Liveblog of the Dan Quayle Bailout

Word is George Bush is going to give money to GM and Chrysler. He is expected to put the money through their credit arms: GMAC and Chrysler Finance.

In other words, Cerberus (otherwish known as Dan Quayle and John Snow and a bunch of other wired Republicans) will get some benefit out of this. You know, a juicy reward for having made a piss poor decision in buying Chrysler in the first place?!?!? 

Capitalism at its finest.

Here’s the plan, which is basically Bob Corker’s plan, with an escape hatch.

Purpose: The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing.

Amount: Auto manufacturers will be provided with $13.4 B in short-term financing from the TARP, with an additional $4 B available in February, contingent upon drawing down the second tranche of TARP funds.

Viability Requirement: The firms must use these funds to become financially viable. Taxpayers will not be asked to provide financing for firms that do not become viable. If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury.

Definition of Viability: A firm will only be deemed viable if it has a positive net present value, taking into account all current and future costs, and can fully repay the government loan.

Binding Terms and Conditions: The binding terms and conditions established by the Treasury will mirror those that were voted favorably by a majority of both Houses of Congress, including:

Firms must provide warrants for non-voting stock.

Firms must accept limits on executive compensation and eliminate perks such as corporate jets. Debt owed to the government would be senior to other debts, to the extent permitted by law. Firms must allow the government to examine their books and records. Firms must report and the government has the power to block any large transactions (> $100 M). Firms must comply with applicable Federal fuel efficiency and emissions requirements. Firms must not issue new dividends while they owe government debt.Targets: The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:

Reduce debts by 2/3 via a debt for equity exchange. Make one-half of VEBA payments in the form of stock.

Eliminate the jobs bank.

Work rules that are competitive with transplant auto manufacturers by 12/31/09.

Wages that are competitive with those of transplant auto manufacturers by 12/31/09.

These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case to achieve long-term viability in spite of the deviations. In addition, the firm will be required to conclude new agreements with its other major stakeholders, including dealers and suppliers, by March 31, 2009.

Here’s Bush: Involves fundamental questions about role of government. Safeguard economy, and free market. If we were allowed to let the free market work now, it would lead to disorderly bankruptcy. I would say "this is the price that failed companies must pay. These are not ordinary circumstances. Allowing the US auto industry to collapse is not a responsible course. How can we best give it a path to succeed. Allow it to reorg through bankruptcy?

Bush says his plan is "similar" to that that had majority support from Congress (but doesn’t note he’s talking about Corker’s legislation, not the House’s). 

Money drawn from TARP. 

Emphasizes retirement, debt, and wages to be competitive to foreign automakers. Automakers and unions must understand what is at stake. Send a clear message to everyone involved: the time to make hard decisions to become viable is now. The only option is bankruptcy. Given the situation, it is the most effective and responsible way to address the problems that face this issue. 

Done. I believe they call this "bloody mary thirty"?

Incidentally, Bush did NOT say he was delivering the money through the finance arms–so it might be the Corker’s Last Laugh Bailout, not the Dan Quayle Bailout.

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99 replies
  1. Jane Hamsher says:

    Sounds similar to what he negotiated with Congress, but Erin Burnett did say that it’s going to the finance arms. Which, as you point out Marcy, are both 50% owned by Cerberus.

  2. RetirinInFive says:

    OT — before this gets rollin’. Thanks for doin’ this, EW. (Enjoying your weather today? We’re forty miles north of ya.)

    • emptywheel says:

      As I was liveblogging this, I saw mr. ew get stuck as he was pulling out of the driveway.

      Touch choices: go help him in my PJs, or continue to liveblog?

      • SouthernDragon says:

        The only way I could get stuck in my driveway would be a sinkhole suddenly appearing or the sea level has risen a whole bunch.

        Gee, tough choice. Cold, snowy, messy outside or warm and cozy inside. Lessee, where’d I put the AAA number?

              • RevDeb says:

                been wicked busy, plus Mr. Rev. having quad bypass and my health being pretty crappy too. It’s been quite a perfect storm here. I have to admit also I stopped commenting when everyone had gone all gaga over Obama. I never saw in him the savior that so many here did. And I got tired of being dissed by some commenters that will remain unnamed.

          • RevDeb says:

            OOOHHH I know, we can ask Rick Warren to pray him out of the stuckness. It’s only a matter of will power and discipline anyway, isn’t it?

