As if President George W. Bush had his hand stuck after slamming it in a car door, the assembly line is moving and the White House, Treasury and Fed are trying to figure out what to do.
Bush supported and endorsed the Congressional plan, brought down by Senators of his own party last week.
Advocates now want the money to bailout the auto makers to come from the Troubled Asset Relief Program (TARP). But half the TARP money is gone and only about $15 Billion is available for carmakers. Add to that the fact that Congress approved the TARP for purposes other than a “bailout” for auto makers.
The White House could get the money from the Federal Reserve. But this is problematic too: before the Congressional bailout failed, Fed Charman Ben Bernanke alread said the automakers had insufficient collateral (or ample “unencumbered assets”) to secure a $15 Billion loan from the Fed.
In a letter to Senate Banking Committee Chairman Christopher Dodd, D-Conn., Bernanke wrote that any decision about whether to provide financial aid to Detroit is best left to Congress.
A key consideration in letting an auto company draw emergency cash loans from the Fed is whether the company has sufficient collateral or other security to ensure repayment of the loan. “It is unclear whether the auto manufacturers have unencumbered assets of sufficient amount and quality to meet this requirement,” Bernanke wrote.
Federal Reserve Chairman Ben Bernanke
So, President Bush is between a rock and a hard place.
Finally, the sticking point with Republican Senators remains unresolved. They want to know the plans of the automakers and their unions to get the workers’ pay and benefit packages more in line with the pay of their competitors like Toyota.
Bush Administration people are going over the automakers’ books and some announcemnt on a bailout could come ….on Tuesday….
File photo shows assembly line workers on a Toyota Motor’s production line at the company’s Tsutsumi factory in Aichi prefecture, Japan. Commercial rating agency Fitch Ratings have downgraded the auto giant by two notches, warning that in the current slump even the strongest carmaker no longer deserved its top rating.(AFP/File/Toshifumi Kitamura)