Posted on December 6, 2008
The Big Three automakers need money now, not money sometime in the future.
Without the money now, they won’t be able to make environmentally-friendly cars in the future. Apparently, that fact just dawned on Nancy Pelosi.
The spin coming from the Speaker’s office was that she blinked because she saw the grim job report on Friday. Well, duh!
But you know she was looking for an out. She made that clear when she said that bankruptcy is not an option earlier in the week. Of course, bankruptcy is an option. It is a bad option, but it is still an option. By taking bankruptcy off the table, she foretold that she was going to blink.
And she did. Just in the nick of time.
That the Big Three need a cash infusion is clear. The credit market disaster has been a double disaster for them. They can’t get cash to make payroll and their potential customers can’t get cash to buy their cars.
So, cash was the answer to this problem. Not environmental policy.
The Congress earlier this year helpfully gave the Big Three access to $25 billion, but they had the Energy Department administer the loans (a curious choice, don’t you think) and they made almost impossible for the program to up and running in time for the money to do any good. And then they made sure that the money could only be used for future investment. That is all well in good, but the Big Three need the money now.
Pelosi accused the Bush White House on malfeasance because they wouldn’t use the TARP money for the automakers. But TARP was created for manufacturers, so any use of TARP for that purpose would have been illegal. Plus, the Treasury Department needs that money for other reasons, like unfreezing the credit markets.
This game of chicken has been playing out in the front pages for the last three weeks. Neither Pelosi nor Bush would budge. But two things were in Bush’s favor. First, he is not running again, so what does he care about the political ramifications. Second, either way the Congress has to act, and without the Bush Administration’s cooperation, it is doubtful anything would pass.
The American people are suffering from bail-out fatigue, which complicates things even more. More particularly, the American people have minimally high regard for American cars these days. If they had higher regard for US cars, the Big Three wouldn’t be in this predicament.
But Pelosi concluded that the imploding economy couldn’t afford any more bankruptcies. So she blinked, just in the nick of time for GM, Chrysler and to a lesser extent Ford.