TARP To The Rescue

It looks like Treasury is going to step in and provide the Big 3 with bridge loans, using the TARP money authorized by Congress.

WASHINGTON — The White House and the Treasury gave strong indications Friday that the U.S. government, at least temporarily, would help prop up the American auto industry.

"Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry," Treasury spokeswoman Brookly McLaughlin said.

And, White House spokeswoman Dana Perino said it is considering using the Wall Street rescue fund to prevent the USA's strapped carmakers from failing.

Perino, speaking aboard Air Force One as President Bush flew to Texas for a commencement speech, said it would be "irresponsible" to further erode the economy by allowing failure in Detroit.

If this indeed does go through, it would have to just be a loan, with little or no strings attached. Instead of following through with a tough negotiation, Senate Republicans get nothing. If this was a game of chicken, Harry Reid played it pretty nicely, actually. He must have known that there's still a whiff of self-protection in Bushworld and that they don't want to be compared with Hoover (even though they will anyway).

As for Senate Republicans, the full story of what they did is astounding.

They were invited, repeatedly, to participate in more than a week of negotiations with a Republican White House. They declined.

They were asked to provide an alternative bill. They refused.

Finally, one of their members - Senator Corker of Tennessee - participated in a day-long negotiation with Senate Democrats, the UAW, and bondholders. Everyone made major concessions. Democrats gave up efficiency and emissions standards. UAW accepted major benefit cuts and agreed to reduce workers' wages. Bondholders signed off on a serious haircut. But when Senator Corker took the deal back to the Republican Conference, they argued for two hours and ultimately rejected it.

Why? Because they wanted the federal government to forcibly reduce the wages of American workers within the next 12 months.

I guess the UAW agreed to rollbacks over 3 years, but not in 2009. That was the dealbreaker. Amazing.

Though not the best method, this is the best possible outcome, if it goes through.

However, I understand the GOP's long game here. They can now ramp up their "blame the union" strategy, say they weren't willing to "give in" to them, and roll that into the fight over the Employee Free Choice Act. If the auto companies survive, they did it on the dole and they're not a viable business. If they don't, they can say "I told you so" and blame the unions some more. It all exists in a vacuum, without the caveat that we're in the midst of a credit crisis and that the UAW already agreed to concessions which will factor in next year and that Ford, in particular, was making very good decisions until they ran into the brick wall of a global economic slowdown,

...I'd like it explained to me how Bob Corker becomes a Senate star in this scenario. He was sent out to break the union and cut the wages of millions of people in the Midwest. Do you think they'll have a lot of goodwill?