CE Week #15: “Detroit Bailout Is Set to Bring on More U.S. Oversight”
WASHINGTON — Congressional Democrats were drafting legislation Sunday for tight government control of the crippled American auto industry, including the possible creation of an oversight board made up of five cabinet secretaries and the head of the Environmental Protection Agency and led by an independent chairman or “car czar.”
While the form of oversight was still to be negotiated by Congressional Democrats and the White House, the talks made clear the extent to which the auto companies would have to submit to substantial government supervision in order to receive a taxpayer-financed bailout.
Whatever oversight entity is created, it would direct the drastic reorganization plans that the auto companies have said they were willing to undertake in exchange for billions of dollars in short-term government loans to keep them in business, a senior Congressional aide said. A main factor complicating the deliberations was the imminent transition between the Bush and Obama administrations.
The discussions of how strong a hand the government should take with the auto industry came as Congressional and White House negotiators sought to put the final touches on emergency bridge loans of about $15 billion to keep General Motors, Chrysler and Ford afloat.
The final legislation is also expected to impose stringent taxpayer protections, including stock warrants that would give the government an equity stake in the three companies, new limits on executive pay and a ban on stock dividends while the loans are outstanding. One proposal would require the auto companies to seek government approval for any business transaction of $25 million or more.
Once a bill offering aid to the industry is completed by Congressional Democrats and the White House, it would still need the approval of some Senate Republicans. Senator Carl Levin, Democrat of Michigan, one of the auto industry’s biggest supporters, said on Sunday that it was uncertain whether the plan would win the 60 votes needed to advance in the Senate.
President-elect Barack Obama, whose transition team has been involved in the talks, made starkly clear in an interview and at a brief news conference on Sunday that any aid to the Big Three auto companies should not come without significant concessions.
“They’re going to have to restructure,” Mr. Obama said in an interview on “Meet the Press” on NBC. “And all their stakeholders are going to have restructure. Labor, management, shareholders, creditors — everybody is going to recognize that they have — they do not have a sustainable business model right now, and if they expect taxpayers to help in that adjustment process, then they can’t keep on putting off the kinds of changes that they, frankly, should have made 20 or 30 years ago.”
Still, the bill seemed likely to stop short of authorizing the broad powers that some lawmakers had urged to allow what could have amounted to an out-of-court bankruptcy proceeding, in which the automakers’ creditors could be forced to accept reduced payments, labor contracts could be rewritten and executives could be summarily dismissed.
Senator Christopher J. Dodd, the chairman of the banking committee that is drafting the legislation, called for the dismissal or resignation of Rick Wagoner, the chief executive of G.M., which is the most imperiled automaker.
“I think you’ve got to consider new leadership,” Mr. Dodd said Sunday in an interview on “Face the Nation” on CBS. “If you’re going to really restructure this, you’ve got to bring in a new team to do this, in my view.”
Asked specifically about Mr. Wagoner, Mr. Dodd said: “I think he has to move on.”
A G.M. spokesman, Steve Harris, said that the company was grateful for Mr. Dodd’s assistance and that it was willing to accept tough oversight, but that it retained confidence in Mr. Wagoner.
“We appreciate Senator Dodd’s support in trying to provide some assistance for the industry, but General Motors’ employees, dealers, suppliers and the G.M. board of directors feel strongly that Rick Wagoner is the right person to continue the transformation of the company that he began and has presented plans to Congress to continue and accelerate,” Mr. Harris said.
All of the proposals made clear that Congressional Democrats and the White House, furious over the need for another huge corporate bailout, intended to make the automakers pay a price far greater than the 5 percent interest on the emergency loans.
Congressional Democrats said that if any of the companies failed to meet government requirements by the end of March, the emergency loans could be called in for immediate repayment.
At the news conference in Chicago, Mr. Obama affirmed his position that it would be unacceptable to allow the auto industry to collapse. But using somewhat tougher language than he had before, he said it made “no sense for us to shovel more money into the problem” if the companies are unwilling to reorganize.
The Bush White House, in its proposal for an auto rescue plan, called for the creation of a “financial viability adviser” within the Commerce Department charged with negotiating a “long-term financial viability plan” for each of the auto companies.
If such a viability plan could not be negotiated, the White House proposal called for allowing the adviser to mandate one.
Democrats were weighing counterproposals calling for the creation of a full oversight board, made up of the secretaries of commerce, energy, labor, transportation and of the Treasury, and the administrator of the Environmental Protection Agency.
Many lawmakers in both parties say they are troubled by the Bush administration’s handling of the $700 billion financial system rescue, which Congress approved in October. Several lawmakers said they did not want to be pressured again into spending billions of taxpayer dollars to rescue private companies.
