November 18, 2008

Provisions Of Big 3 Loan Bills

The House and Senate each have their own bill for automaker loans, each contain impossible stipulations.

Both have these provisions

• The Treasury would start lending money as soon as 25 days after the bill is approved.

• Money would come from the $700 billion set aside for the financial industry bailout.

• Top executives' pay would be limited, and so-called golden parachutes banned.

Senate version

• Automakers and suppliers would have 10 years to repay the loans, paying 5% interest in the first five years and 9% interest in the second five years.

• Automakers would have to submit plans when they apply for how they will use the money to restructure the business and build more efficient models.

• The government would take unspecified amounts of warrants or senior debt of in companies that take loans.

House version

• Suppliers don't qualify; automakers would only get part of the money now, with the rest coming after a restructuring plan.

• That plan, due March 31, would have to include reworking debt and meeting fuel economy standards.

• The government would take warrants worth 20% of the loan, and the loans would be due in 7 years.

I am still trying to find similar stipulations that congress placed on the Bank Bailout but haven't found them yet.

Besides the above, congress wants to tell the automakers what to make and what kind of gas mileage the cars should be getting.

The industry's old enemies in Congress, while mouthing support for the bailout, clearly see it as an opportunity to saddle carmakers with even more costly mandates. Pelosi, President-elect Barack Obama, Rep. Barney Frank, D-Mass., and others continue to talk about the conditions that will be placed on the bailout, including requirements for more fuel-efficiency and emission controls.

Such mandates will cost more money than Washington is offering in aid. Government regulations that required the automakers to build vehicles the market wouldn't support help to bring about this crisis. Adding more such mandates won't make things better.

Dumocrats just see this as an opportunity to tell the automakers what to make and tell the public what they can drive, they will get their way one way or another.

Posted by Quality Weenie at November 18, 2008 10:20 AM | TrackBack
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