To the Rescue: Bush to Give Low-Interest Loans to Carmakers

(Associated Press)



The Bush administration came to the rescue of the troubled U.S. auto industry Friday, offering $17.4 billion in loans in exchange for concessions from car makers and their workers.

Bush explained that the “orderly” bankruptcy the White House had been toying with in recent days might send the auto makers into an unstoppable death spiral because of their weakened state and likely increased consumer unwillingness to buy their products.

“My economic advisers believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis,” he said. “It could send our suffering economy into a deeper and longer recession.”

There are strings attached. Among them, firms must: provide warrants for non-voting stock; accept limits on executive compensation and eliminate perks such as corporate jets; allow the government to examine their books and records; report and the government has the power to block any large transactions (> $100 M); comply with applicable Federal fuel efficiency and emissions requirements; and, not issue new dividends while they owe government debt. Additionally, debt owed to the government will be senior to other debts, to the extent permitted by law.

Update: More information at the Wall Street Journal. Lengthier video from CNN via TPM.