End of day Congressional loan status, Monday 12/8/08

At this point, it appears that Congress will be willing to provide $15 billion in loans to the Michigan automakers, with the money coming out of a prior $25 billion in promised loans which the White House, acting through the Energy Department, has blocked. 

In return for a deal, Congressional Democrats appear to have given in to the White House’s conditions, namely that the money come from the previously appropriated $25 billion in loans, and that a “car czar” be appointed. George W. Bush has demanded that this person be allowed to send automakers into bankruptcy on demand. Senate Republicans, who previously opposed bankruptcy and voted to toughen bankruptcy laws in order to protect banks and other creditors, have been pushing hard for automaker bankruptcies, so that automakers could pay creditors (including suppliers) “20 cents on the dollar” and stop giving benefits to autoworkers. 

It is possible that this “czar” would also be empowered to push two automakers into an unwanted merger. However, the details of the “czar’s” powers have not yet been defined by all parties. 

Even if the deal is made, it would still have to be passed by both houses of Congress.

In the current version of the bill, the car czar would be appointed by Bush, who has generally not been friendly to domestic automakers. The government would get stock warrants for 20% of the amount of the loans. The automakers would, as proposed earlier, need to get approval from the czar for any $25 billion or greater transaction; the czar would also be able to stop large asset sales or investments. Detailed, long-term restructuring plans would have to be approved by March 31, and the automakers would be banned from spending their money on litigation against states for having their own vehicle emissions standards.