            • demi says:

              Oh, brother. It almost hurts to see his name these days. Several people have asked me if I read his book, and I always answer that I read the original. Hope people won’t hold that against me. And, yes I do interpret it. Context and experience are required to see meaning.

    • RieszFischer says:

      Are you up north? I thought you lived in the Flint area. That’s where I am and we’re having a beautiful snow storm right now!

  3. ThingsComeUndone says:

    So the cash goes direct to Cerberus huh? JUST WHO IN THEIR RIGHT MINDS AT THE WHITE HOUSE THINKs GIVING DAN QUAYLE MONEY IS A WISE INVESTMENT?

  4. RieszFischer says:

    The root of the problem is lack of national health care. And Obama will jump on that right away. Not.

  5. ThingsComeUndone says:

    So the big three can’t be trusted, Unions can’t be trusted they must give up benefits but trusting the business sense of Dan Quayle with money is an idea the GOP thinks is a winner at the polls?

  6. RieszFischer says:

    MSRNC: “The government’s money is your money.”

    Funny, they don’t say that when they’re talking tax cuts!

  7. BooRadley says:

    CNBC first question from Erin Burnett was about Cerebrus. If only she would have mentioned Quayle and Snow.

  8. ThingsComeUndone says:

    If we had national healthcare for everyone at the same costs the Japanese have our cars would be competitive on price.
    Next we need them to be competitive on MPG.

    • BooRadley says:

      Agree.

      OT, a last week, one of the CNBC reporters, Doyle Ratigan, was talking about the importance of a gas tax (he was talking about a tax that would keep the price of gas at $4.00/gallon). His point was industry needs stable energy costs.

      • ThingsComeUndone says:

        Forget a gas tax thats a tax on the poor. Industry needs stable costs? I never heard the oil companies complain when gas prices went up. They were all free market then!
        We need government to tell everyone not only the big three that no car should get below 40 mpg. Truck/SUV MPG should go up to I’m not sure how much though.
        This way people who can afford the new tech buy the new tech and poor people can buy the older cars to get them sold.
        As the tech gets cheaper thanks to mass production and the old cars wear out poor people can buy the new tech cheaper.

        • BooRadley says:

          I understand it’s a tax on the poor.

          A lot of trades people and small business owners, who are the back bone of this country be on much more solid footing if they didn’t have to worry so much about oil shocks.

          Rationing may be a better alternative to a tax.

          In past years we’ve spent around $600 billion on foreign crude, each year. That’s $600 billion we could be investing in domestic, renewable energy such as wind, solar, and things such as algae oil. I think algae is a much better alternative than ethanol or methane.

          Without a gas tax or rationing, we might not be able to invest in those alternative, domestic fuels.

          • ThingsComeUndone says:

            A tax on gas has almost no chance of passing and will hurt Obama worse than an anti gay Preacher. Of course Obama I admit does not seem to care.

          • foothillsmike says:

            Why not put that tax on the license plates for vehicles so that folks driving the bhummers around town pay it.

        • emptywheel says:

          You want them to go bankrupt, make that demand. That’s what you’re asking for.

          That, plus a subsidy for people to be able to use as much gas as they want.

          Last I checked, it wasn’t per se a good idea to ask corporations to basically subsidize American driving habits. That’s what you’re asking for.

  9. RieszFischer says:

    Wow! A guy on MSRNC just mentioned the fact that this involves the health care and credit crises. He’ll be fired right after the show.

    • RieszFischer says:

      David Gregory is on– Is he one of the three idiots?

      He just said the economy could not sustain the loss of any one of the big three– that means that 60% of the American public are dumber that David Gregory. Scary.

      • RevDeb says:

        Yep he’s one of them. They talked about how awful it is that the ‘mericun taxpayer is going to have to float the industry for 4 months. I don’t seem to recall them saying the same thing about the Wall Street fat cats. And Noron was aptly named by the FDL community.

  10. Crosstimbers says:

    Since this is an executive branch document/agreement, cannot the terms of the agreement be changed as desired after Jan. 20?

  11. TrulyLeft says:

    For those of us who know of what they speak, Chrysler was not a bad investment. Just because Daimler cleared out its cash coffers and gutted it, doesn’t mean that Cerebus didn’t get it for a song. FYI, if you look at Chrysler historically, it has been best positioned to weather the storm and has maintained market share up until this latest credit crunch. So, badmouth Cerebus all you want but to connect that with Chrysler’s viability is a mistake.

