The auto industry bailout has stalled in the Senate, putting the fate of Detroit’s Big Three and their employees in the hands of the White House. Why did this bailout — or bridge loan, depending who you ask — fail, when the bank bailout succeeded?
Maybe because the public and the legislators they elect are wary of another bailout with a price tag in the billions. That’s not an unreasonable stance, given the recent questions about the implementation of the bank bailout. Last week, the Government Accountability Office questioned Treasury’s oversight of the Troubled Asset Relief Plan (TARP), saying that the department must do more to ensure that banks are actually lending the funds they’ve gotten through the bailout.
The Congressional Oversight Panel monitoring the bailout has also raised questions: 10 of them, in fact. Among the 10 questions outlined in the panel’s first report, released Wednesday, are:
- “What is Treasury’s Strategy?”
- “Is the Public Receiving a Fair Deal?”
- “What is Treasury Doing to Help the American Family?”
Given that the oversight panel doesn’t seem to know the answers to those key questions, it makes sense that legislators aren’t rushing into another industry rescue plan.
But it’s important to understand that a $700 billion bailout and a $14 billion bailout are two very different things, although few (if any) news reports have taken the time to explain the difference.
If the $700 billion bank bailout was paid back at the rate of $1 per second, it would take more than 22,000 years to pay it off. Which makes the $14 billion bailout for the automakers seem like a bargain — it would take a mere 445 years to pay back at the same rate.
Some other differences between the two blockbuster bailouts:
The oversight panel’s report notes that “Congress has told the auto industry to reform its current practices before it could be considered for taxpayer aid,” and asks whether the Treasury Department has required banks receiving aid to “present a viable business plan,” “replace failed executives and/or directors,” or “undertake internal reforms to prevent future crises.”
“So far as I can tell . . . there don’t seem to be any restrictions on any of the banking practices,” said Elizabeth Warren, the Harvard University law professor chairing the oversight panel, speaking on National Public Radio’s Fresh Air.
So while the auto industry executives have been pushed to issue a mea culpa, take $1 salaries, present detailed plans for their industry’s future, and eschew plane travel, similar reforms have not been imposed on financial institutions — despite the fact that the auto industry is seeking far, far less money than the banks have already gotten.