Forgive members of Congress if they feel a sense of déjà vu this week. After all, they, and we, have all been here before not so long ago, in fact. The economy is teetering, on the brink of collapse, and if the House and Senate don't act right now a full-blown Depression looms and we'll all find ourselves on breadlines faster than you can say AIG er, Citibank. I mean, General Motors.
Congress is set to reconvene this week for the final vote of 2008, and it's no surprise, given the state of the economy, that they will be voting on yet another bailout, this time of the Big Three American automakers. It is, perhaps, cold comfort to the more than half of Americans who oppose the move that the funds will not be drawn from new debt but rather from existing dollars appropriated earlier this year in the energy bill. This is the same modernization fund the automakers were banking on to get them from SUV-land to Hybrid-world, so it's likely that come January President-elect Barack Obama will have to find or print fresh resources to help keep the ailing companies on the road. In other words, the $15 billion bridge fund Congress is expected to approve in the coming days is only the first installment of what some economists warn could cost up to $200 billion when all is said and done. (Read TIME's biographies of the Big Three CEOs)
For the moment, at least, taxpayers can relax about that imposing figure. Whether it's donor fatigue or anger that the Big Three to a large extent brought this upon themselves, there simply isn't the political will in Washington to pass a comprehensive rescue plan. When they returned to Congress last week to plead for help, the automakers asked for $34 billion in order to avoid bankruptcy. Most economists agree that if even one of the Big Three Chrysler, General Motors or Ford were to file for Chapter 11, it would have a potentially crippling cascade effect on the economy. The automakers and their suppliers employ more than 2.5 million American workers nearly one in 10 U.S. jobs. The $15 billion is intended to see Chrysler and GM in particular Ford is in better financial shape and is not asking for any short-term help through the first quarter next year and to give the incoming Obama Administration time to work out a more long-term solution.
But even the $15 billion installment isn't being handed over without some strings attached. In order to receive the funds, the Big Three will have to work with a so-called car czar, as well as a board made up of as many experts as the President deems fit (President Bush will handle the initial appointments, and there is some hope that Obama and Bush can agree on a car czar). By March 31 of next year, Detroit will have to lay out a schedule for how and when they will repay the funds as well as plans for their long-term viability; they must also sell their corporate planes (in a terrible public relations fiasco the Big Three CEOs came to Washington on their jets to beg for public funds) and agree to tight executive compensation restrictions. In the interest of passing a bill quickly, Congress dropped many proposed provisions, such as allowing the car czar to dictate operations at the three companies and forcing the resignation of all three CEOs. "While we take no satisfaction in loaning taxpayer money to these companies, we know it must be done," Senate majority leader Harry Reid said on the Senate floor Monday. "But this is no blank check or blind hope. If the companies fail to develop a plan that will lead to long-term competitiveness and profitability, if they fail to stick to that plan, the loan can be recalled."
Still, the White House and Republicans criticized the Democratic proposal late Monday, saying it didn't go far enough in requiring long-term viability plans from companies that they view as a bad investment. "We cannot expose the taxpayers to new burdens without the promise of avoiding in the future the same mistakes that created these problems in the first place," said Senate minority leader Mitch McConnell. "This is the principle that should guide all of us in this week's negotiations, and I'm confident it will guide Republicans."
Reid and House Speaker Nancy Pelosi have long wanted to see the money come from the $700 billion bank bailout fund, known as the Troubled Asset Relief Program, or TARP, and have argued against taking money from the modernization fund. Pelosi relented only after Friday's job report the worst in 34 years, showing that the economy shed more than 533,000 jobs last month. But, having made this concession, Dems said they were unlikely to yield more ground. "This is a bad choice that we have to make. We should be able to use TARP money. The White House doesn't want to do that. So we have to use money that is designated for an innovative purpose," Pelosi tersely told reporters on Capitol Hill Monday evening.
Pelosi was careful to underline that she expects the full $15 billion to be repaid by the end of March, meaning the car companies will either be forced to go it alone after that or, more likely, the Obama Administration will replace the $15 billion plus the additional funds the car companies say they need with money from the TARP, the Treasury or the Federal Reserve. In fact, the bill has language specifically authorizing the President to take money from the TARP, a provision the Bush Administration which has steadfastly opposed using such funds for the automakers has presumably chosen to overlook.
While none of these Democratic moves would be a problem next month, when the Dems will enjoy a bigger majority in the Senate, right now the GOP still controls 49 Senate seats and with Obama's seat vacant and Joe Biden and Hillary Clinton not voting, there is little Reid can do without GOP approval. Grim-faced and drawn, lawmakers Monday began parading across the Senate floor to give their views on the measure the start of what will surely be a joyless run-up to one of the least popular votes of the year.See the 50 worst cars of all time. See pictures of the remains of Detroit.