    • ThingsComeUndone says:

      I can make the same argument about America and the Bush Presidency. Get rid of Dan and Chrysler looks a lot better as an investment.

    • BooRadley says:

      For those of us who know of what they speak

      That was funny.

      Can you link to someone besides friends of George Bush who thinks Chrysler is well positioned for anything except Bankruptcy court?

      If Chrysler’s so “well positioned,” why did Daimler’s stock go up after they sold?

      If it was so well positioned, why was Dan Quayle the one who bought it for a song?

      Are they selling any cars?

      The Chrysler brand is so weak, GM doesn’t even want to buy them.

      Please by all means tell us how well positioned Chrysler is wrt technology, dealers, financing or anything else. Don’t hold back, remember, you’re “in the know.”

      • readerOfTeaLeaves says:

        Hey BooRadley, in case you find your way back, here’s a particularly delicious sentence from a NYT article about Cerberus, in case you missed it:

        Mr. Snow and Mr. Feinberg declined to comment for this article. Cerberus does not have much of its own money riding on Chrysler and GMAC. The two investments amount to about 7 percent of its assets under management, and this past July Cerberus and its co-investors lent $2 billion to Chrysler.

        From NYT “Crysler’s Friends in High Places”, http://www.nytimes.com/2008/12…..;st=Search

        No, I’m sure Cerberus doesn’t have much of ITS OWN money riding on Chrysler.
        It has a little bit of its own, and has ‘hedged’, ‘leveraged’, or whatever-they’re-calling-it-today. Which it has now set up the rest of us to cover, no doubt in some clause in that agreement.
        So they’ve ‘hedged’ that the US Federal Treasury will cover those bets; why not? It worked for Wall Street, so why not this time out, too?

        I wouldn’t want to be running for election when citizens figure out that the TARP $$ has been covering hedges that went south, and Cerberus’s move on GMAC is Phase ? in this ongoing nightmare.

        ferrarimanf355 – go over to NYT and search on “Cerberus”, or else just google “Cerberus + GM”.

  12. plunger says:

    UH, GMAC is working feverishly to become a “bank.” Clearly the Treasury is going to give them enough money in order to meet the required monetary threshold to become a “bank.” Then, after giving them that money, they will say “OK, now that you’re a bank, we can give you even more money!”

    For those who have yet to see the truth, but banksters are literally stealing every penny they can get their hands on (through their surrogates, those we wrongly perceive to be our representatives, before they finally let the trap door open wide – a plan that has been in the works for over a decade.

    WATCH AND LEARN:

    http://www.youtube.com/watch?v=8PIEGK0IbA4&e

  13. BooRadley says:

    I’d be interested fn anyone runs across any dish about why the f Bush waited.

    AFAIK, today is some kind of “quadruple witching hour” in trader talk.

    And what was Clusterfuck’s Bush’s headfake yesterday at the AEI about “disorderly” bankruptcy.

  14. RetirinInFive says:

    Riesz — just northwest of Linden. (Eighteen miles southwest of Flint.) Beautiful? I’ve got two hundred feet of driveway to reach the road and don’t own a snowblower.

    • emptywheel says:

      Look on the bright side. That means that, if you get stuck as mr. ew did approximately 10 feet after starting the car, then you won’t be (as he was) sticking out into a fairly major artery stuck in the snow!!

  15. ThingsComeUndone says:

    Why is it the guys who scream free trade are all now looking for handouts? Is their a link between no rules capitalism and taking risky/stupid chances to make money?
    Is it any surprise that all the risk takers boats capsized in the Storm?

  16. RevDeb says:

    OT it looks like Caroline isn’t big on showing up to vote:

    Records show Kennedy did not pull the lever for any of her fellow Democrats in city primary races for mayor in 1989, 1993 and 1997 and 2005, which Republicans went on to win three out of four times in the general election.

    as Matt says, OOPS.

  17. plunger says:

    The oil price collapse is overshooting – on purpose. If you run out a supply v. demand spreadsheet over the past three years, there was no supply/demand based reason for it to have risen the way it did in the aftermath of the invasion of Iraq. Oil and the US (petro) dollar are correlated – as it seems the masters of the universe have elected to back the dollar with oil rather than gold.

    As they drove the price of oil over $140 per barrel, it coincided with record low valuation of the US Dollar. Demand had not tripled in that time, and the only shortages that we saw here in the US were related to refining and distribution in the aftermath of a natural disaster.

