Response from Sen. Arlen Specter on the Auto bailout
Dear Mr. Masters:
Thank you for contacting my office concerning economic aid to the auto industry. I appreciate your views on this matter.
In November 2008, executives of the “Big Three” automakers – General Motors, Ford, and Chrysler – told Congress that the economic downturn and the credit crunch were threatening their survival, and that federal aid would be required to help them weather the storm. Legislation to extend $14 billion in emergency bridge loans was approved by the House of Representatives (H.R.7321), but was met with mixed reaction in the Senate where members sought to include more stringent concessions from the automakers, bondholders, and the United Auto Workers union so that the taxpayer would have a better chance of seeing the loans repaid.
On December 11, 2008, after extensive closed-door negotiations, an agreement on concessions was not reached among the stakeholders and the Senate then failed to cut off debate on a motion to proceed to consideration of the House measure by a vote of 52-35 – short of the necessary 60 votes. Along with nine other members of the minority party, I voted in favor of the procedural motion so that the Senate could continue to deliberate and perhaps come to agreement.
I am not in favor of throwing good money after bad. As a matter of public policy, I am opposed to bailouts. In our free enterprise system, the market, not the government, should determine winners and losers. However, there is an exception when the potential consequences of failing to provide federal economic aid could produce a devastating effect on the economy. In this case, I was prepared to consider economic aid because of consequences to the economy if the Big Three failed. I agreed with the bill’s opponents that the proposed legislation drafted by the White House and Congressional Democrats was unsatisfactory but thought it might be sufficiently improved with amendments to get the necessary votes if we had kept trying.
In the absence of a legislative solution from Congress, the White House announced on December 19, 2008, that $17.4 billion in emergency loans would be made available to General Motors and Chrysler, with assistance conditioned on the companies undertaking reorganization plans to show that they can return to profitability. Specifically, the companies will be required to reduce their debt obligations by two-thirds and to reach an agreement with the United Auto Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers working in the United States. To gain access to the emergency loans, the companies must also agree to various taxpayer protections, including limits on executive compensation and the elimination of their private corporate jets. If, by March 30, 2009, the two companies are unable to meet these conditions, the loans would need to be repaid, ahead of all other creditors.
Again, thank you for writing. The concerns of my constituents are of great importance to me, and I rely on you and other Pennsylvanians to inform me of your views. Should you have any further questions, please do not hesitate to contact my office or visit my website at http://specter.senate.gov.
Sincerely,
Arlen Specter
