Obama on the Auto Bailout
Riding the subway on the way to work I read a column by Steven Pearlstein where he praises president-elect Barack Obama as a voice of reason on the auto bailout. He writes:
Then, in steps Obama with the utterly reasonable proposition, delivered in a television interview, that while the failure of General Motors, Chrysler and Ford posed as much of a risk to the economy as AIG and Freddie Mac, he wasn't about to provide three uncompetitive companies with a bridge loan to nowhere. As a condition of his support, he would require that all the constituencies -- the shareholders, creditors, workers, pensioners, managers and dealers -- make the necessary concessions needed to restructure these companies and put them on sustainable, competitive footing.
Now, you have to keep in mind that we're talking Washington DC here, so a voice of reason is not a high bar. As Pearlstein noted, "Democratic leaders in Congress were initially willing to prostrate themselves before the United Auto Workers union and write the companies a blank check."
The Republicans were no better it seems. I need to dig into it further, but basically they seemed to be saying let's allow the auto companies use the loans we approved in the fall. Let them use it for a bridge loan to get by this crisis instead of for retooling for green cars (another stupid idea). Their position hardly seemed much different than the Democrats other than they didn't want to make two loans.
So by this standard, Obama does look reasonable. He is stating the obvious, which is if we're going to do this, we should do it in a sensible way. I don't think they should, and am skeptical to say the least that Obama will prevail in obtaining the necessary conditions for a healthy industry.
It would be nice if Pearlstein would have identified the TV interview, but it didn't take too long for me to find it -- 60 Minutes ran it.
Obama talks about the proposed bailout at the 7:50 mark.
By comparison to others in this town, it is a voice of reason. Not that I agree with it, but if you are going to do something like this, you have to do it that way. It has to be like a prepackaged bankruptcy. Besides Pearlstein, Robert Samuelson wrote a column with the similar idea last week.
If he does indeed go ahead, it will be a great test to see how serious his is, and how much clout he will have with the unions, the dealers and the Democrats in Congress.
I have a feeling that this is a crucial test for him. Is he indeed really different? Will he get such a deal? Somehow I doubt it. But if he does, then he will be very powerful indeed. It is exactly what the Democrats need, a force to keep their special interests in check.
