Bush Administration Announces $17.4 Billion Bailout of US Automakers
Jeremy Pelofsky, White House Correspondent for Reuters, and John Crawley, a reporter for Reuters, wrote in a Dec. 19, 2008 article titled "Bush Announces Auto Loan Program; Toyota Loss Looms" on the Reuters website:
"President George W. Bush announced $17.4 billion in emergency loans to faltering U.S. carmakers on Friday [Dec. 19, 2008] in a dramatic step that would pull the industry from imminent collapse and save hundreds of thousands of jobs from falling victim to a deep recession...
The government will offer up to $17.4 billion in loans to the ailing U.S. automakers and expects General Motors and Chrysler LLC to access the money immediately, a senior administration official said.
'If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers,' Bush said, warning that to do nothing would deepen and prolong the U.S. recession... Click herefor a full transcript of the speech
Some $13.4 billion of the total will be made available in December and January from a $700 billion Wall Street bailout fund that was originally designed to rescue struggling financial institutions.
The White House moved on its own after Democrats and Republicans in the U.S. Congress were unable to reach agreement after weeks of negotiations that included desperate pleas on Capitol Hill from the auto chiefs.
Bush attached some conditions. The loans would be called back if the automakers cannot prove they are viable by March 31, an administration official said.
The three-year loans would require limits on executive compensation. Auto companies must demonstrate how they would become viable. They must pay back all their loans to the government, and show that their firms can earn a profit and achieve a positive net worth. The automakers would also have to provide warrants for non-voting stocks...
The Treasury said the move to help the automakers had effectively exhausted the initial $350 billion of the Wall Street bailout funds approved by Congress and that it now needs to access the second half of the total $700 billion.
The remaining $4 billion in aid to the automakers is contingent on the administration seeking access to the second half of the financial rescue plan, known as the Troubled Asset Relief Program, the administration official said."