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December 9th, 2008 (Modified on December 10th, 2008)

Bailout: Car Czar in Exchange for Short-Term Lending

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Maybe I’m confused. Perhaps I just don’t understand. Yesterday we wrote about the latest edition of the auto bailout making less and less sense. As lawmakers worked yesterday into the night, fine tuning the details of the Big Three’s “bridge loan” into the next administration, the structure of the rescue (because that’s what it is) has presented itself again as a cluster of “try agains” and “we’ll give you another shot.”

U.S. lawmakers have proposed a federal babysitter or “car czar” in exchange for short-term lending. The czar will be in charge of overseeing the management of the automakers, including drafting his/her own blueprint for a federal overhaul if the manufacturers fail to do so by March. Didn’t the Big Three already submit overhaul plans to Congress? The automakers’ books will be open to the czar, and GM, Ford, and Chrysler must inform the overseer of any transaction over $25 million.

The proposed $15 billion (keep in mind, that number is likely to grow) is slated to be drawn from an existing loan package of $25 billion reserved for automakers to develop more fuel-efficient vehicles. Since the $15 billion is merely a bridge loan, just enough to get the Big Three through the final weeks of 2008, the cash will likely not be spent on research and development — leaving only the remaining $10 billion for R&D. Whether the $15 billion will be reallocated so GM, Ford, and Chrysler can develop the types of vehicles that currently dominate the market has yet to be seen.

Maybe I’m confused, or just don’t understand it properly, but this rescue seems to pull from one mouth to feed another. Let’s just hope this czar will have better luck than Nicholas II.

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3 Responses to “Bailout: Car Czar in Exchange for Short-Term Lending”

  1. aaron4unitruth Says: December 22nd, 2008 at 5:45 pm

    There are many reasons why the bailout of Wall street and the auto industry is wrong but most importantly because the federal government is far more powerful than it was ever meant to be. Now the government can be a stockholder? Sounds too much like socialism.

    http://www.theartdeptchronicles.blogspot.com

  2. aaron4unitruth Says: December 22nd, 2008 at 5:46 pm

    There are many reasons why the bailout of Wall street and the auto industry is wrong but most importantly because the federal government is far more powerful than it was ever meant to be. Now the government can be a stockholder? Sounds too much like socialism.

  3. Tim Manni Says: December 23rd, 2008 at 12:11 pm

    aaron4unitruth,

    Thanks for reading and sharing a comment. Your sentiments are shared by Americans all across the country. Can either of these bailouts manage to cancel out the bad by outperforming with “good?”

    Thanks again,
    Tim

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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