    The subsequent 75% decline in the price of oil is not correlated in any way to a 75% decrease in demand – though it did correlate to a head and shoulders top on the US Dollar charts. The decrease in demand for oil is not more than 10% from when oil was at its peak. Here in America, the US Government announced a couple months ago that miles driven in the US was down 5% year over year.

    These moves are made by those in charge of the value of the US Dollar, the value of gold and silver, the prime rate, the FED, The US Treasury, The IMF, The World Bank, Oil Company Ownership and the operation of the banking cartel.

    Those who attend the Bilderberg Group call the tune on all of it. They know in advance what they will do, and work together to manipulate the whipsaws and major moves that result in a redistribution of wealth from those who think they know, to those who truly know, tomorrow’s news, today.

    Yesterdays dramatic whipsaw of the dollar CAUSED the drop in the price of oil and gold/silver. THEY caused the dollar whipsaw. They literally control every lever.

    Those who made bets on “Green Technology” are getting their asses handed to them right now by the Masters Of The Universe, who cynically whipsaw the markets for their own entertainment and enrichment. They will NEVER allow Detroit to build an efficient auto. NEVER. And they are obviously in charge of EVERYTHING.

  18. wavpeac says:

    Cerberus and Gmac are criminal enterprises. I just don’t/ can’t ugh. IS anyone every going to report the criminal behavior of this company?????? My god there are literally thousands of posts up about this company. Once they got a really well written law suit written dealing with the REAL violations of RESPA and TILA laws…the company goes under???

    It’s really really hard. They have been fearless in their lawbreaking and they continue to be. MY STATEMENTS don’t even have my payments applied accurately. I hope it all comes out when O is pres, but I don’t have high hopes of that!

    How can so many people have been violated in the way they have…and not have anyone stop them? Let’s see, if I sell my house now, I will only have to pay them an extra 10 thousand. I just got a letter stating that they haven’t paid my second half of the year taxes!! They love to do this…then you get in trouble with the tax folks and lose your house before you even know what happened!! At least I know I am being screwed.

    I feel really sick to my stomach. This country is being run by criminals. It’s not the u.s.a. It just isn’t, anymore a country of laws.

  19. ThingsComeUndone says:

    Everyone assumes that there will be a bailout before Christmas because otherwise the Dow will tank, retail sales will tank, merchants who make goods for retail sale will tank.
    So yes an auto bailout is the only sane/smart thing to do.
    But when has Bush ever done the sane or smart thing?
    Even if we get a bailout what do you want to bet Bush will make it a bad deal?

  20. plunger says:

    The masters of the universe view the entire globe as their playground. They know exactly how 9/11 tied into their plan to inflate, then deflate the global economy. They understand that EVERY topic is related to every other topic, because they make it so. This focused discussion on the auto industry does not afford the context essential to connect the thousands of dots which, once connected, serve to explain the otherwise inexplicable.

    The requirement to stay “on topic” actually prevents understanding and context. Every topic connects to every other topic. The banksters hope we only discuss politics. They depend on it.

  21. plunger says:

    “The art of illuminism lay in enlisting dupes as well as adepts and by encouraging dreams of honest visionaries or the schemes of fanatics. By flattering the vanity of ambitious egotists. By working on unbalanced brains or by playing such passions as greed and power to make men of totally divergent aims serve the secret purpose of the sect. People with money were welcomed, but kept oblivious of actual secrets. The purpose is to win power and riches. To undermine secular or religious government and attain the masters of the world.”

    Nesta Webster

  22. wigwam says:

    Per emptywheel in a subsequent posting:

    So what Bush is demanding is that the UAW lower wages plus pensions to the level of Japanese wages plus pension (though since they have very few retirees, their pension number is basically zero). Alternately, they could lower this number by basically picking the pocket of a bunch of seniors, by taking away pension money those seniors already earned while they were still working. But one or the other will have to happen.

    […]

    But as written, Bush’s last major act as President is to demand that workers for American-owned companies work less than workers for foreign owned companies. American capitalism, at its finest.