“I think Congress is tired of being stampeded,” Senator Jeff Sessions, Republican of Alabama, said on “Face the Nation.” “We haven’t even seen a bill yet. So I think there’s still a lot of skepticism out there.”
Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, on “Fox News Sunday” urged his Republican colleagues to filibuster a bailout bill. “I think this is a bridge loan to nowhere,” he said.
As lawmakers grappled with ways to aid the auto industry. Mr. Obama cautioned on “Meet the Press” that it was critical to think about both short- and long-term solutions to the nation’s economic woes. “Things are going to get worse before they get better,” Mr. Obama said.
David M. Herszenhorn reported from Washington, and Jackie Calmes from Chicago. Peter Baker and John M. Broder contributed reporting from Washington, and Bill Vlasic from Detroit.
Oversight Definition (answers.com): In general usage, oversight usually means something that has been forgotten or overlooked. But in Congress it means just the opposite. When Congress performs its oversight functions, it is supervising, or looking over, the business of executive branch departments.
The Legislative Reorganization Act of 1946 assigned to each committee or subcommittee with jurisdiction over legislation relating to a particular agency, or with the power to appropriate its funds, the power to exercise “continuous watchfulness” over that agency. Through their oversight functions, congressional committees monitor how well agencies are administering the laws and if they are spending federal money properly. The General Accounting Office conducts regular audits of agency finances. Committees also call agency heads to testify during oversight hearings. By contrast to investigations, which are usually special hearings concerned with a single issue or event, oversight is a regular, year-to-year, ongoing procedure. Consequently, Congress’s oversight functions get less attention from the media than dosplashier investigations. (1946 and 1970)
Over the last few weeks, I have heard about a possible bailout of the auto industry in passing. “The final legislation is also expected to impose stringent taxpayer protections, including stock warrants that would give the government an equity stake in the three companies, new limits on executive pay and a ban on stock dividends while the loans are outstanding.” But, since a bill has yet to be attempted to be passed, it is not entirely certain what will be included with the federal money. The Democrats seem to be pushing “for tight government control of the crippled American auto industry, including the possible creation of an oversight board made up of five cabinet secretaries and the head of the Environmental Protection Agency and led by an independent chairman or ‘car czar.’ ” So, the bailout generated by the Democrats would certainly be in support of the Democratic agenda. It is also the belief that “any aid to the Big Three auto companies should not come without significant concessions.” I agree that restructuring is right to include in the bailout as the industry got themselves into the situation that caused them to seek a bailout. “All of the proposals made clear that Congressional Democrats and the White House, furious over the need for another huge corporate bailout, intended to make the automakers pay a price far greater than the 5 percent interest on the emergency loans.”
Connection: A bailout would result in a bill. A bill is a proposed law. The bailout intended for the auto industry has yet to be submitted for consideration by the Congressional Democrats drafting it. A bill can be submitted by members of the House or Senate.
Even though all that we heard about from last bailout were bad such as the lavish spa retreat for the CEOs. This bailout seems to be constructed way better than the last one. It attatches some pretty big strings but it is good. Since this is also going to create a “car czar” cars will be more carefully made. They will have better gas milage and made more environmentally friendly such as completely taking out the Hummer line created by General Motors as well as other large trucks. I do agree with the article that we should have done this years in advance but as they say “hindsight is always 20/20.” Maybe this hindsight will urge the auto industry to speed this thing up of creating better cars.
This bailout as we may not like the reprocussions of it such as taxes and possible cuts in other places, if we do not bail the “Big 3″ out it will put thousands of workers out of work and more without retirement and benefits. These three companies, Ford, General Motors, and Chrysler, are a good base of American economy. Buying cars, American cars especially help to drive the economy so if we help them out in the long scheme of things it will come back.
Connection: No bailout= worse conditions than we are already in with more unemployment and no large definite source of money that helps to keep the economy flowing. Also this bailout is essentially a bill so the Senate must agree on it in order for it to pass.
I agree with Barack Obama and his transition team in that assistance has to be given to the three big auto industries, Ford, Chrysler, and General Motors. Considering the shape our economy is currently in, losing the three biggest automotive companies in the industry would have a huge impact on our economy. We cannot afford to knock the economy off balance any more than it already is. However, the government cannot be the only ones to hold all responsibility in this situation. The Big Three have to do their part, as well. Like Obama said, “They’re going to have to restructure.” In my opinion, the Big Three should decide what they can do to help themselves before they come running to the government’s help. This may include a change in management, ownership, wages, and products. However the government decides to assist them, the Big Three needs to do their part.
Connection: In our last section of reading, we learned about “Congressional Oversight.” Congressional oversight is the congress’s way of monitoring the bureaucracy and its administration of policy. This oversight is handled mainly though hearings. Obama needs to develop some sort of oversight group to organize the creation of the legislation that will assist the auto industries. This group will need to set guidelines, in order to make the companies do their part, too.