The auto plan, as currently written, gives the Auto Czar the absolute ability to decide if he or she likes the auto restructuring plan presented by the Big 3. If the Czar doesn’t, the loans can be immediately recalled, which would cause the companies to go under immediately. Added to the ability to approve or disapprove of any expenditure in excess of 25 billion, and this puts a ton of power in one person’s hands.
That person does not answer to Congress and is chosen by the current President: George W. Bush. As best I can tell, the next president will not be able to fire him, though Obama could ask for his resignation, I guess. I don’t think the Czar would have to give it, however.
I cannot imagine that any Auto Czar appointed by Bush would not make it a priority to make the companies viable by breaking the unions and probably by ditching the companies’ pension obligations. As best I can tell, then, this bill’s effect will be to ensure that both of things happen.
Obviously the bill is this bad because Bush will veto anything that doesn’t let him break the unions. Indeed, Bush is even making noises about how this bill doesn’t go far enough in ensuring viability of the companies going forward, which I think is the administration’s way of saying "let’s make it even more explicit, just in case my auto Czar isn’t loyal to me once I’m gone".
At this point, the only thing I can think of that might work is to lean hard on Bernanke.
Either Bernanke or Paulson could snap their fingers and make the problem go away, by just lending the necessary money to the car companies through their finance companies (why not, they’ve made every other financial institution a bank). Making the finance companies banks would be smart anyway, they are having trouble financing cars because of tight credit, but if they had access to the Fed window, they could reopen the spigots that way, which would be good for them and good for the economy.
Bernanke probably doesn’t want to be asked to step down, publicly, January 20th. Of course, he should be asked to do so, but avoiding the breaking of the unions and the offloading pension obligations onto the public purse might be a worthwhile price for allowing him to stay on a while longer and then leave gracefully. I’d suggest that some back channel hints are probably needed. Bernanke needs to remember that Obama is the future and Bush is the past, and that Bernanke’s going to have to work with Obama very soon, not Bush.