Pelosi, Reid and Emanuel Push for Carmaker Bailout

2560777189_1cfcb929ba.jpgCadillac assembly line replica at the Detroit Historical Museum

Over the weekend, Democratic leaders in the House and Senate urged the Bush administration to extend financial aid intended for Wall Street to struggling domestic carmakers, a move that could have the support of President-elect Obama.

The Times reports that on Saturday, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid co-signed a letter to Treasury Secretary Henry Paulson asking that part of the $700 billion bailout package be directed toward Detroit. "A healthy automobile manufacturing sector is essential to the
restoration of financial market stability, the overall health of our
economy and the livelihood of the automobile sector’s workforce," they wrote.

The letter was issued following a Thursday meeting between Congressional leaders and representatives of Ford, Chrysler and General Motors, as Big Three sales continue to plunge. On Friday, GM announced that it could begin running out of cash in 2009.

Rahm Emanuel, incoming White House chief of staff, hinted on Sunday that his boss could be amenable to the Pelosi-Reid proposal. Again, the Times

When asked on ABC’s "This Week" where Mr. Obama stood on the issue,
Mr. Emanuel seemed to suggest that Mr. Obama, as a last resort, might
be open to tapping the rescue fund to help carmakers, calling the auto
industry an "essential part of our industrial base."

He added
that Mr. Obama has asked his economic team to look at ways to involve
the industry in shaping an energy policy that weans the country off
foreign oil, seeking ways to use the $25 billion in loans that Congress
passed in September to help make auto plants more capable of producing
fuel-efficient cars.

The Bush White House, for its part, has indicated it would not support using bailout funds for the Big Three.

Photo: MarkinDetroit/Flickr

  • anon

    Matthew Yglesias has an interesting idea about taking lemons and making lemonade and using this bailout as leverage for making the US auto industry more energy efficient.

    Of course this adds yet more costs to the bailout but gives _something_ in exchange for the US taxpayers saving GM’s stockholders.

  • Car Free Nation

    As much as I’d like to keep more cars off the street, I think it would be a mistake to let any of the big three fail. It’s virtually impossible these days to start a car company from scratch, and we’d have the pension obligations.

    I think the key thing is how this is paid for. My recommendation would be through a carbon based tax on fuel, so that non-drivers aren’t continuing to subsidize drivers. This would serve the purpose of encouraging people to buy fuel efficient cars, and might be politically feasible–our gas tax is going to retool the industry to make cars less expensive. It could be structured so that there was money for transit improvements and bike sharing as well…

  • john the bicyclist

    Pelosi and Reid are wrong; Bush is right here (I can’t believe I’m typing this).

    Detroit carmakers need to go bankrupt, to allow for restructuring and oversight. Giving them money willy-nilly will be flushing cash down the toilet. They need to be accountable now and forced to make vehicles needed in this day and age.

  • I agree with anon and car-free nation, in that a bailout should be used as leverage to get progressive agenda items from the big three. I want to see fewer, fuel-efficient cars, increased rail & bike transportation and urban planning that doesn’t rely on car travel – but the way to get there is going to be from here. Leverage and accountability could be combined to create some big steps forward, without further harming workers in Detroit who need jobs right now and pensions they can count on down the road.

  • Larry Littlefield

    As I wrote on Room Eight, if there was a universal health care financing system at the federal level, the crushing burden of retiree health are would be lifted off the automakers and state and local governments.

    The problem is that if health care funding was equal for everyone, there is no way that the auto workers and public employees would get the same deal they have now. Thus they want a separate, better deal for themselves, up front — at the expense of nothing for millions, millions who would pay taxes to pay for it.

    There is a desperate grab for money BEFORE Obama’s priorties have a chance to even be considered.

  • Tom

    Let ’em fail. We will not want for cars if they go under. I think this pruning is at least 20 years over due. How long do the tax payers have to carry these ignoramuses?

    @car free nation

    Yes, it is very hard to start automobile manufacturer from scratch. I think, you and I, could probably start one that makes cars that nobody wants.

    It’s a shame, that when you finally think you’ve got a government with its head on straight, you find out they don’t have the guts to carry out the vision. Maybe an opposition party is not a bad thing.

