The more we learn about the auto industry bailout that will be debated in Congress this week, the worse it sounds.
Based on the description in today’s Washington Post, it’s looking for all the world like a de facto government takeover of the auto industry:
Congressional Democrats are drafting legislation that would give the teetering Detroit automakers at least $15 billion in emergency loans early next week and grant the federal government broad authority to manage a massive restructuring of their operations.
The proposal, which could be put to a vote in Congress as soon as tomorrow, would establish a seven-member “auto board” of Cabinet officials and a chairman to be appointed by President Bush to oversee both the short-term loans and a long-term effort to restore the faltering industry to profitability. If the companies take the cash, they would be accountable to the government for nearly every move, and for every transaction of $25 million or more.
As part of that restructuring, General Motors, Chrysler and Ford could be asked to jettison their top executives, one of the chief architects of the plan, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), said yesterday. Stating bluntly that “GM is in the worst shape” of the three auto giants, Dodd said that GM chairman G. Richard Wagoner Jr., the company’s chief since 2000, “has to move on.”
(…)
the Detroit Three would be eligible for low-interest loans to be disbursed by the Treasury on Dec. 15. The seven-year loans would carry a 5 percent interest rate for the first five years, and 9 percent thereafter — the same terms offered to financial firms under the Treasury program.
As long as the loans are outstanding, the auto companies would be barred from paying dividends to their shareholders or bonuses to their top executives. And they would be required to submit a long-term restructuring plan to the auto board by March 31.
The board would be composed of the heads of six Cabinet agencies — including Treasury, Energy, Labor, Commerce, Transportation and the Environmental Protection Agency — plus a chairman to be appointed by the president.
And The New York Times has further details:
The final legislation is also expected to impose stringent taxpayer protections, including stock warrants that would give the government an equity stake in the three companies, new limits on executive pay and a ban on stock dividends while the loans are outstanding. One proposal would require the auto companies to seek government approval for any business transaction of $25 million or more.
And thus the most vital functions of what is being described as one of America’s key industries would be handed over to a board composed entirely of political appointees, each of whom would be answerable to their own set of interest groups.
And thus three companies that one produced cars would become little more than a laboratory for the latest social experimentation.
