Obama: Congress right in sending Detroit 3 back empty-handed

[Truth Teller]

Source: Detroit Free Press

President-elect Barack Obama said today that Congress was correct to reject Detroit automakers’ request for $25 billion in emergency loans without further details, calling on the industry to justify its needs.

“I was surprised they did not have a better thought out proposal when they arrived in Congress,” Obama said at a news conference announcing his economic team. “I think Congress did the right thing, which is to say you guys need to come up with a plan and come back before you’re getting any taxpayer money.”


Read more: http://www.freep.com/article/20081124/BUSINESS01/81124033

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How detailed was the $700 billion dollar bailout plan he voted for? Has he condemned the Citi cash bonanaza for lack of a plan???


As a Michigander that supports Obama, I find this heartbreaking.

[Captain Hilts]

1. But correct to bail out Shitti Bank???????????

[Truth Teller]

2. It's phucking unreal

And I for one think Obama gets a lot of undeserved criticism here at DU.

[LisaM]

3. Exactly, CitiBank gets a deal apparently done behind the scenes over the weekend

With barely a peep. And it's a handout, not a loan?

[Truth Teller]

4. But I'm sure they had a far better plan

:eyes:

[notadmblnd]

5. he also said that automakers and auto workers both must make sacrifices

I wasn't an auto worker. My husband was. We've survive on his benefits since I've been unemployed. If I and my children lose those benefits, we'll be living on the street in no time.

[countingbluecars]

6. He wants details

about how the money will be used for the long term good of the American automobile industry. He didn't say they wouldn't get the money.

[Fumesucker]

8. Citibank I'm sure provided a great many details..

About how the money they are being *given* will be used for the long term good of the American financial industry. :eyes:

[pampango]

11. A bailout with no strings attached would be bad for the auto workers in the long run.

For their sake, if for no other reason, we need to attach conditions to a loan/bailout for the industry. To do otherwise would be to miss an opportunity to force auto company management to change the way the industry operates (what cars they build, how/where they build them, etc.). To miss this opportunity and let management continue with "business as usual" would be to allow the decline of the domestic auto industry (and the union) to continue.

[countingbluecars]

12. Well said. n/t

[blue_onyx]

39. This doesn't address

why Citibank and the other financial institutions aren't being held to the same standard. Why shouldn't the companies that created the credit crunch (the reason the automakers need the money) be required to submit plans on what they are going to do with the money they receive?

[pampango]

42. The financial institutions should be held to the same standard, but whether

they are or not, I don't want to miss this opportunity to revamp the auto industry for the long run.

Citibank had to agree to government power over executive compensation, dividend payments and government ownership of some of their stock. That would be appropriate for the auto companies, too, along with changes to the types of cars they produce and where/how they produce them. I'm sure the auto executives will be working the "It's not fair" angle, because they want the money with as few strings attached as possible, but I don't to let management off the hook. They need the financial help now, so now is the best time to get them to agree to necessary changes to make the industry viable (and the workers jobs viable) in the long run.

[deadmessengers]

7. Good for him.

Bottom line is that if I were to walk into a bank looking for a business loan, I had better have a well-researched, convincing business plan in hand if I actually expect to get anything other than a laugh and a bootprint on my ass on the way out the door.

I see no reason why the Big 3 automakers should be held to a different standard. If they want a loan, they're going to have to show similar due diligence - and I've not seen anything other than "booga booga economy booga collapse booga can we have the money now we'll take it home on our Learjets booga."

[tekisui]

9. Why the double standard, though?

citibank, AIG, and the other big banks haven't offered any plans either. Yet they get whatever they ask for.

[deadmessengers]

25. They should have.

No objection - the wall st. bailout passed WAY too easily.

[Political Heretic]

29. Did Obama say he supported the Citi Bank deal in that statement?

[Truth Teller]

34. He voted for the $700 billion

How much detail did that have?

[muntrv]

16. Citibank, AIG, Bear Stearns didn't have to present a business plan.

[gblady]

10. guys, guys, guys!!!

did you listen to the press conference where this was addressed???

If so, you would have clearly heard Barack state...
It is important that we help out the car companies...

He said that they needed to come up with a plan on how the $$$ would be used...
it's called accountability...and I, personally, think that's a good idea...

I, too, wish there was more accountability on the part of the bank bailouts...

but, just like the tax cuts misstatement tempest here at DU yesterday...
this is more misleading and untrue information.

[blue_onyx]

40. It's not misleading or untrue

to point out that Obama is holding the auto companies to a different standard than he did the financial institutions. I have no doubt he will help the auto companies but the double standard pisses me off.

