Bailout Buyer’s Remorse: The Ironies of the Republican opposition to saving Detroit (Barf Alert!)

The Columbia Journalism Review ^ | December 15, 2008 | Charles Kaiser

[2ndDivisionVet]

“On the executive compensation thing, it went to the core of their being. It was like asking the chief rabbi of Jerusalem to eat bacon on Yom Kippur. It was the most unthinkable thing they could think of.” — House Financial Services Chairman Barney Frank, on trying to limit the pay of bankers who are beneficiaries of the $700 billion federal bailout.

Blank Check for Banks, Pink Slips for Detroit

That was the headline on Sunday’s business story in The New York Times by the indispensable Gretchen Morgenson, and it’s a splendid summary of the economic policies being pursued so vigorously by the Republican minority in the United States Senate.

Morgenson quoted Mitch McConnell, the Republican from Kentucky who is leading the fight to kill off the Big Three as quickly as possible: “We simply cannot ask the American taxpayer to subsidize failure.”

To which Morgenson replies: “That’s a new concept…”!

Maybe the Republicans are suffering buyer’s remorse over the previous $700 billion bailout, but the ironies here are endless, and Morgenson is on to all of them:

* “[I]n the bank rescue, taxpayers are subsidizing not only failure but also outright recklessness and greed.” (Lest we forget: the banks knowingly loaned $3.2 trillion—yes, trillion—to home buyers with bad credit and undocumented incomes.)

* “The supposedly exorbitant autoworker wages that get everybody so riled up pale in comparison with the riches of Wall Street.”

* Unlike Detroit, no one asked the bankers to sell their private jets or “supply Treasury with in-depth restructuring plans in exchange for bailout funds.”

* The “Troubled Asset Relief Program is open to banks that are both well and sickly. And nobody overseeing the program seems eager to ensure that its funds go only to those institutions that will survive and be able to pay back the taxpayer.”

* Treasury has no way to determine if the program is achieving its goals of increased lending by banks.

* There also seems to be no monitoring of the banks’ compliance with TARP limits on executive compensation.

Actually, there are no real limits on the bankers’ compensation at all. That was the exciting news in this morning’s Washington Post. The Bush administration, apparently in response to the rabbi-like objections cited by Barney Frank above, slipped a loophole into the bill which so far has ensured that the federal government can’t do a thing about bankers’ salaries or bonuses.

According to Post reporter Amit R. Paley, “at the last minute, the Bush administration insisted on a one-sentence change to the provision…The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.”

Guess what: “In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives.”

Undoing this classic example of Washington legerdemain should be a priority of the new Congress that’s about to take office, but don’t hold your breath. As Eric Lipton and Raymond Hernandez reported on the front page of yesterday’s Times, prominent Democrats like Chuck Schumer are often just as willing to do the bidding of Wall Street as their Republican colleagues.

For example, when a few people in Congress moved to close an outrageous loophole which freed hedge fund managers from millions of dollars in income taxes, Schumer claimed to be in favor of the reform—but then backed a bill that would also cover executives at energy, venture capital, and real estate partnerships. “His position was identical to that of lobbyists for a group paid by Mr. Kravis and other finance industry executives,” the Times reported. The Schumer bill was called a “poison pill” by the leading Republican advocate of the tax increase, and it “went nowhere after provoking opposition from an array of industries.”

One underreported aspect of the Republican opposition to saving Detroit was spotlighted on the CBS Evening News last Friday by correspondent Sharyl Attkisson. The CBS reporter observed that many southern senators have foreign car companies in their states, including BMW in South Carolina, and Honda and Mercedes in Alabama—the home state of Republican Richard Shelby, another leader of the fight to kill Detroit—so they actually have a vested interest in destroying the American car industry. That’s what they mean when they say “all politics is local.”

[2ndDivisionVet]

* “[I]n the bank rescue, taxpayers are subsidizing not only failure but also outright recklessness and greed.” (Lest we forget: the banks knowingly loaned $3.2 trillion—yes, trillion—to home buyers with bad credit and undocumented incomes.)

It was Democrats like the aforementioned Congressman Barney Frank that FORCED those banks to lend those trillions to people with bad credit & no source of income!! What chutzpah!!

[April Lexington]

Um... maybe the Democrat controlled Congress can pass something to help them out? The Republicans are powerless and in the minority so why is it their problem?

If they wanted a Republican solution, they should have voted for McCain and a GOP Congress!!!

[VeniVidiVici]

When do we get to put congressional pensions, health care, housing, expenses and ALL THE OTHER PERQS those poor excuses for human life get as part of their congressional kingdom stipend, under the microscope?

Congressional compensation is where the true problem lies with the system.

[TheThinker]

so they actually have a vested interest in destroying the American car industry. That’s what they mean when they say “all politics is local.”

