Comments on: House Passes Auto Rescue Plan

By: Divided We Stand United We Fall

Divided We Stand United We Fall — Thu, 11 Dec 2008 21:55:16 +0000

If they take the bailout – Boycott GM and Chrysler. Buy a Ford….

Last night, the House of Representatives voted 237 – 170 to pass the Federal Auto Loan Bill. As I write this, the Senate is debating the bill….

By: D@n S.

D@n S. — Thu, 11 Dec 2008 19:13:16 +0000

The last bailout we approved — the one for the banks — was intended to give banks enough latitude to be able to give credit again. However, many banks didn’t do that; in some cases, bailed-out banks bought other banks instead. That sure didn’t leave extra funds floating around to secure credit.

So if there was a $25b lump already approved for “retooling”, and after lots of begging $14b of it is now freed up for any application, why would they use it for that?

Not to mention that we could have nationalized the auto industry for far less money.

By: Doug Mataconis

Doug Mataconis — Thu, 11 Dec 2008 12:35:19 +0000

Let’s be serious, they’re not going to “invest” this money in new technologies, because they’re going to need to use it for operating expenses.

GM and Chrylser are bleeding cash at a rate that, in a rational universe, would lead them straight to Chapter 11 where they belong. Giving them this money is the financial equivalent of putting a finger in the dyke to stop a flood.

By: gerryf

gerryf — Thu, 11 Dec 2008 12:20:32 +0000

Actually, I do not think that is accurate to say that the money they are using was already going to them to retool to make more fuel efficient vehicles. The Washington Post got that wrong.

First, a lot of companies that are not the big three were looking at that money to help them retool so they can provide the Big 3 with technology and products–it was not really designed strictly for the Big 3 (hence the reason the Big 3 needs to pay this money back fairly quickly).

But more on point, the Big 2 are seeking a loan not to retool anything, but to bridge the gap between money going out and money going in. Thanks in large part to the poor practices of the financial markets, their is no credit that the Big 3 would normally use to borrow money to allow them to continue to pay suppliers and ride out the hard times without shutting down.

It is actually fairly common for the Big 3–and many other businesses– to take short term loads so they can pay bills and workers and continue operations. The $25 to $35 billion was larger than normal, and since most of the larger banks and money houses have tightened credit, there really is no choice but to go to the government.