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[Congressional Record Volume 154, Number 176 (Wednesday, November 19, 2008)]
[Extensions of Remarks]
[Page E2278]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

                        WHEN WILL BAILOUTS STOP

                                 ______
                                 

                           HON. VIRGINIA FOXX

                           of north carolina

                    in the house of representatives

                      Wednesday, November 19, 2008

  Ms. FOXX. Madam Speaker, last December, I joined 99 of my House 
colleagues in opposing H.R. 6, the Energy Independence and Security Act 
of 2008 which authorized a $25 billion bailout for the automobile 
industry. Nine months later, I voted against H.R. 2638 which designated 
$7.5 billion in emergency funding for the bailout. Now Detroit is 
asking for an additional $25 billion as Democrat leaders line up to 
deem this industry ``too big to fail.'' When will it stop? What means 
of production are next in line for seizure by our centralized 
government?
  Detroit automakers' management and labor unions have created a toxic 
combination of poor decision-making that has led to this mess. I 
understand that prepaid pensions decreased by $16.6 billion or 82.1 
percent to $3.6 billion on September 30, 2008 from $20.2 billion on 
December 31, 2007 and by $15.3 billion or 80.9 percent from $18.9 
billion on September 30, 2007. These decreases are due to: (1) losses 
of $6.3 billion on the hourly and salaried pension plan asset 
portfolio; (2) recording a $2.7 billion liability related to the 
Settlement Agreement; (3) recording a $2.7 billion liability due to the 
increase in the monthly pension benefit paid to salaried OPEB plan 
participants as compensation for the elimination of post-65 healthcare 
benefits; (4) the transfer of $2.1 billion of Delphi pension 
liabilities to GM; and (5) recording a $2.0 billion increase due to the 
2008 UAW and IUE-CWA Special Attrition programs. There are some who 
believe that this means that after combining General Motor's cash 
losses, and with the losses disclosed in GM's most recently filed SEC 
10Q form, it totals about $23 billion. Therefore a $25 billion bailout 
is little more than a three month band-aid.
  The accompanying Wall Street Journal editorial outlines the perils of 
pursuing this latest bailout. It is my hope that Congressional leaders 
will reject this latest misguided effort to bailout industries that 
have made poor decisions at the expense of those who have not.
                                                November 10, 2008.

                         Nationalizing Detroit

       In the Washington mind, there are two kinds of private 
     companies. There are successful if ``greedy'' corporations, 
     which can always afford to pay more taxes and tolerate more 
     regulation. And then there are the corporate supplicants that 
     need a handout. As the Detroit auto makers are proving, you 
     can go from being the first to the second in the blink of an 
     election.
       For decades, Congress has never had a second thought as it 
     imposed tighter emissions standards on GM, Ford and Chrysler, 
     denouncing them for making evil SUVs. Yet now that the 
     companies are bleeding cash, and may be heading for 
     bankruptcy, suddenly the shrinking Big Three are the latest 
     candidates for a taxpayer bailout. One $25 billion loan 
     facility has already been signed into law, and Senator Debbie 
     Stabenow (D., Mich.) wants another $25 billion, this time 
     with no strings attached.
       Speaker Nancy Pelosi and Senate Majority Leader Harry Reid 
     met last week with company and union officials, and they 
     later sent a letter urging Treasury Secretary Henry Paulson 
     to bestow cash from the Troubled Asset Relief Program (Tarp) 
     on the companies. Barack Obama implied at his Friday press 
     conference that he too favors some kind of taxpayer rescue of 
     Detroit, though no doubt he'd like to have President Bush's 
     signature on the check so he won't have to take full 
     political responsibility.
       We hope Messrs. Bush and Paulson just say no. The Tarp was 
     intended to save the financial system from collapse, not to 
     be a honey pot for any industry running short of cash. The 
     financial panic has hit Detroit hard, but its problems go 
     back decades and are far deeper than reduced access to credit 
     among car buyers. As a political matter, the Bush 
     Administration is also long past the point where it might get 
     any credit for helping Detroit. But it will earn the scorn of 
     taxpayers if it refuses to set some limits on access to the 
     Tarp. If Democrats want to change the rules next year, let 
     them do it on their own political dime.
       A bailout might avoid any near-term bankruptcy filing, but 
     it won't address Detroit's fundamental problems of making 
     cars that Americans won't buy and labor contracts that are 
     too rich and inflexible to make them competitive. As Paul 
     Ingrassia notes nearby, Detroit's costs are far too high for 
     their market share. While GM has spent billions of dollars on 
     labor buyouts in recent years, they are still forced by 
     federal mileage standards to churn out small cars that make 
     little or no profit at plants organized by the United Auto 
     Workers.
       Rest assured that the politicians don't want to do a thing 
     about those labor contracts or mileage standards. In their 
     letter, Ms. Pelosi and Mr. Reid recommend such ``taxpayer 
     protections'' as ``limits on executive compensation and 
     equity stakes'' that would dilute shareholders. But they 
     never mention the UAW contracts that have done so much to put 
     Detroit on the road to ruin. In fact, the main point of any 
     taxpayer rescue seems to be to postpone a day of reckoning on 
     those contracts. That includes even the notorious UAW Jobs 
     Bank that continues to pay workers not to work.
       A Detroit bailout would also be unfair to other companies 
     that make cars in the U.S. Yes, those are ``foreign'' 
     companies in the narrow sense that they are headquartered 
     overseas. But then so was Chrysler before Daimler sold most 
     of the car maker to Cerberus, the private equity fund. Honda, 
     Toyota and the rest employ about 113,000 American auto 
     workers who make nearly four million cars a year in states 
     like Alabama and Tennessee. Unlike Michigan, these states 
     didn't vote for Mr. Obama.
       But the very success of this U.S. auto industry indicates 
     that highly skilled American workers can profitably churn out 
     cars without being organized by the UAW. A bailout for 
     Chrysler would in essence be assisting rich Cerberus 
     investors at the expense of middle-class nonunion auto 
     workers. Is this the new ``progressive'' era we keep reading 
     so much about?
       The car makers say that bankruptcy is unthinkable and ``not 
     an option.'' And bankruptcy would certainly be expensive, not 
     least for Washington itself, which could be responsible for 
     600,000 or so retiree pensions through the Pension Benefit 
     Guaranty Corp. In that sense, the bailout is intended to 
     rescue the politicians from having to honor that earlier 
     irresponsible guarantee. But at least that guarantee would be 
     finite. If Uncle Sam buys into Detroit, $50 billion would 
     only be the start of the outlays as taxpayers were obliged to 
     protect their earlier investment in uncompetitive companies.

  If our politicians can't avoid throwing taxpayer cash at Detroit, 
then they should at least do so in a way that really protects 
taxpayers. That means handing a receiver the power to replace current 
management, zero out current shareholders, and especially to rewrite 
labor and other contracts. Anything less is merely a payoff to Michigan 
politicians and their union allies.

                          ____________________
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