In a hearing on a bailout for the auto industry before the House Financial Services Committee, Congressman Paul Kanjorski (D-Penn.) asks Richard Wagoner Jr., chairman and CEO of General Motors, for the specific amount of money needed by GM and how long GM can last without government aid. Kanjorski says he wants the numbers so that Congress can take the appropriate amount of time to weigh whether or not to give the money. Wagoner gives vague answers, and Kanjorski presses him for more specifics. (2:46)

 

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In a hearing on a bailout for the auto industry before the House Financial Services Committee, Chairman Barney Frank (D-Mass.) points out a distinction between reaction to proposed aid for white-collar jobs and proposed aid for blue-collar jobs. When the AIG and financial-industry bailouts were being debated, there was no discussion of the salaries for the employees, yet in the current debate there has been significant discussion of salaries of auto workers. Frank says people seem to be more willing to accept aid to the white-collar industry than to the blue-collar industry. (0:43)

 

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Representatives from the flailing Big Three automakers appeared before the Senate Banking, Housing and Urban Affairs Committee Tuesday to make their case for receiving a 25 billion dollar bailout.

Alan Mulally, president and CEO of the Ford Motor Company; Robert Nardelli, chairman and CEO of Chrysler LLC, and Richard Wagoner Jr., chairman and CEO of General Motors explained that if they were to fail, there would be millions of lost jobs across the entire spectrum of the automobile industry, from those in manufacturing positions to those who work in dealerships.

While the committee members’ opinions about the bailout were mixed, the sense of cautious doubt seemed unanimous.

“Let me say what I have said previously: I support efforts to assist the industry. Not because their leaders necessarily deserve taxpayer’s help. On the contrary, they deserve no more help than do the leaders of the financial companies that created the subprime mortgage mess that has exploded into a global financial crisis,” said Chairman Chris Dodd (D-Conn.)

Dodd asserted that the blame for the Big Three’s dilemma rested on the CEO’s themselves.

“None of us relishes being here today to consider these prospects. That goes for our company and labor witnesses. Their discomfort in coming to the Congress with hat in hand is only exceeded by the fact that they are seeking treatment for wounds that I believe are to a large extent self-inflected,” said Dodd.

However, the Big Three disagreed that they should be held responsible, with the Ford and GM CEOs saying that their companies were headed towards profits until the credit crisis hit. The result was that the consumers ability to buy cars was severely impacted and gains quickly dropped.

The automakers also rejected the notion that they have not been innovative and have been refusing to make needed changes. All three companies have begun the creation of hybrid vehicles and have made attempts to reach more effective labor costs.

The CEOs flatly disagreed with suggestions that they declare Chapter 11, citing that there would be no real benefit since the restructuring that would come with a bankruptcy declaration was already being attempted. This would be coupled with the companies supposed inability to maintain liquidity on remaining products, since they contended that few consumers would purchase a product from a folding company. Mulally also stated that Ford still owed wages to workers that would be lost if the company declared Chapter 11.

An additional witness, Peter Morici; economist and professor at the University of Maryland School of Business, disagreed and said that Chapter 11 was a viable option.

“If Chapter 11 is put off, the successors to GM, Ford and Chrysler that emerge from a bankruptcy reorganization process will be smaller and support fewer jobs than if these companies endure this difficult transition in 2009. More jobs can be saved among GM, Ford and Chrysler and their suppliers if bankruptcy reorganization is endured now than in the future.”

Although weeks have past since the Program was approved and $290 billion of the first $350 billion has already been pledged, the President has announced his nomination: Neil Barofsky, Assistant United States Attorney in the Souther District of New York. Appearing before the Senate Finance Committee, Barofsky outlined his professional background and explained how he would utilize his position to bring about proper oversight.

“This past summer, our United States Attorney asked me to supervise a newly created Mortgage Fraud Group to respond to the havoc that mortgage fraud has caused to countless homeowners and lenders in our district…we attacked at the roots of those who have contribute significantly to the current housing and financial crisis through wholesale fraud of homeowners, lenders, and investors,” said Barofsky.