Maybe, but where's the proof that Shelby is deliberately trying to sink the Big3 for self-interest? When the article says "they" it means other Southern Republicans. Again, back up the accusation.

[Lancey Howard]

Exactly!
Every paycheck that goes to Capitol Hill is “subsidizing failure”.

[musicman]

From the article:

"One underreported aspect of the Republican opposition to saving Detroit was spotlighted on the CBS Evening News last Friday by correspondent Sharyl Attkisson. The CBS reporter observed that many southern senators have foreign car companies in their states, including BMW in South Carolina, and Honda and Mercedes in Alabama—the home state of Republican Richard Shelby, another leader of the fight to kill Detroit—so they actually have a vested interest in destroying the American car industry. That’s what they mean when they say “all politics is local.” "

[vaudine]

My Senators (Sessions and Shelby-of the Banking Cmte) BOTH opposed and voted against TARP, so trying to say they want to destroy the American auto industry is disingenuous to say the least. They rightly see the auto industry bailout as futile unless the auto makers do something drastic about the unions. It is, truly, a union bailout.

I drive a Pontiac Montana which I love, but the truth is it has a much lower warranty than the foreign cars made in the US and those made elsewhere. Many here in my area work for Mercedes and they make a lot less than Detroit when everything is added up. Why should they and the rest of us subsidize private industry when said industry is not wanting to change very much in its way of doing business?

THIS IS A DEMOCRAT/UNION THING and we are going to get much more of the same thing with Obama and pals.

vaudine

[ari-freedom]

Well WE didn’t ask for the 700 billion bailout either. We told you this would happen, that they’d be able to use it to ask for more bailouts. Stupid Republicans and the WSJ.

[ari-freedom]

“Congressional compensation is where the true problem lies with the system.”

no it’s not. The problem is that they get to spend trillions of dollars and control every aspect of the economy. Their salary is nothing compared to all the perks they get for being the gatekeepers. “Want that tax break? Well, what am I gonna get in return?”

[Iron Munro]

Isn’t it ludicrous to watch these self important scoundrels primp like demented peacocks trying to convince us they are being prudent and diligent?

They oppose loans of $25 billion or so to the Big 3 after practically Coronating Paulson and Bernanke throwing open the doors of the treasury to Wall Street raiders without taking 5 minutes to question if Paulson was lying to them.

Various accounts put the real number handed over to financiers at $4 to $8 trillion so far and the money is still pouring out. No one really knows how much is gone because Paulson and Bernanke won’t tell anyone.

Now that Congress know Paulson was lying through his teeth and made fools of them for all the world to see they want to recover by looking tough in front of the TV cameras by belttling American auto company CEO’s and holding back on $25 billion.

The only difference on this issue between Republicans and Democrats is that the Democrats are pushing an agenda and the Republicans are just playing the fool and going along for the ride.

[Republic of Texas]

The only difference on this issue between Republicans and Democrats is that the Democrats are pushing an agenda and the Republicans are just playing the fool and going along for the ride.

THAT, my friend, is the truest statement written in the internet in a looong time.

[GVnana]

Exactly. Lord I'm tired of reading analyses on the "financial crisis" from people who know virtually nothing about it.

The author could have, at least, read the reporting from the NYT on Franks and the Fannie/Freddie fiasco.

[ding_dong_daddy_from_dumas]

>>Isn’t it ludicrous to watch these self important scoundrels primp like demented peacocks trying to convince us they are being prudent and diligent?<<

If you mean Shelby, Sessions, DeMint, and Vitter, you have not been paying attention. Here are the NAY votes on HR1424, the “Taxpayer Asset Removal Program.”

NAYs -—25
Allard (R-CO)
Barrasso (R-WY)
Brownback (R-KS)
Bunning (R-KY)
Cantwell (D-WA)
Cochran (R-MS)
Crapo (R-ID)
DeMint (R-SC)
Dole (R-NC)
Dorgan (D-ND)
Enzi (R-WY)
Feingold (D-WI)
Inhofe (R-OK)
Johnson (D-SD)
Landrieu (D-LA)
Nelson (D-FL)
Roberts (R-KS)
Sanders (I-VT)
Sessions (R-AL)
Shelby (R-AL)
Stabenow (D-MI)
Tester (D-MT)
Vitter (R-LA)
Wicker (R-MS)
Wyden (D-OR)

And even in the case of senators like McConnell, who voted for it, I think it’s a good sign that they are finally showing some backbone. IMO one problem with the $25B is that Detroit has failed to show that it will not continue to lose a lot of money. It’s not just $25B. It’s one more step along the path of “You gave them money, so give me money too,” and it will never end unless somebody starts saying NO. And that’s going to be a lot harder to do after the Dems take total control next month.

[mewzilla]

A good description of the UAW bailout: Requiring people who make far less to bail out people making far more.

Note to the 'Rats: Make our day.