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Vote on Automaker Bailout Nears
Because Obama has resigned his seat, Democrats have at best a 50-to-49 edge in the Senate until new members take office next month. It was unclear yesterday whether Obama's vice president-elect, Sen. Joseph R. Biden Jr. (D-Del.), would cast a vote on the auto bill, meaning Democrats may need as many as 11 GOP votes to prevail over filibuster threats. A spokesman for Obama's pick for secretary of state, Sen. Hillary Rodham Clinton (D-N.Y.), said she would be available for the vote.
The agreement would grant General Motors, Chrysler and Ford less than half the $38 billion they had been seeking to help them survive the sharpest drop in car sales in 25 years. The money is intended to keep GM and Chrysler afloat through the end of March. Ford has said it does not expect to need federal aid immediately.
Under the proposal, the government would get warrants for equity equal to at least 20 percent of the loan it provides to each firm, and the companies would be barred from paying dividends to shareholders or bonuses to top executives. They also would be required to get rid of their corporate jets. And by March 31, they would be required to submit detailed plans for profitably producing fuel-efficient vehicles that can succeed in the marketplace.
Yesterday, Democrats bowed to the White House on a series of key demands, including that the car czar be granted little discretion over the decision to extend long-term government assistance to the companies.
Democrats also agreed to require the companies to report investments, asset sales or other transactions of $100 million or more, rather than the $25 million limit previously sought. That provision is intended to prevent the firms from using taxpayer dollars to make investments abroad, but the Bush administration argued that the lower figure would amount to "micromanaging," according to Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, whose staff was leading the talks for House Democrats. Under the legislation, the car czar would have veto power over transactions of $100 million or more.
Democrats kept a provision, opposed by the White House, that would bar the car companies from pursuing lawsuits against California and other states trying to implement tougher tailpipe emissions standards. Republicans say the move would undercut the automakers' profits, but Sens. Dianne Feinstein (D-Calif.) and Bill Nelson (D-Fla.) said yesterday in a letter to Reid that GM and Ford have laid out business plans indicating that they intend to outperform the California fuel economy standards within a few years anyway.
The administration official predicted that if the prohibition is not removed, the bailout proposal will not be approved by Congress.
Democrats also included a provision that would permit the government to take warrants in Cerberus Capital Management, the private-equity firm that owns 80 percent of Chrysler, rather than Chrysler itself, according to a senior congressional aide. The White House balked at that idea, congressional aides said, but even some Republicans are troubled by the possibility that Cerberus could profit from the bailout.
Yesterday, Sen. Charles E. Grassley (R-Iowa) said taxpayers should not pour cash into Chrysler if Cerberus was unwilling to do so. Grassley also objected to an unrelated provision in the developing measure that would enable transit agencies, such as the Washington area Metro, to continue benefiting from a financial arrangement that amounts to a tax shelter for foreign institutions.
"Taken together, these issues are a one-two punch. They insult the taxpayer by propping up tax evasion, and they insult every American feeling the brunt of the economic crisis by putting tax dollars on the line where private equity investors refuse to put any of their own money at risk," Grassley said in a statement.
In a statement, Cerberus said that it had "worked tirelessly to assist Chrysler" and would "continue to provide Congress with full transparency as to its financials."