Tough line on auto bailout may extend to other industries

Congress's rescue of financial institutions may prove the exception, as automakers learned last week.

By , Staff writer of The Christian Science Monitor

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    Request to Congress: Mark Madden, who works at a GM plant in Bowling Green, Ky., posted this sign at his station when legislation to help the auto industry faltered.
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In punting on a $14 billion rescue plan for the US auto industry, the US Senate has signaled that the struggle over who gets federal help – and who is left to take their lumps in the marketplace – is likely to be an acute and ongoing issue for lawmakers into the next Congress.

The auto bailout now falls to the Bush administration, at least for the moment. The White House said Friday it may tap part of the $700 billion meant to buttress the shaky financial-services sector for the purpose of saving any of Detroit's Big Three from collapse. At time of writing, the administration was deciding what mechanism to use to help the industry.

Regardless, this month's fight in the lame-duck Congress over the auto bailout is a cautionary tale for how lawmakers are likely to deal with future calls for help. Lesson No. 1 is that swift congressional action based on the premise that an industry is too big to fail – or that job losses in the absence of a government bailout would be cataclysmic for the economy – cannot be counted on.

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It's an argument that worked for the financial-services industry, which in early October extracted from Congress as much as $700 billion in government funds to save it from ruin tied to mortgage-related debt. But the way the Treasury Department has allocated the first $350 billion in the Troubled Asset Relief Program (TARP) has led to buyers' remorse among many lawmakers – and appears to be making them more reticent to dole out dollars to ailing industries.

Indeed, unless changes are made to how TARP is implemented, critics say, Congress may invoke its right to prevent the Treasury Department from drawing on the remaining $350 billion.

"It is likely at this point, absent ... work on foreclosures and other things, that such a resolution could pass," said Rep. Barney Frank (D) of Massachusetts, who chairs the House Financial Services panel.

Senate Republicans who provided 34 of the 74 votes for passage of the financial bailout say they are less likely to vote for rescue plans in the future.

"I voted for a financial rescue package that I thought was essential to keep the country functioning," said Senate Republican leader Mitch McConnell, after a Dec. 10 GOP caucus meeting on the auto bailout. "I was convinced ... that it was a once-in-100-years crisis…. That, in my view, is not a precedent for what we're dealing with [regarding the auto industry] or may be dealing with in the future."

The Senate voted Thursday not to proceed with a bill to loan US automakers $14 billion. A bipartisan deal that would have required autoworkers to cut wages to match those of foreign competitors ultimately failed. The United Auto Workers, on Capitol Hill for negotiations, balked.

Out of time and options, Senate majority leader Harry Reid called for a procedural vote that failed 52 to 35. Of 49 Senate Republicans, all but 10 opposed moving forward with the bailout bill.

Still, the vote revealed rifts in Republican ranks that could help Democratic lawmakers work out industry rescues in the next administration. There will also be fewer Republican senators come January: They'll number 41, maybe 42 if the undetermined Minnesota contest goes their way.

Most GOP senators see market forces and bankruptcy courts as the solutions for embattled industries.

"Unless Chrysler, Ford, and General Motors become lean and innovative and competitive in the market place, this is only delaying their funeral," said Sen. Richard Shelby (R) of Alabama.

But 10 Republicans, seven of whom return in the next Congress, voted to move forward on an auto bailout. Sen. Bob Corker (R) of Tennessee, who worked for the compromise but in the end did not vote with the 10, said he, too, once favored market solutions but became convinced the stigma of bankruptcy would be too great for the industry to overcome.

Going forward, a demand for benchmarks in any rescue plans may emerge as a common point for Democrats and what could be a critical mass of Republicans.

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