Rep. Frank Wants Bailout Shared With Automakers

Barney Frank i i

Rep. Barney Frank speaks on Capitol Hill on Wednesday in front of the leaders of the "Big Three" automakers. Chip Somodevilla/Getty Images hide caption

itoggle caption Chip Somodevilla/Getty Images
Barney Frank

Rep. Barney Frank speaks on Capitol Hill on Wednesday in front of the leaders of the "Big Three" automakers.

Chip Somodevilla/Getty Images

CEOs from GM, Ford and Chrysler appear Wednesday before the House Financial Services Committee. Rep. Barney Frank, the committee's chairman, has drafted legislation extending the $700 billion rescue program to Detroit's Big Three automakers. The Massachusetts Democrat talks with Steve Inskeep about the legislation.

Steve Inskeep: I want to ask you about something mentioned in that report from an economist from the University of Maryland. What makes you think the $25 billion would even be enough?

Rep. Barney Frank: We don't think it would be enough. The way we have this structured, they will get $25 billion if the bill passes, with a lot of conditions. No dividends can be paid, no bonuses for people over $200,000, and some other things. But they would have to prepare and file by March 31 a plan that shows how they plan to get much more efficient and to get cars that can be marketed.

But let me ask you about the first thing you said, Congressman, because you said you don't think $25 billion is enough.

Right, I'm trying to explain to you how it works.

OK.

They get $25 billion — the federal government would be in the first position to be repaid. We will come ahead of the debt holders, the shareholders, etc. They file this plan on March 31. If, on March 31, the president does not believe that this is going to get them the viability with energy efficiency cars, they have to repay the loan; they get no more money. If they can show by March 31 a plausible way to go forward, then we would consider giving more money, again, under equally stringent conditions.

So this could be $50 billion, $75 billion, $100 billion?

Well, [insurance company] AIG, which I don't think anyone would think was as important to the American economy as the auto industry ... got $40 billion just now to make it up over $100 billion. To some extent, let's not have a white-collar/blue-collar bias in our public policy. You know, those who say, hey, go bankrupt so you can cut back on what the unions have won — the unions have already made some concessions. But, you know, we've had enough anti-union activity, and enough increase in income inequality in this country. I don't want to set a precedent that bankruptcy now is a way in which you undo what gains unions have been able to hold on to.

Congressman, if you're advocating 25 and maybe later 50, 75 more billions of dollars for the auto industry, you're urging Treasury Secretary Henry Paulson to use more of the financial bailout to help homeowners, Paulson is trying to reserve some of the money for the next administration — are we actually going to get in a position where $700 billion is not going to seem like very much to fix all these problems?

No, not even close. We are talking about a proposal by a Bush administration appointee, Sheila Bair, and some others to put maybe $20 [billion] to $25 billion into reducing foreclosures. Nothing could be more important for reducing the economic crisis that we're in. The secretary has $410 billion left. I agree that he should withhold some so that the new president can make some decisions, but $20 [billion] to $25 billion to solve the foreclosure crisis — which it could do; it could make foreclosures no longer the central factor driving the economy down — that's not a problem.

So there's plenty for foreclosures, plenty for banks, plenty for auto industry — there's plenty for everybody, Congressman?

Well, there would be, especially if we'd end the Iraq war. I'm always struck when I'm asked to defend spending that people just take the Iraq war and the enormous defense spending as a given. We have a new president coming in, and I believe he will have the opportunity to save, frankly, almost as much as the $700 billion over the past few years by putting an end to the Iraq war. This is a wealthy country. If we spend things well, we can spend them. But I'm not prepared to say, "You know what? Hundreds and hundreds and hundreds of billions for a war that we never should have been in, but we don't save an important industry and protect workers from having gains that they fought hard for taken away."

Congressman, one thing I don't understand. You're saying that under your plan, you're going to require and urge the auto industry to come up with a better plan for the future over the next several months. If it doesn't work, they have to pay back the loan. If it does work, they get more money from the federal government...

No, they don't automatically...

They get a chance for more money...

They don't automatically get more money. If they can come up with a plan — the money, by the way, is a loan. And again, of the $700 billion you've talked about so far, the $250 [billion] that has been committed is clearly going to be a loan. We're going to get the money back. The secretary bought preferred shares in Bank of America. We will get that money back, so when you talk about running out of money, the fact is that we have made some loans. There'll be some losses on the loans, but far less than the overall amount.

We've just got a few seconds left. I want to understand this about the auto industry. You're hoping that they come up with a better plan for the future...

No, we're requiring them to, and if they don't, they gotta pay the money back.

OK, we'll put it your way. But if you're requiring this — we've just got a few seconds left...

Well, don't raise a complicated issue with just a few seconds left.

I will try to make it simple. If they've just got these fundamental problems with labor and health care costs, isn't this going to just be one more goal that they can't quite meet?

No, you seem determined to kind of distort this. Health care, by the way, is also on the agenda. Health care is a real problem, and we have burdened all American industry with a bad health care system that's tied to your employment. One of the things I very much look forward to is working with the new president so we change the health care system. And going forward, if they have to stay with health care the way it is now, yeah, that's bleak. But what I am hoping is that we will get a change in the health care system that will reduce the burden that we put not just on the American auto industry, where it's more expensive to build a car in America than in Canada because of health care.

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