Despite the successful Republican effort in the senate to kill the auto bailout, there is still one more avenue open for The Big Three to cruise to taxpayer funded heaven; Secretary of Treasury Paulsen and his $350 billion dollar kitty:
Now that Senate Republicans have foiled the Detroit 3 bailout in a late-night vote, any hope for a bailout falls to Treasury Secretary Henry Paulson Jr.
According to lawmakers on both sides of the aisle, the Emergency Economic Stabilization Act which created the $700 billion fund known as the Troubled Asset Relief Program, or TARP, could be used for the $14 billion bridge loan to the Detroit-based automakers.
In recent weeks, Paulson has resisted the idea of using TARP funds shouldn't be used for a Detroit rescue since it was created to provide liquidity to the financial sector.
But it may prove impossible for Paulson, and by extension President Bush, to remain purists on this as fears grow that a bankruptcy by one or more of the Detroit automakers could trigger a cascade of horribles and unintended consequences that could prove a devastating blow to an already sickly economy.
The administration may be a victim of its own scare tactics, creating panic where none had been before by speculating that any bankruptcy involving the automakers would have horrible consequences. If GM had been allowed this avenue weeks ago - restructuring itself in order to lower its debt and its costs of doing business - there's a good chance the shock would have been mitigated.
But this has now turned into something much more thanks to the overselling of the importance of the bailout to Congress by the Administration. The bottom line; Detroit is not selling cars. They have not been selling cars for a long while, predating this financial crunch. This would seem to indicate a vote of no confidence from the consumer which makes one ask the fundamental questions; how will the bailout help The Big Three sell cars that no one seems to want? And if they can't sell cars, how on earth is $15 billion going to help them?
Paulsen and Bush will probably give in because GM is hours away from having to file for bankruptcy and the expectations of disaster they so skillfully created would then come back and bite them. Of course, the $15 billion is a drop in the bucket and the auto execs will be back - perhaps as early as March next year - with their hands out once again.
At that point, the spigot will really open up because Democrats will refuse to face the only real fix in this whole mess; contract renegotiations with the UAW. Expect twice or three times the $15 billion to be on the table at that time.
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