It appears that a compromise proposal by Senators from Democrats Carl Levin and Debbie Stabenow, and Republicans George Voinovich and Kit Bond will be presented today at a press conference, which will be covered live on CSPAN.
The compromise plan involves repurposing the $25 billion from the 2007 Energy Bill which was allocated for retooling and reducing fuel consumption. It would purportedly make the money available to help the automakers get through the current cash crunch. This is the proposal favored by George Bush, and probably the only one the Democrats could get enough Republican support for to get through the Senate.
GM is currently losing around $2 billion a month. As Dean Baker said this morning, at this rate they would be bankrupt in about two months. He also notes that "the fallout from a GM bankruptcy could sink Chrysler and Ford as well, as common suppliers shut down and credit for the industry vanishes and customers flee to manufacturers with longer life expectancies."
The impact of a Big 3 bankruptcy would be far reaching. Elijah Cummings was on MSNBC earlier noting that local television advertising revenues would be cut by 30% if local auto dealers went out of business.
The Dow has now dropped just slightly below 8,000. 8,000 is the last technical support point and if the Dow drops much below 8K, it could lead to a full fledged collapse. If the bailout was done to stop a collapse of the stock market, then it’s certainly justified now. Congressional Republicans may not understand what losing one or more of the Big 3 would mean to the economy, but investors certainly do.
Reid and Pelosi have scheduled a second lame duck session starting December 8 to take the matter up.
CNBC is reporting that the compromise may be a "non-starter" in the House.
Update: Reid at the press conference — we have decided that the automakers must submit a plan to congress through Chairmen Frank and Dodd no later than December 2. They will review plans and hold hearings during that week if necessary. Congress is prepared to come back week of the 8th to vote, but only if the auto makers come back with a viable plan. It is important to know that the administration has the authority to use TARP money in the mean time to help them out (Paulsen is claiming they don’t).
Pelosi: the industrial base is vital to our national security. It is important that we see some path for viability from the auto industry. We reject the notion that bankruptcy is an option.
Dodd: He will hold hearings, possibly with Barney Frank, the week of the second.
Pelosi: We’re not talking today about what money will be used, we’re talking about accountability and the prospect of viability. The White House wouldn’t sign a bill that allocated TARP funds, and it couldn’t pass the Senate.
Reid: What happened here this week wasn’t good for the auto industry. These guys flying in on big corporate jets doesn’t help anything. They need to get their act together. Yes we’re kicking the can down the road.
Hoyer: It is a demonstration that we intend to keep working on this matter because we feel it’s critical. We will be working, the automakers will be working, and we expect the administration to be working on it as well.
Barney Frank: We put through a bill committing $700 billion to taxpayer money. There is widespread discontent throughout the country that we didn’t provide appropriate safeguards to that money. There is a great deal of skepticism on the part of the media, the public and the congress that we moved too fast. We need to not do that this time.
Update 2: Levin — auto makers all over the world are asking help from their governments. Our plan has taxpayer protections, and requires long term plans for viability to be part of the applications for the loans. White House opposed the use of any of the $700 billion stabilization funds, and Reid said there were not enough votes into Senate to appropriate those funds. We can’t allow fight over source of funds to let the auto industry goes under, which could have dire economic implications.