Senators appear to aim for plan that won’t need vote
From buffalonews.com By Jerry Zremski NEWS WASHINGTON BUREAU CHIEF
WASHINGTON — Senators searched Thursday for politically palatable ways to rescue the U.S. auto industry, with some options seemingly designed to avoid submitting the unpopular idea to a vote in Congress.
Over the course of a six-hour hearing featuring the heads of the three major automakers and the United Auto Workers, senators repeatedly noted the difficulty of building support for the $34 billion in assistance the companies are seeking.
Without such a package, General Motors could be bankrupt by the end of the month, UAW President Ron Gettelfinger said.
With a leading economist telling them an auto industry bankruptcy could cost taxpayers hundreds of billions of dollars more than a bailout, lawmakers acknowledged the ramifications of doing nothing would be immense.
“All of us sense that inaction is unacceptable,” said Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, who presided over the hearing. “But we are not about to write a check and hand it over.”
Options spelled out over the course of the hearing included a Treasury Department or Federal Reserve bailout from available funds or a mandate that some of the recently rescued banks come to the aid of the auto companies.
Sen. Charles E. Schumer, D-N.Y., suggested a two-tier approach: Auto companies would get immediate assistance and federal oversight, then receive more money later if they met specified conditions.
After the hearing, Dodd said he was optimistic.
“We’ve got the makings of putting something together,” he told reporters.
If so, the deal seems to be coalescing painstakingly — with Dodd starting by pushing the sort of bailout he has favored all along.
He asked Gene L. Dodaro, the acting controller general of the Government Accountability Office, whether the Treasury Department had the authority to use some of the $700 billion Congress set aside for the financial bailout to help rescue the auto industry, or whether the Federal Reserve had the authority to use its funds.
“Both of those avenues of authority are available,” Dodaro said.
Neither solution would require action from Congress. Yet Treasury Secretary Henry M. Paulson and Fed Chairman Ben S. Bernanke turned down requests to testify at Thursday’s hearing.
Noting that Paulson is in China on business, Dodd said: “It’s time to come home. We have a serious problem on our hands. And I realize he has a meeting over there, but I need him over here, and I need the Federal Reserve to step up, too.”
The auto leaders made it clear that they need someone to step up to help them.
“I believe we could lose General Motors by the end of this month,” Gettelfinger said, adding that his union agreed to drastic concessions Wednesday for that very reason.
“Some forces beyond our control have pushed us to the brink,” said Rick Wagoner, chairman of General Motors, who asked for $4 billion in loans to get the company through the rest of this year and as much as $18 billion in total.
“Chrysler needs a $7 billion bridge loan to bridge the current crisis,” said Robert L. Nardelli, the company’s chief executive officer. “We believe this is the least costly alternative.
Alan R. Mulally, chairman of Ford — the least troubled of the Detroit Three — struck a less desperate tone.
Nevertheless, “the collapse of one or both of our domestic competitors would threaten Ford because we have 80 percent overlap in supplier networks, and nearly 25 percent of Ford’s top dealers also own GM and Chrysler franchises,“ Mulally said.
That sort of collapse would be “cataclysmic” for the American economy, said Mark Zandi, an economist with Moody’s economy.com. He warned that 2.5 million jobs could be lost as the impact of an auto bankruptcy trickled down to dealers, suppliers and communities.
The result would be dramatically higher government spending on unemployment benefits, auto industry pensions and other bankruptcy-related expenses that would, in total, far outstrip the cost of the bailout.
“It’s not a close call,” Zandi said. “It would be several hundred billions of dollars. It’s not even in the same universe.”
Zandi predicted the automakers eventually would need upwards of $125 billion in assistance — more than three times more than they are now seeking.
But for now, lawmakers seemed to be leaning toward a more limited rescue attempt.
Sen. Bob Bennett, R-Utah, suggested that banks rescued by the government be encouraged to lend the auto companies the money they need, with the loans to be insured by the government.
Schumer, meanwhile, suggested giving the auto companies the cash they need to operate through March 31, along with a trustee designated by the president to oversee how they spent it. Auto companies then would be eligible for more government loans if they needed them, and if they had used the earlier loan money according to preset conditions.
Schumer said appointment of a trustee would be quicker than putting together an oversight board to watch over the use of the government funds, which other lawmakers proposed.
Sen. Mike Crapo, R-Idaho, said an oversight board would be “basically a federal restructuring trustee” with power similar to that of a bankruptcy court.
Addressing the auto executives, Crapo said: “I did not hear any objection from any of the three of you to the establishment of an oversight board, or whatever we call it, of a federal oversight entity that has the literal authority to impose restructuring conditions and to enforce those as a matter of law as these dollars are utilized. Am I correct?”
All three executives said yes, Crapo was correct.
Some Republicans, however, remained skeptical about helping the auto industry in any way.
Sen. Richard C. Shelby of Alabama, the top Republican on the banking panel, said he would oppose the bailout, calling the companies’ loan requests hastily drawn and not nearly specific enough.
With some Republicans striking that attitude, Democrats will face difficulty mustering 60 Senate votes to allow passage of any bailout plan — which is why Dodd was looking for solutions inside and outside of Congress.
While Dodd stressed greater involvement by the Bush administration and the Federal Reserve, his counterpart in the House of Representatives— Rep. Barney Frank, D-Mass., chairman of the Financial Services Committee — put the onus on President-elect Barack Obama.
“He’s going to have to be more assertive than he’s been,” Frank said at a Consumer Federation of America conference in Washington, the Associated Press reported.
“At a time of great crisis with mortgage foreclosures and autos, he says we only have one president at a time. I’m afraid that overstates the number of presidents we have,” said Frank, who will convene another hearing on the auto bailout today. “He’s got to remedy that situation.”