Friday, December 19, 2008

Bush Moving Toward BK on Autos?

News reports are conflicting.

Yesterday, CNN implied that the White House was attempting to use TARP funds to "rescue" the autos.

Today, CNS reports that it's leaning toward 'managed BK,' a Chapter XI type proceeding.

Here's the TARP language which is germane:

The actual legislative language gives the secretary of the Treasury the authority “to purchase and to make and fund commitments to purchase troubled assets from any financial institution.”

Financial institution is defined in the law as, “any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company.”

It would not be surprising to see GMAC and Chrysler Financial suddenly become "financial institutions" as defined above ('not limited to' covers a multitude of possibilities); it's also possible that Bush will use TARP to reflate the capital of those companies and allow the parent automakers to go BK.

Bush certainly should not play Santa here. There's no expectation that the automakers will reform their operations (and contracts) unless they file BK, despite the UAW's assertions to the contrary.

Related: Toyota is expected to announce its first operating loss since 1941...

UPDATE: Bush's comments at an AEI function.

President Bush said he understood the frustration people felt over the financial industry bailouts, but at the time Ben Bernanke had told him that if he didn't act, there could be an economic crisis greater than the Great Depression.

"I didn't want to be the president who was there at the beginning of a crisis that is greater than the Great Depression," he said.

Although he emphasized that a final decision hasn't been made, Bush spoke as if the auto bailout were a foregone conclusion.

"Under normal circumstances, no question bankruptcy court is the best way to work through credit and debt and restructuring," Bush said. "These are not normal circumstances. That is the problem."

Bush argued that we'll never know what kind of economic catastrophe would have resulted had he not taken the actions he did. He said that all the actions he took should be viewed as "temporary" and he doesn't believe that government should be running the auto industry or mortgage system over the long run.

"This is a difficult time to be a free market person," Bush observed at one point in his remarks

Ummmnnnhhhh....but not a difficult time to obey the laws, Mr. President.

1 comment:

steveegg said...

You should see the tombstone at Michelle Malkin's place (or over at mine because I, borrowed it).

I seem to recall the state sales tax as "temporary".