  • Bailing out the car makers is the wrong way to save jobs. The right way to save jobs is to fund a massive expansion of public transit which would provide jobs in every region of the country for those who build, run, and maintain transit systems. Even rural areas would at least get new bus service. The benefit would hit all 50 states, not just the ones that make cars and car parts.

  • rlb

    The car makers should be bailed out with the caveat that the retooling result in the production of rail cars and buses. The nyc subway used to get its cars from St. Louis, now they come from France and Japan.

  • “essential part of our industrial base.” Western Europe seems to have an industrial base, even though people there drive much less than Americans.

  • Edgar

    We can’t keep these obsolete, inefficient, over-regulated companies limping along. Imagine if we’d bailed out the horse carriage-makers when the car was invented.

    On the one hand, it diverts the productive power of America’s workers into underproductive industries instead of creating things that people actually need or want. This injures the economy in the long term, instead of helping it. Imagine if the government put everyone who is currently working in Silicon Valley to work in a telegraph factory, subsidized by Federal funds. We’d all be significantly poorer because the wealth created by computers would not exist, and we’d also be flooded with a lot more telegraph machines than we need.

    On the other hand, if cars do indeed have a future as an industry in America, they’ll be built again some day. People forget that in this globalized day and age, GM is no more an “American” car maker than Honda or Nissan are–anyone from anywhere in the world can buy stock in GM or Honda or DaimlerBenz or any other multinational corporation. Hell, the Japanese car makers even employ Americans building cars for sale in the U.S. So it’s not like cars will stop being made in America once GM goes kaput.

    The reason this is even being considered is the entrenched special interests (both corporate and labor) that stand to be harmed from change. Yes, change hurts in the short run, but in the long run it helps more people than it hurts. It’s just socially optimal.

  • Edgar

    The health of the “industrial base” of America doesn’t lie in the well-being of any one corporation or lobbying group.

    Compare the Dow Jones Industrial Average components list in 1900, in 1950, and today. Very few of the corporations stayed on from one list to the next. As the reality of the world shifted, people demanded new products, and the industrial base shifted with this shifting reality.

    Every person who is kept on the SUV assembly line in Detroit is one less person who is put to work building high-speed rail in California, or CPU’s or anything else we manufacture.

    Imagine the effect on any emerging, innovative new industry of having to compete for workers with a federally-backed obsolete industry. This could stifle innovation.

    These car companies are shrinking because we don’t want their products as much as we used to. Both capital and labor need to flow to industries and projects that benefit society and the economy as a whole a lot more.

  • ben

    You ever notice at a National park or Forrest you hear things like, this was made in the 1930s, and this was made in the 1930s. Yet very little has been done or made since then.

    Or how about Reclamation projects? Dams that feed us water now or still provide cheap electricity.

    And no one can forget the Defense industrial complex.

    Rather investing in America’s infrastructure and people, we invest in cooperate companies and DOD torture/death.


    CONGRESS: Here’s a radical plan…

    It’s this, or bankruptcy. The American Auto industry should be saved but under new conditions

  • Sunnyvale

    I think big oil should bail out the car makers and NOT the tax payer.
    After all big oil and the car makers complimented each others businesses and ripped main street off by as much as they could. Now it’s time to feed their golden calf.

  • Martin

    Let atleast one of the ‘big three’ fail and then restructure it into manufacturing high-quality transit cars for the upcoming high speed rail in CA and the other projects that should be coming soon behind it. Make drivers and car owners pay the true cost of their social burdens.

  • Tom

    As President-elect Obama looks to bail out the auto-industry, he also considers a stimulus in infrastructure spending. The Chinese just announced a similar plan. However, Japan did the same thing in the 1990s, but with little success. PBS has an interesting take on it:

  • jmc

    Obama has a great record funding non-highway infrastructure. Why, just look what he did to fund the “L” in Chicago and promote its maintenance and expansion. Oh wait, he didn’t! The thing is falling apart!

    I think it’s funny that this ridiculous plan isn’t immediately shot down by other members on this site. It seems to me that this Obama fellow brainwashed people into believing there was going to be a “new deal” and a national rebirth when instead it’s a feeding frenzy for auto industry lobbyists!

