Today, House Leader Nancy Pelosi held a press conference explaining what the Big Three automakers have to do in order to access a federal loan, asking for a written plan regarding three issues:
[O]n the accountability side, no dividends, and no bonuses for people making over $200,000. ... In addition to that, on the viability side, it talks about as they go forward, how they plan to make investments in the advanced technologies so that they can compete in the marketplace, so that the people will want to buy their cars.
We are all in this together. ... I reject those who say, let them go bankrupt and then we will deal after that. I just think that would be digging a hole far too deep, and just would have a devastating impact on the workers, on the economy, on the manufacturing base and on the confidence of the country.
It seems that congress has learned at least one lesson from the bailout, which is that any business socialism that goes on needs to come under strict provisions and with a very clear idea of who exactly is helping who. As to the idea of the loan itself, it is a good idea to work through a restructuring with federal aid because simply letting the firms slip towards what would likely be Chapter 7 bankruptcy would have disastrous economic results in a variety of sectors. But allowing the automakers to continue as they stand is unacceptable. Jon Cohn's arguments resonate.
From the Post, this note: "If Detroit bites on this, this will represent a significant and at one time unthinkable step forward in federal government control of how a private business runs itself. Think about it: This is Congress telling GM how to set corporate policy, at least for the term of a loan, which could be up to 10 years." To which I say, if the three automakers would like to run their businesses without the help of a government loan and the conditions attached to it, they can continue on in as they have been. Of course, continuing running their companies into the ground could prompt cries for nationalization, given the very negative national outcomes associated with the potential collapse of the companies.
Also, just for fun, Pelosi on corporate panhandling optics: "CEOs getting off a corporate jet rattling a tin cup is not a good image."
--Tim Fernholz
