The White House reached an agreement with Congressional Democrats this morning on a $15 billion bailout
Weary Democratic congressional leaders and White House officials agreed in principle Tuesday on a $15 billion bailout of U.S. automakers that would give the government extraordinary power to restructure the failing industry. But the rescue faced snags as Republicans raised deep concerns.
Congressional aides and a senior administration official said the proposed deal would speed the loans to Detroit’s struggling car companies and place a “car czar” named by President George W. Bush in charge of overhauling the auto industry. Congress could vote on the plan as early as Wednesday and the money could be disbursed within days.
A breakthrough came when negotiators reached a compromise to require the czar to revoke the loans and deny any further federal aid to automakers that don’t strike a deal with labor unions, creditors and others to ensure their survival by next spring — essentially pushing them into bankruptcy.
NBC reported that under the agreement, the czar would bring together all of a company’s stakeholders — creditors, labor, shareholders, management, dealers, etc. — to negotiate a restructuring by March 31. A 30-day extension could be granted if the czar believed the stakeholders were negotiating in good faith and if the czar believed a deal could be reached.
If there was no deal by March 31 and no extension, the czar would be required to call the loan, which would send the company into insolvency. The czar would then be required to propose a course of action, which could include Chapter 11 bankruptcy reorganization.
Ed brings up a good point:
So why offer the $15 billion now? Why not just force them into Chapter 11 now and allow them to renegotiate the contracts under those circumstances? All this does is spend taxpayer money to maintain a status quo for an extra four months that has already proven unsustainable. Management and labor won’t have to change positions at all until that time, under this agreement.
For all their talk, we got..talk…that’s it..there are no changes that need to be implemented, it is just business, bad business as usual!
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