  • Here’s something from a Times article on the bailout:

    Mr. Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Mr. Obama and Congressional Democrats dropped their opposition to a free-trade agreement with Colombia

    Talk about horse trading! “Why yessir, Mister ‘bama, I sure can give you that mangy old mare – um, I mean fine strong horse – you’re asking for, but she’s gonna cost you a purty penny!”

    Whew, that honeymoon was over fast. Yes We Can … prop up inefficient businesses whose main product kills our children and destroys our quality of life!

  • gecko

    Might be good to get innovators like Amory Lovins and the Rocky Mountain Institute front and center to detail trajectories toward large scale improvements in efficiency, safety, cost, and major reductions in green house gas emissions and energy usage, with broad “ideal vehicle” implementation like bikes, ebikes, recumbent trikes, Segways, Uno Bikes, etc. made practical, as the long range goal.

  • “I think it’s funny that this ridiculous plan isn’t immediately shot down by other members on this site. It seems to me that this Obama fellow brainwashed people into believing there was going to be a “new deal” and a national rebirth when instead it’s a feeding frenzy for auto industry lobbyists!”

    Hasn’t it been shot down, or at least disapproved of, in nine out of ten comments? If you’re looking for people to tear their hair out because Obama is disappointing on this issue, the fact that they are not is evidence that the obamamania you’re referring to (or kool aid or obamabot-ism, pick your internet cliche) was never as manic as it was alleged to be. Anyone that thought he was going to be perfect hasn’t been paying attention; my enthusiasm was greatly tempered by his surprising flip-flop on telecom immunity for wiretapping crimes. But I’m still cautiously optimistic. I would rather have an engaged president that compromises on some issues, knowing he is doing the wrong thing, than a disengaged one that is letting others do the thinking for him. Having Bush’s DOT support congestion pricing—what a trip that was! Does anyone think Bush could explain how c.p. works, why it is helpful and fair? Obama could, even though his DOT may not give it the same support. And as we saw in c.p.’s federally supported first attempt here, a disgraced presidential administration that is disengaged at the top is not very helpful in accomplishing whatever good things it happens to attempt.

    We will see if Obama changes his automaker welfare position as economic thinkers line up against it (and mildly inform the public) the way they did against the McCain-Clinton gas tax summer partytime. I’m thinking, probably not, but there’s HOPE. 😉

  • poncho

    this is the first time i’ve ever agreed with cato…burn baby burn. theres still 2 other us automakers and all the foreign auto makers have plants in the us employing americans and that make good cars that americans want. if there was ever a company that needed to die its gm, an outdated bureaucracy making junk and overpaying its workers. instead of prolonging the inevitable by giving gm another 3 months of cash to burn through, the govt should be trying to put them out of their misery now.

    i’m a big obama supporter but am very much against this bailout and obviously this is all for political reasons for michigan’s white union swing voters.

  • tal

    Well, I HOPE you’re right, though I highly doubt it considering how much they’ve sold out to established interests. (Coal companies, the UAW, etc.)

    I also deal with the same sort of situation every day when discussing health care reform.

    This charlatan is more sold-out to big pharma and health insurance companies than any previous candidate, yet his loyal followers keep asking for a leap of faith or hope in the absence of any actual actions.

    I also deal with this when discussing marriage equality.

    He’s against it. He believes for religious reasons that gay people are second-class citizens (he’s farther to the right on gays in the military than Clinton in 1992!). Yet I’ve been told that he “doesn’t really mean this” and that I should have a leap of faith, or hope, or whatever. This man is a charlatan who dupes people!

    The scariest thing is that they need a new enemy… now that Hillary and Palin are vanquished, there needs to be a focus for the negative emotions of the people involved in the “movement.” It will probably be some foreign con

  • tal


  • tal, the only thing your carciature of Obama supporters needs is someone who fits it.

  • caricature.

  • gecko

    This might be an opportune time to lobby for ideal transport and transit virtually available here and now with modest industrial design initiatives, along with long-range research and development of molecular strength material science as industrial, environmental, and security imperatives that make extremely important economic sense.

  • Terry Bernard

    What would happen if only ONE carmaker were bailed out?


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