Bush to Bail Out Big 3

After hedging bets with talk about “controlled bankruptcy,” the Bush administration has decided to give the Big 3 loan guarantees that could not pass the Senate.

The White House has decided to come to the rescue of General Motors and Chrysler by providing them with $17.4 billion in low-interest loans to keep them afloat, ABC News has learned. The money for the loans will come from the Troubled Asset Relief Program fund, signed into law this fall to bail out the financial industry. The president will provide $13.4 billion in short-term financing in December and January and plans to make another $4 billion available in February, provided it can reach into the second half of the $700 billion TARP fund to do so.

[…]

Bush and other administration officials publicly worried in recent days about the need to avoid an uncontrolled bankruptcy by the two car companies. “This is a difficult time for a free-market person,” Bush said Thursday. “Under ordinary circumstances, failed entities, failing entities should be allowed to fail. I have concluded these are not ordinary circumstances, for a lot of reasons… We got to the point where if a major institution were to fail, there is great likelihood that there’d be a ripple effect throughout the world, and the average person would be really hurt.”

Treasury Secretary Henry Paulson told a business forum in New York Thursday night it was too risky to simply let the automakers fail. “When you look at the size of this industry and look at all those that it touches in terms of suppliers and dealers& it would seem to be an imprudent risk to take,” he said.

[…]

Treasury Secretary Paulson will administer the plan until Jan. 20, at which point there will be another “presidential designee” to oversee the loans under the new administration. If the companies cannot prove they are financially “viable” by March 31, the loans will be recalled and the money returned to the Treasury. The White House is also calling for no dividends for stockholders until the money is paid back, and stipulating that the government can block transactions over $100 million.

The facts that this is overwhelmingly opposed by the American people, was killed in the legislature, and that the TARP funds were allocated for an entirely different purpose were apparently not major factors in this decision.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. M1EK says:

    Big 1.8, really. Ford gets nothing, their competitors get subsidized, and they’re the one that deserves to live.

  2. Anderson says:

    The facts that this is overwhelmingly opposed by the American people, was killed in the legislature, and that the TARP funds were allocated for an entirely different purpose were apparently not major factors in this decision.

    Bush is at least consistent.

    I’m sure that the Executive Bailout (pun intended) is included within the president’s commander in chief powers. If the Big Three fail, America will be weaker, and the terorrists will have won!

    Or maybe Bush is invoking his Article 11 powers under the Constitution.

  3. odograph says:

    Are the polls still 45/55? I oppose, but I was actually thinking that was a close split (considering that it is a national, and not just ‘heartland’ result).

  4. Dave Schuler says:

    Big 1.8, really. Ford gets nothing, their competitors get subsidized, and they’re the one that deserves to live.

    Be careful with talk like that Keep it up and you’ll be lambasted the way I have for not showing sufficient sympathy to GM and Chrysler’s workers.

  5. Raoul says:

    You are coming close to wanker territory. First, the story above: the Lizard ballot had two entries in the senate slot; the Favre had only one, as Nate explained. As to the bailout, a poll skeptic like you should know better-it depends how the question is asked, but even so, my best guess is close to 50/50. A minority killed the package in the legislature meaning that a majority of the legislature was for it. Your frame is done to make points sound grander than they really are. And ALL TARP funds are being spent differently than originally allocated for.

  6. Steve Verdon says:

    But if we tweak the economy just right, always elect just the right man…why everything will be fine.

    Christ, it really amazes me that so many grown adults have seen this kind of stuff time and again, and still they think there is a pony somewhere there in government intervention in the economy.

    For some people there is absolutely no amount of empirical evidence that will move them from a viewpoint.

  7. Rick Almeida says:

    …still they think there is a pony somewhere there in government intervention in the economy.

    It is equally amazing that so many believe with religious fervor that, if only there were no government intervention in the economy, ponies would spontaneously generate.

  8. […] have already ragged on this, so I’ll leave it to James to summarize my opinion: The facts that this is overwhelmingly opposed by the American people, was […]

  9. Steve Verdon says:

    It is equally amazing that so many believe with religious fervor that, if only there were no government intervention in the economy, ponies would spontaneously generate.

    Yeah, good thing I’ve never indicated anything like that.

  10. […] the post about President Bush’s decision to bailout GM and Chrysler I wrote the following, But if we […]

  11. charles johnson says:

    The facts that this is overwhelmingly opposed by the American people, was killed in the legislature, and that the TARP funds were allocated for an entirely different purpose were apparently not major factors in this decision.

    The fact that a large number of Americans and the majority of Senate Republicans are ignorant of macroeconomics is a sad fact, but fortunately this ignorance is being circumvented.

  12. Brett says:

    Big 1.8, really. Ford gets nothing, their competitors get subsidized, and they’re the one that deserves to live.

    Quite the contrary. Ford itself has said that it wanted a bailout for its fellow members of the Big Three even if it didn’t need one personally, because they use a lot of the same suppliers and so forth – they said something along the lines of “Ford will probably need a bailout if GM and Chrysler go under.”