We're All Technocrats

The auto bailout is dead, at least for now:

A bailout-weary Congress killed a $14 billion package to aid struggling U.S. automakers Thursday night after a partisan dispute over union wage cuts derailed a last-ditch effort to revive the emergency
aid before year's end.

Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit's beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.

Good.  Chapter 11 was made for this kind of situation, and folks will quickly come to understand that productive assets don't go *poof* in a bankruptcy  (though equity values can).

By the way, you will note that Senate Republicans did not suddenly become economic libertarians.  Their objection seems to be that the bill does not micro-manage the auto industry they same way they would want to micro-manage the auto industry.  You can see in these political battles that Congress brings its usual identity politics to these decisions:  Republicans want to hammer the unions, Democrats want to hammer executive pay.  Which is why these restructuring discussions don't belong in Congress.


  1. Rolo Tomasi:

    Congressional approval? Bush don't need no stinking congressional approval.


  2. morganovich:

    "the bailout is dead"

    "long live the bailout!" looks like bush and co have been outfoxed by the congress again. suddenly the last $15bn of TARP is on the table and the the bush and the bald (paulson) are making noises about the need to do something.

    meanwhile, arguably my least favorite congressman, barney frank, has finally come out and said it: "it's not about saving the companies. it's about supporting the workers." communist, sure, but at least he's finally being honest as opposed to blaming deregulation for the bad lending he helped mandate.

  3. Doug Murray:

    "though equity values can (go poof)", which has mostly already happened.

  4. joe:

    A couple of questions to consider:
    1. How do the current problems in the credit market affect DIP financing?
    2. How big a hit to employment can the economy absorb?
    3. Given our existing social safety net what's the cheapest way to deal with the problem? Pay unemployment? Or provide a bridge loan?
    4. Since the market for new cars has gone from 17million to 12 million units a year what are the chances that it will be C7 and not C11?

  5. Anon E. Mouse:

    It will never be dead.

    As long as UAW workers have mandatory payroll deduction that goes (barely in-)directly into the coffers of one our major political parties, there will be a bailout.

    Ignore the kabuki theater. There will be a bailout.