans have got to be prepared to fight for sobriety in January and February, and their principled positions of this month allow them to do that. President Bush's intervention provides his successor with all the options available."