“‘[It] has given me the tools to identify the markers of fraud throughout the financial industry, the necessary expertise in investigating such frauds, and the experience of establishing a plan of attack on those committing these fraud.”

Committee member Senator Charles Schumer (D-N.Y.) elaborated on Barofsky’s previous experiences.

“Mr Barofsky demonstrated great personal bravery when he investigated the Revolutionary Armed Forces of Columbia, FARC, the narco-terrorist group that controls more than half the world’s annual cocaine production. He successfully indicted the FARC’s top 50 leaders at great risk to his own personal safety,” said Schumer.

Following Congress’s initial rejection of the Troubled Assets Relief Program, the bailout bill was subjected to numerous alterations. One important change was the addition of an inspector general to provide the program with oversight.

Barofsky described how he would bring his investigative experience to the position, stating “We will need to establish an investigative arm, which I can assure this committee will tirelessly investigate and refer for prosecution any individual or entity that tries to criminally profit from the Program.

Senator Jay Rockefeller (D-W.V.) warned that banks and those high up in financial institutions have ways of “slipping things by” and essentially asked if Barofsky would be a tough enough inspector general to provide proper oversight to which Barofsky responded, “I won’t give you empty words. Instead I’ll just point to my record and what I’ve done as a prosecutor in the Southern district of New York. Whether it was attacking the FARC in the jungles of Columbia or Refco on Wall Street, all I’ve done is to go after those who violated the law. And I will take that exact same tenacity and dedication to this job as I’ve done with every prosecution I’ve worked on.”

The U.S. Chamber of Commerce’s (USCC) Institute for 21st Century Energy today announced a “Transition Plan for Securing America’s Energy Future,” an energy policy roadmap with 88 concrete recommendations and detailed timelines for President-elect Barack Obama and the 111th Congress.

In order to implement a new energy strategy, the Institute recommends that President-elect Obama create a new office within the Executive Office of the President to coordinate the implementation of all aspects of energy policy, both foreign and domestic. The head of this office would have a seat on the National Economic Council and National Security Council.

According to the USCC press release, the transition plan builds on 13 fundamental pillars that the Institute released in July in an “Open Letter” to the next President and Congress that was signed by 27 national leaders and has received broad bipartisan support.

According to the Institute’s plan, the 13 pillars include: aggressively promoting energy efficiency, improving environmental friendliness, increasing R&D funding, expanding domestic oil and gas exploration and production, increasing nuclear energy use, using clean coal, increasing renewable electricity sources, transforming our transportation sector, addressing the critical shortage of qualified energy professionals, reducing “burdensome regulations and opportunities for frivolous litigation, and demonstrating global leadership on energy security and climate change.

The Open Letter and Blueprint are available at www.energyxxi.org

“A lot of the people that we represent won’t…have a job at Christmastime,” said Congressman Elija Cummings (D-Md.) at a hearing at the Domestic Policy Subcommittee of Oversight and Government Committee. The House Subcommittee met to discuss “Is Treasury Using Bailout Funds to Increase Foreclosure Prevention as Congress Intended?”

“I don’t want these [bailout] companies coming to Congress for a handout, thinking they can take the money, do whatever they want to do, get their manicures, pedicures, massages, pay $1600 a room and then come dancing back to us and say ‘give me more,’ when the American people’s tax dollars are being wasted,” said Cummings, referring to how some companies are using money from the $700 billion bailout plan to give bonuses to their employees. “The United States banking system is turning to the American taxpayer to bail them out and the administration is fully behind them. This administration wants to privatize Wall Street’s gains and socialize Wall Street’s losses,” said Cummings.

“We’ve got millions of people threatened with losing their homes…why won’t the Treasury act swiftly and forcefully to maximize assistance to homeowners…and play a significant role in modification of home loans at risk of imminent default?” asked Chairman Dennis Kucinich (D-Ohio). “The Treasury has been given almost omnipotent power, and you have unfortunately not exercised the interest of homeowners.”

