A Letter From My Congresswoman

Back in November I wrote a letter to my Congresswoman expressing my firm opposition to any bailout of the automobile industry. Yesterday I got the following response:


Dear Mr. Goy:



Thank you for e-mailing me to oppose the bailout of the "Big Three" American auto companies. As a member of the Financial Services Committee, I listened to hours of testimony on the companies' plans and the American auto industry's effects on our economy as a whole. While I had some reservations about the Auto Industry Financing and Restructuring Act, I voted for the final bill because I was convinced that letting the industry fail would have catastrophic consequences.



As you know, the bill did not pass the Senate and the President has made a bridge loan available in the meantime to stabilize the carmakers. On December 19, 2008, the President announced that he would use $13.4 billion of the money set aside for the Troubled Asset Relief Program and in February another $4 billion would be allocated.



This was far from ideal, as the comprehensive package would have mandated companies show they could become viable before accepting money, with strict controls on executive pay, dividends to shareholders, and concessions from labor that would have protected taxpayer money from being wasted. The bill also would have established a "Car Czar" to oversee the whole program, protect the public investment and ensure the plans submitted by the companies were fiscally sound. I agree with many people who believed that Former Federal Reserve Bank Chairman Paul Volcker would have been perfect for this post. The bailout of Chrysler in the 1980s shows that the government can - with proper oversight and prudent goals to meet - protect the taxpayer dollars we lend and possibly turn a profit. As you may remember, the federal government loaned Chrysler $1.5 billion in 1980 to keep the company in business during the downturn caused by the oil spikes of the 1970s; Chrysler took out $1.2 billion of that loan but repaid it with interest within 2 years, 8 years before it was federally mandated to do so. Furthermore, the government received stock warrants that were sold for $311 million at a profit to the American taxpayer.



One of the biggest differences between the bailout of the auto industry and the financial industry was the number of people employed in the auto industry and its support services. Without the money, two of the Big Three were in immediate danger of filing for bankruptcy with hundreds of thousands of jobs on the line. Further, when AIG was bailed out, we did not put any restrictions on the employees' salaries, while the United Auto Workers have already made large concessions for the good of the industry.



Fortunately, the President will direct the Secretary of Treasury to use the terms negotiated by the White House and Congress, although the appointment of a Car Czar will have to wait for the new administration to take office. Meantime, General Motors announced it will temporarily close 20 plants and Chrysler announced it is closing all of its 30 plants for at least a month; I am optimistic that this bridge funding will ensure these aren't permanent closures.



The real test will be transforming our domestic automakers into 21st century, green companies that can compete with the foreign automakers, who realized long ago that consumers do not want gas guzzlers. Congress can help by passing a stimulus bill that would provide incentives for new car purchases, increasing consumer demand for more fuel efficient vehicles. These incentives should center around providing small rebates starting at 27.5 miles per gallon overall for passenger cars, but significantly bigger rebates as overall mileage moves towards 30 MPG - and then we should raise the bar each year for several more years, at a minimum.



As long as there are the protections of a tough regulator in place, I could not in good conscience cast a vote that would have led to massive layoffs at a time when our economy is so weak. Further, I will continue to demand that Chrysler's parent company, Cerberus, open their books to public scrutiny. I cannot support committing taxpayer money to bailing out a private company without ensuring there is transparency in the transaction.



At an excruciating time in our nation's history, I wanted to make sure that people would have jobs on January 1, 2009 and that the companies wouldn't be in bankruptcy. I want to thank you again for writing to me on this important issue. While we may disagree on this issue, I appreciate your opinion, as it helps me serve you better here in Congress.







All the best,

Jackie Speier
Member of Congress