[whistle]

13. Well, $25 billion pledged to U.S. auto makers and they asked for $25 billion more

...with NO plan as to how that bailout money, any of the $50 billion total would be used. I think we the taxpayers deserve to know what corporations will do with the funds we provide to help them. If it is to cut and run, then forget it they can go look elsewhere. NO PLAN, NO BAILOUT! Same applies to the banks and insurance companies and any other BushCo crony who comes to the bailout trough.

[Eric J in MN]

14. What is CitiGroup's "plan"?

CitiGroup got $25 billion for their shares.

Now they're getting another $20 billion, and $306 billion government guarantee on their "troubled assets."

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/24/AR2008112401118.html

[Truth Teller]

15. Has Obama objected to the Cititgroup cash bonanza?

Not that I know of, but I'd like to know for sure.

[Eric J in MN]

19. Obama voted for the $700 billion bank bailout.

I assume he supports the CitiGroup bailout unless I hear otherwise.

[Political Heretic]

30. Nice logic.

:eyes:

[muntrv]

17. Uh Barack? Wall Street didn't have a plan either and got $700 billion.

[pampango]

32. We need to force the Big 3 to have a plan, because if we allow them to continue with "business as

usual", the auto workers are going to be out of a job in the long run anyway. This is the time to use the auto management's desperation for financial help to force them to commit to changes that will make the industry viable (and the auto workers jobs secure) in the long run.

Whether the $700 billion works for Wall Street or not, I want the $25 billion for the auto industry to work long term - not just throw a was of money at them and keep them "alive" for a few months, only to watch them continue to lose money at such a rate that the $25 billion is gone in a few months and nothing has changed.

[Ian David]

18. They were going to use the $25 Billion to finance a union-busting Chapter 11 Bankruptcy.

Obama is playing a game of chicken with them.

It's brinksmanship diplomacy.

They'll be back, and they'll eventually get a loan, but they'll know they're gonna have to play by our rules.

[Eric J in MN]

20. If they want to go into Chapter 11, why ask for the loan? NT

NT

[Ian David]

21. They need a certain amount of cash on hand in order to qualify for chapter 11.

There were discussions about that on The Young Turks and on Bill Press that covered it, but it went over my head.

But the crux of it is, they need to have at least a certain amount of money.

And then they can dump all their union contracts and "legacy costs" such as pensions and health insurance for retirees.

[amandabeech]

48. When companies go to Chapter 11, they continue to operation and

work on reorganizing themselves. During the reorg, the companies are called 'debtors in possession.' The reorg consists of abandoning or renegotiating contracts, including employment contracts, selling off operations where appropriate, figuring out how much money can be doled out to creditors, and resolving which creditors have legal priority. Lawyers and accountants get paid first, then secured creditors, then unsecured creditors, which i think includes unpaid but earned wages.

In order to keep operating during the reorganization period, the companies need financing. It's called 'debtor in possession' financing.

If a debtor cannot get financing to continue operations while reorganizing, the Chapter 11 reorg ceases and the bankruptcy will be converted to Chapter 7, which is liquidation. Everything is sold, the creditors are paid, and the business winds up. For very large companies, this can take forever. There is still an Enron 'winding up' corporation to handle the lawsuits and miscellaneous filings.

[acmavm]

22. Now this is the first real bitch I've had with Obama and it's a BIG

ONE. He was quick to give his blessing to Wall Street. Now he's got a different sat of rules for the last American industry, the auto industry.

[Ian David]

24. Fool me once, shame on you. Fool me twice, shame on me.

The Big Three will be back to the bargaining table.

Don't worry.

[acmavm]

31. Oh yes, I have no doubt about that. But still, what a crock to

demand that an industry that employs thousands of Americans who earn an honest living by their labors toe the line and provide a business plan while letting the nasty bastards who committed criminal acts (are gambling and fraud not crimes???) move right in and lay claim to trillions just disgusts me beyond words.

By the way, how did the vultures from AIG, Goldman Sachs, etc., get to Washington? Dog sled?

[ryanmuegge]

50. This is far from the last, I'm sure. Those who are not ultra-rich are going to get fucked HARD

over the next four years.

[4lbs]

23. The US Government was going to be on the hook for Citigroup's assets one way or the other.

If they simply let it fail, there would have been hundreds of thousands of people or even a million or so with bank accounts that would have had to been paid via FDIC insurance.

With potentially $500K per account holder (checking + savings each $250K), that amounts to hundreds of billions anyway. However, just like what happened in the late 1980s with the S&L crisis, even though larger accounts (i.e. more than $250K) were only insured for a lower amount, the federal government usually insured and paid them the full amount.