  23. wavpeac says:

    Here’s my nightmare story…just to remind people of what Danny boy has done to people.

    http://www.dailykos.com/story/…..609/601449

    And here’s the pdf version of the lawsuit if you want to read the long list of TILA and RESPA violations…

    http://www.homecomingsfinancia….._Order.pdf

    I just really think that this is a massive cover up. How many people really lost their homes to this stuff? Those of us affected have been completely shut down at almost every turn. Yes, one or two class action suits went through, but none that addressed the violations I struggle with. And, they continue to violate these laws fearlessly. I don’t even think my statement belongs to me. I think they have the wrong numbers. I don’t know if they are just inept or whether it’s criminal, but I and lots of others can’t make it stop because we have been stripped of our rights. I said a long time ago that the A.G’s were colluding and I was right. I think now, those who colluded fear legal and political fall out if they admit what they did. So many have become part of this conspiracy that because of fault, they will keep their silence!

    Sick. I am going to lose my home and my credit to these creeps and when it all over I will still own them money that was never rightfully theirs. And there are thousands in the same boat. Why do american’s have poor credit because the finance industry isn’t following the laws of the country THAT’S WHY!! And it’s perfect because who listens to people with bad credit?

    • ThingsComeUndone says:

      The money for Cerberus will be used to cover their bad home loans? What will force them to make car loans? The banks are not making loans despite their bailout. We need details on the bailout.

      • wavpeac says:

        Then why is ditech advertising home loans like crazy? What’s the value in that.

        Also note…they are running ads in nebraska to ask our senator not to bail out the union bosses…in the ad they conflate the bail out with the “union bosses” big spenders who want a free ride.UGH.

        I called Senator Nelson but told him something else.

  24. RetirinInFive says:

    I give up. ”Refresh” is taking like five minutes or so. EW, Riesz — I’m goin’ out to shovel. Have a great day all.

  25. Rayne says:

    This is still a disaster, before we pick it apart.

    This didn’t happen fast enough, thanks to those stupid fuckwads Shelby, Corker, McConnell who cut off their economic noses to spite their faces.

    Confidence has tanked so badly that the crisis is picking up speed like a snowball downhill

    Have anecdotal evidence of layoffs at a Caterpillar plant in Georgia; no demand for commercial trucks now and they build engines there.

    And more personal anecdotal evidence: kid brother got his layoff notice from Delco in Indiana last night, effective 26-JAN (which doesn’t jibe with anything we’ve seen so far about other GM-related layoffs, a lagging indicator). Parts manufacturing plant; figure he will be working on shut-down assignments based on his job, the last man out kind of function.

    It’s too late to stop a surge of unemployment.

    • Waccamaw says:

      It’s too late to stop a surge of unemployment.

      DING! :-((( The only place I hope it comes to rest in the laps of scum like corker and his ilk.

    • RieszFischer says:

      I’m really sorry about your brother.

      I thought the same thing, that Chimpy was reacting really slowly. But on all the news sites, even here at FDL, no one was expressing any urgency about it. I thought Chimpy was just taking his time to play to his base. I was hoping that a week delay at the end of the year wouldn’t affect the outcome. Now you’re saying my initial instincts were right.

      I hope you’re wrong, I don’t want a depression.

  26. plunger says:

    Make no mistake…we are already in a Depression. If you wait for the government and the media to tell you the truth, you’ll be waiting a very long time.

  27. wavpeac says:

    Rayne sorry about your brothers situation. The other thing that will happen as a result of this new wave of unemployment is that more folks will end up not being able to make house payments. If they have a loan like homecomings or ditech, that means lots more money for these finance companies who make their money when YOU CAN’T pay the bills. Then they will sell one more wave of these companies off like the ponzi scheme it is.

    Until this behavior stops, that’s how it will roll for thousands who start missing their payments.

    • Rayne says:

      Thanks, appreciate the sentiments.

      Unfortunately, my entire family doesn’t have a lot of sympathy for my kid brother. We’ve warned him for nearly a year to change jobs and take his engineering degree somewhere else. He’s made decent money and could have paid his inexpensive house off, so if he’s in financial straits we’ll have a tough time being charitable about it.

      Sounds like tough love, but everybody in my family knew this was coming, could see the handwriting on the wall with Chrysler’s troubles. There are other more personal details here, trust me on this; there’s no excuse for him to have stayed until this “detonated,” and far more reasons for him to have left.

      He serves as an indicator, though, that this mess is spreading, and it’s personal. At this point nearly all of us in and out of the blogosphere know somebody who’ll be directly impacted.

  28. alank says:

    Snow and Quayle are lobbyists for Cerberus. The beneficiaries are the consortium that invested in GMAC and Chrysler with borrowed money.

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