DC Auto Bailout Ideas Involve US Equity Stakes, Turn into an Early Christmas Tree

Can I have permission to utter the S-word ("socialism")?

Ken Thomas's Associated Press report today (link is dynamic, subject to change, and will probably be gone in a week) on auto industry bailout ideas emanating from Washington includes these items, all of which expand soc- ... soc- ... socialism:

  • Legislation proposed by Barney Frank involves the government taking ownership stakes in the companies.
  • Lawmakers want to use funds that were meant only for the financial sector bailout.
  • A note that the current bailout is over and above the $25 billion in government-guaranteed loans that has already been approved for "development of fuel-efficient vehicles."
  • News that auto industry suppliers want in on the bailout action
  • The United Auto Workers wants a separate $25 billion "to help cover future health care obligations for retirees and their dependents."

Are we having fun yet?

Here are key paragraphs from the AP story:

Democrats at work to tap bailout for automakers

Congressional Democrats are marshaling support for a rescue package to pump $25 billion in emergency loans to U.S. automakers in exchange for a government ownership stake in Detroit's car companies.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, and Sen. Carl Levin, D-Mich., are developing legislation that would let the auto industry tap into the $700 billion Wall Street rescue money, approved by Congress last month, to fund their business operations.

..... Treasury Secretary Henry Paulson said Wednesday that the auto sector was "critical" but that the financial industry rescue was not designed for car companies.

..... Senate Republican leader Mitch McConnell of Kentucky, which is home to two Ford Motor Co. plants, was noncommittal about additional aid. In a statement, his spokesman said Congress should move to speed the release of a $25 billion loan program passed earlier to help the carmakers develop fuel-efficient vehicles

.... Frank's legislation would carve out a portion of the $700 billion financial rescue program for the Big Three automakers, letting the government take an equity stake in them in exchange for the loans. ....

..... The car companies would face tougher restrictions on awarding pay packages to executives and dividends to their shareholders than the financial companies that get a piece of the original bailout.

Auto executives, labor leaders and other industry proponents are seeking an immediate $25 billion loan to keep the companies operating. Union officials are also hoping for a separate $25 billion to help cover future health care obligations for retirees and their dependents.

Beyond the car companies, lawmakers may hear from a broad coalition of manufacturers seeking aid. Auto suppliers, which carry a wide manufacturing presence in Michigan, Indiana, Missouri, Ohio, Tennessee and Illinois, are seeking a piece of the rescue.

An AP story yesterday evening, blogged earlier today at NewsBusters and BizzyBlog, at least mentioned, though barely, the high labor cost structure that has been a millstone around the companies' necks for decades. This AP report has not a word.

As to Barney Frank's ownership proposal -- Fannie Mae and Freddie Mac, which Frank and his mostly Democratic colleagues allowed to fester to the point where they wrecked the economy, are known to the Wall Street Journal and yours truly as " Barney's Rubble" for a good reason. It is beyond me why we should rely on the Massachusetts congressman for financial advice on assisting troubled companies.

The $25 billion the UAW wants for future health care obligations has to do with the fact that it now runs its retirees' health care. All that $25 billion will do is keep the union from imposing necessary cost-control measures on a retiree group long used to gold-plated coverage. The money won't do a thing to develop or build a single car.

Thomas's AP report also failed to note that:

  • The Treasury bailout, which was supposedly meant to buy up troubled assets, has instead largely been used to buy equity stakes in financial companies. This UK Times Online story reports that Paulson has now completely abandoned buying troubled assets.
  • As the beggars continue to line up and lobby hard, that same UK Times story reports that Paulson has already gone through all but $60 billion of the first $350 billion installment of the $700 billion bailout.

Soon the list of those who have not been bailed out may shorter than the list of those who have.

Cross-posted at BizzyBlog.com.

Tom Blumer
Tom Blumer
Tom Blumer is a contributing editor for NewsBusters.