Automakers bailout details starting to take shape

It sounds like the White House and Democratic leaders in Congress are getting close to agreement on the outlines of a compromise measure to bailout the Detroit automakers. Some of the details reflect concerns that have been raised on this blog as well as by legislators during the recent hearings.

The first step would be an emergency diversion from the earlier $25 billion loan package that was granted to the automakers months ago. That money was supposed to be invested in converting factories to make fuel-efficient vehicles. Under the new plan, up to half of this money would be used instead as emergency loans to the automakers available for more broad usage. This was the White House’s preferred approach all along, and it reflects the essential nature of the compromise: Democrats gave in on this in exchange for the White House’s agreement to the rest of the plan.

The second part of the package would be additional loans available to the carmakers on December 15 (no figure attached to this yet.) The Bush White House would then appoint a person or board which would write guidelines that the automakers must follow in restructuring their businesses to become viable in the long-term. The automakers would have from January 1 (when the guidelines are published) to February 15 to show sufficient progress in implementing the guidelines. If they failed to do so, in the judgment of the overseeing person (either the same person who wrote the guidelines, or whoever President Obama might appoint in their place), then the loans would be revoked and the automakers would have no choice but to file for bankruptcy.

The agreement would also require the automakers to limit executive pay, cease paying dividends, share a percentage of future profits with the government, and most importantly, guarantee that the government would be reimbursed before any other shareholders. It’s not clear yet whether the automakers would be required to replace their CEOs, though at least one Senator is calling for the head of GM to resign as a condition of any deal.

I am still not convinced that this bailout is really necessary. However, it does sound like the Administration and the Democrats are cooperating to find compromises, and including the necessary protections for the taxpayers’ money. If everything I’ve described above ends up in the bill, I can live with it. (The issue of the CEOs I think is a red herring – if they stay, they’re the ones that will have to implement the changes, or they’ll be cashiered anyway in a couple of months.) The question is whether the automakers will agree to it, though they may have little choice.

I have to ask myself though: why is it that the foreign car companies that build cars here, such as Toyota and Nissan, which operate under the same legal environment and regulations as Detroit, have performed so much better? It seems like bad management, rather than a bad economy, is what we are really bailing out here.

ObamaWatch: His dirty little secret!

Yesterday on Meet The Press, Tom Brokaw cornered President-elect Obama on his dirty little secret: Our new president is a recovering tobacco fiend.

This is not really news, as Obama was often seen chewing Nicorette gum during the campaign – and once or twice was caught with an illicit cigarette. Obama admits he’s fallen off the wagon once or twice. However, his habit is of renewed interest because smoking has been banned from the White House for years, since Hillary Clinton became First Lady in 1993.

Of course, Obama could lift that ban. But he says he intends to abide by the rule. Now, while I don’t doubt the sincerity of Obama’s desire to quit, I also know that the Presidency is about as stressful a job as you can have. So don’t be surprised if President Obama is occasionally caught sneaking a cigarette when outside the walls of the White House, especially at Camp David where the press cameras are severely restricted.

Actually, Obama’s little vice and his struggles with quitting might have the effect of making him easier to relate to for the average Joe. It also might shed some light on why Obama’s health care proposals are adamant about not excluding individuals with pre-existing conditions…

ObamaWatch: Backpedaling on promises left and er, left

Now that President-elect Obama is faced with the prospect of actually governing, he’s giving off lots of signals that many of the promises he made during the campaign that delighted the Left may be left to twist in the wind, at least for a while.

According to Politico.com, Obama has strayed from liberal othodoxy in the following ways:

• Hasn’t appointed any crackpot lefties to Cabinet
• Promised to tax windfall oil profits, now says he won’t
• Promised to repeal Bush tax cuts, now says he will let them stay until they automatically lapse at the end of 2010
• Ran on platform of ending the war in Iraq, now says at least some troops will remain until 2011 and even beyond

My response to all of this is: Good! I have said all along that Obama is intelligent, and his intelligence is telling him that he has to adapt to the very economic circumstances that helped propel him into office. With oil prices nearing $40/barrel, there aren’t going to be any more windfall oil profits any time soon, so it would be foolish to tax this year’s profits when anything you spend them on will soon lack a revenue source.

Politically, Obama doesn’t need a big floor fight during his first 100 days on the Bush tax cuts, especially with some conservatives in his own party likely to vote to preserve them. And on the war, Obama now says that it’s important to prevent “any resurgence of terrorism in Iraq that could threaten our interests.”  Which of course is what the military has been saying all along, as well as an old white-haired veteran Senator whose name escapes me.

While there may be some among the wide-eyed left who are surprised that Obama is not turning out to be the liberal Messiah, Obama didn’t get to where he is today by being a naive ideologue. From a political power perspective, Obama doesn’t need the left-wing fringe anymore. He’s figured that out, but they haven’t – yet.