House OKs $25 Billion Loan Package for Detroit

On Wednesday while the McCain Campaign was suspending its operations to deal with the credit problems, the US House of Representatives quietly passed a $25 billion loan package for the Big 3 (or 2.5) US car makers. The vote wasn’t even close, 370 yea and 58 nay. Could it be that Michigan and Ohio, where the Big 3 operate, are swing states this election?

Both Senators McCain and Obama approve of the idea, and the top executives of General Motors, Ford Motor and Chrysler along with their suppliers have lobbied heavily for the loans. The money is to be used for plant modernization, and therefore, is restricted to plants older than 20 years. By a convenient coincidence, most foreign car companies with plants in the US built theirs less than 20 year ago.

The Financial Times reported, “The loans will not take effect until the energy department has written detailed regulations dealing with, among other issues, which investments will qualify and conditions for repayment. Congress has directed the department to begin writing the regulations quickly and will provide any extra staff required to do so. One lobbyist said he hoped the regulations would be completed by early 2009.” This would mean that the modernization could be completed in time for the 2010 model year – which GM has already said will feature electric cars.

Of course with the Wall Street bail-out holding the nation’s short-lived attention, it made sense not to pass this package as a stand-alone bill. That would have required hearings, committee meetings and votes, and other such red tape (or what this journal likes to call representative democracy). No, the package was tacked onto the continuing resolution that will keep the government operating after the end of Uncle Sam’s fiscal year on Tuesday.

There is one distinction between this assistance to the car companies and the Paulson Proposal for Wall Street. Under the terms of the Advanced Technology Vehicles Manufacturing Incentive Program, GM, Ford and Chrysler are legally bound to repay the loans (although they might be forgiven in future). For his part, Mr. Paulson seems to have no qualms about simply letting the financial world off the hook entirely.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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