“With due respect sir,” responded Neel Kashari, Interim Assistant Secretary of Treasury for Financial Stability, “if we had spend all $700 billion on loans that’d be about three million loans. There are 55 million mortgages in America…we could benefit three million directly by buying over loans or we could benefit every American by not allowing the financial system to collapse.” Kashari defended the Treasury Department’s decision to invest the bailout money in big banks in order to secure the credit market. “Many people around the country…need help,” said Kashari, “if we went out to each of the people and each of the businesses and helped them directly the $700 billion wouldn’t go far enough. We’re trying to take the $700 billion to stabilize the system as a whole…to help every American.”

The Senate Committee on Banking, Housing and Urban Affairs held a hearing today on “Oversight of the Emergency Economic Stabilization Act: Examining Financial Institution Use of Funding Under the Capital Purchase Program.”

Committee Chairman Christopher Dodd (D-Conn.) voiced his concerns over how the money for the $700 billion Emergency Economic Stabilization Act (EESA) was being used.

“The acceptance of public funding carries with it a public obligation,” said Dodd. “One cannot benefit from taxpayer support in all its many forms and assume that one has no duty to serve that same taxpayer.”

Dodd expected lenders who received some of the $700 billion to preserve homeownership. “The foreclosure crisis is the root cause of the larger financial crisis…Until we solve the foreclosure problem, we will not have any hope of solving larger economic problems.”

The Senator was critical of lenders who had received public funds and used the money to buy other financial firms or give their executives benefits rather than give out loans. “Credit is the lifeblood of the economy…Lenders have a duty to use these funds to make affordable loans to credit-worthy borrowers on reasonable terms,” said Dodd. “If they do not, then in my view they are acting outside the clear intent of the statute and should reform their actions immediately,” he concluded.

Should we invest in Medicaid and Biomedical research in a stimulus package for our down turning economy? The House Committee on Energy and Commerce held a hearing today to discuss “Treatments for an Ailing Economy: Protecting Health Care Coverage and Investing in Biomedical Research.”

In her testimony, Arizona Governor Janet Napolitano (D-Ariz.) stated, “one of the wisest and most effective things Congress can do now to speed a national recovery is to invest in the federal-state programs that Americans rely on during a downturn.” Napolitano continued, “one of the most effective ways to aid in a national economic recovery is temporarily to increase the Federal medical Assistance Percentage (FMAP), or the share of the Medicaid program paid for by the federal government.”

A recent survey of state fiscal conditions found that more than 30 states are currently projecting budget shortfalls in fiscal year 2009, totaling $26 billion. Napolitano said the federal government should “invest in existing programs where it partners with the states.”

The committee discussed how Medicaid is continuously an issue in times of economic struggle, and “congress should make a counter-cyclical stimulus a permanent part of the Medicaid statute” as Gov. Napolitano stated in her testimony.

Alan D. Viard, American Enterprise Institute, agreed that the stimulus package can increase aggregate demand by increasing consumer demand, but it cannot permanently increase the level of jobs. Viard said, “counter-cycical increases in Medicaid matching rates would function poorly as a stimulus tool…Financial transfers from the federal government to the states do not directly boost aggregate demand because they do not directly increase consumer spending, business or residential investment, government purchases, or net exports.”

In regard to the inclusion of BioMedical Research, Families USA Executive Director Ronald F. Pollack expressed support for the National Institute of Health “in order to stimulate the economy.” Pollack said, “if the sum of all NIH awards to the states were to increase by 6.6 percent, the national economic benefit would add up to $3.1 billion worth of new business activity, 9,185 additional jobs, and $1.1 billion in new wages.”

Gene Sperling, Senior Fellow at the Center for American Progress Action Fund, expressed his support for an increase in Federal Medicaid Assistance Percentage.

 

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Rep. Gregory Meeks (D-N.Y.) says dealing with the housing crisis is vital because it shows that the government wants to help all people. (1:03)

 

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