So, how do you want hundreds of billions to go to Citigroup? Via loans that will be paid back and you are invested in them in the meantime, or via FDIC funds that don't get paid back?

By "loaning" them the money, you can also regulate their business practices.

[Eric J in MN]

27. Who says CitiGroup is getting a loan?

This article says the government will cover losses on $300 billion of "troubled assets," not that it will be a loan:

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/24/AR2008112401118.html

[4lbs]

33. It depends on how you look at it.

The government gets $52 billion of preferred shares that pay 8 percent annually, at a low per-share price. That's $4.1 billion per year back to the US government.

After 8 years, that's about $33 billion. Plus, the federal government can sell those shares at a higher stock price later down the line and get back more than the original $52 billion. Let's say the shares double in value in 8 years. Sell them for $100 billion or so, plus the $30 billion or so that you've already gotten from the 8 percent annual payback. The federal government gets back $130 billion over 8 years.

That's better than simply paying out hundreds of billions via FDIC insurance and not getting anything back, if Citigroup is allowed to fail.

I consider the above as a type of loan, but more of a business investment type "loan". The federal government is investing hundreds of billions into a company and the plan is to get about half that back in about 8 years.

[MilesColtrane]

37. .

[Doctor_J]

26. I think he's trying to run out the clock until Bush and the current Congress are gone

I predict Detroit will get an infusion in January

[Daemonaquila]

28. I'm sure they'll get money.

The Big 3 came to Washington arrogantly - on private jets, without a plan, expecting a no-strings bailout. I don't think there's that much serious opposition to helping keep Detroit going, but there needs to be some sort of reasonable plan for how they expect to survive with or without the money when nobody is buying cars and their gas-guzzling offerings are extremely unpopular right now.

[Politicalboi]

35. I don't like this either but

If there are no banks there are no car loans. How does that help the auto industry? We need alternative fuel and I hope that is going to be the key that unlocks this mess. To hell with more MPG. More MPG means more oil use. We need to stop it entirely. We need clean fuel now. And we still need a plan for the banks. They should have to show what they are going to do with the money too.

[blue_onyx]

41. Well, the banks aren't really lending again

The purpose of bailing out the banks was to open the credit markets up. That's not happening. So people still can't get loans to buys cars, which is part of the reason the auto companies need the bailout in the first place.

[Doctor_J]

36. I would like to see UAW given a prominent voice in the negotiation

Giving the whole lump to the execs is just more "Supply side economics" which has now been proven to be a disaster. I would like the plan to include pensions, living wage, and anti-off-shoring components. Health care won't be an issue because the entire country will be covered soon.

[Phred42]

38. Zackly - Why didn't they send Paulson back?

[JerseygirlCT]

43. So two wrongs would make a right?

They ought to have had much more of a plan before, and they ought to demand a plan now, and they ought to demand a plan for every business coming the gov't's way with its hand out in the future.

We don't need to try to fix a bad situation with another bad situation. It was arrogant to expect that we should just throw money at any of these situations. Can't we learn from mistakes and do better?

[spoony]

45. It isn't "learning from mistakes"

it's just a bullshit excuse for deflecting Detroit. If Wall Street wanted more money tomorrow they'd get it. Jumping through hoops, oops I mean "detailed plans" is just for lowlife industry beggars, not power players.

[JerseygirlCT]

46. Well, I tell you what

I'm not really too keen on handing over a whole mess of cash to anyone who can't be troubled to come with a solid plan for who they intend to use the money to get back on their feet. Period.

I don't care if it's the "little guy" or "the big guys" or Wall St. or Detroit. All the same to me - big business, and badly run big business. They were all happy to ignore bad habits and bad decisions while times were fat. Now it's time to line up for the hand-outs, and I find it amazing that it's a problem for any of them to come with something tangible in return - such as a plan.

[spoony]

44. Not a good tone to set there PE

My hopes that Obama prioritise American industry and labour just got cut in half. Meet the new boss...

[NeoConsSuck]

47. Why Citigroup got Detroit's money

http://money.cnn.com/2008/11/24/markets/thebuzz/index.htm?postversion=2008112414

And no, I don't agree with the article. If Citibank is too big to fail, then it is too big to exist, and they should be broken up. And so should Bank of America.

[ryanmuegge]

49. These companies are going down anyway, but the double standard is disheartening, not surprising.

We gave all that money to the banks, and this country is done anyway, why not give the automakers some money to keep this whole house of cards up for another 3 or 4 months? Oh, that's right: because Obama is an anti-union thug.