As of Friday night, it still appeared the Bush Administration was prepared to do what Senate Republicans wouldn't: Rescue the auto industry. The news had broken in the morning, first with a press release from the White House and then with an announcement from the Treasury Department: “Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry."
At the time, I was in Flint, Michigan, driving past the vast General Motors powertrain and truck plants that still employ a few thousand workers. I stopped at a hall for one of the United Auto Workers locals and spoke to some officials there. He was furious at the Senate Republicans, pleased to hear Bush stepping in, but also mindful that--even with a rescue--already tough times were about to get tougher. Following the lead of Chrysler, GM would be temporarily stopping production at several plants, including two in Flint.
I do think Bush is doing the right thing--and for the right reason. Simply letitng the auto industry collapse at this point could be devastating to the economy. As my colleague John Judis wrote, it's simply unconscionable that Senators like Bob Corker were willing to take that chance.
No, we can't be certain of the effects. (If GM and Chrysler go down, how many part suppliers go with them? And does that take down Ford, too?) But the risk of catastrophe is both real and significant. At a time when most economists are talking about enacting a stimulus in the hundreds of billions of dollars, throwing $15 billion at the automakers just to keep them going--and keep much of their workforce employed--for even a few months is probably money well spent.
From the media reports, it's not clear exactly what form the Bush bailout would take. In the latest New York Times article, there's talk of a possible "pre-packaged" bankruptcy--an option plenty of smart people prefer--for at least one of the companies. Presumably that means Chrysler, which is the weakest of the three, though it could mean GM, as well.
But I'm still among those who would perfer a restructuring overseen by the government and conducted outside the bankruptcy process. The legislation enabling such a bailout could include some bankruptcy-like provisions, particularly when it comes to restructuring arrangements with dealers. But it'd also avoid the litigation of Chapter 11 and, perhaps, help the auto companies avoid a bankruptcy stigma that could be toxic for sales.
Of course, it takes time--and consulation--to craft such legislation appropriately. And, to be perfectly honest, the bill Congress almost passed didn't seem to have such thoughtful effort behind it. The process was rushed and the final measure, although worth passing, was far from ideal. If the Bush bailout merely props up the industry until Obama and the new Congress can take the time to draw up a better rescue package, that wouldn't be such an awful outcome to this mess.