The White House announced a $17.4 billion rescue package for the troubled Detroit auto makers that allows them to avoid bankruptcy and leaves many of the big decisions for the incoming Obama administration.Deal Not Contingent On Anything
"In the midst of a financial crisis...allowing the U.S. auto industry to collapse is not a responsible course of action," Mr. Bush said.
"Under ordinary economic circumstances, I would say 'this is the price that failed companies must pay' and I would not favor intervening to prevent the auto makers from going out of business," the president said. "But these are not ordinary circumstances."
The deal would extend $13.4 billion in loans to General Motors Corp. and Chrysler LLC in December and January, with another $4 billion likely available in February. It also would provide the government with non-voting warrants, although the exact amount was unclear immediately. Ford Motor Co. has said it doesn't need short-term assistance.
The deal is contingent on the companies' showing that they are financially viable by March 31. If they aren't, the loans will be called and all funds must be returned, officials said.
"We lost 533,000 jobs last month," Mr. Bush said in an appearance Thursday. "What would another million jobs lost do to the economy? What would that do to the psychology in markets? What would that do -- how would that affect the working people? And so as you can tell, we're all in, in this administration. And if need be, we'll be in for more."
Leaving the deal up to Obama means the deal is not contingent on anything: It does not mandate restructuring, force any concessions from the unions, or do one single thing to ensure the long term viability of the automakers. It was a toothless maneuver hoping to absolve his administration for bearing responsibility for the collapse of autos.
In other words, the Bush administration wasted another $17.4 billion, and has set in motion a potential string of countless such actions by Obama, all of which will throw more good money after bad, in a misguided attempt to save jobs.
The irony is not a single job will be saved by this action. Indeed, Bush's decision will cost jobs because it does nothing to eliminate the overhang of debt at GM, wage differentials vs. the non-union shops, or the overhang of Wagoner and his incompetent staff, three fatal flaws that afflict GM.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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