Posted by Brad @ 7:41 pm on November 21st 2008

Obama’s Thinking on the Auto Bailout

Donklephant flags an interesting article on some rumblings from the Obama camp about how they might deal with the auto industry crisis.

Bloomberg:

In a prepackaged bankruptcy, an automaker would go into court with financing in hand after reaching agreement with lenders, workers and suppliers on what each would give up and on the business plan to be followed. The process might take six to 12 months, compared with two to five years if the automakers followed an ordinary Chapter 11 proceeding and worked out agreements under a judge’s supervision, Bane said.

[…]

A representative of Obama’s team has already contacted at least one bankruptcy-law firm to say that Daniel Tarullo, a professor at Georgetown University’s law school who heads Obama’s economic policy working group, would call to discuss the workings of a so-called prepack, according to this person.

U.S. lawmakers yesterday delayed until December a vote on whether to give General Motors Corp., Ford Motor Co. and Chrysler LLC a $25 billion bailout. GM today said it would idle production at four plants an extra week and return some corporate jets to conserve cash. Automakers could use a judge-supervised bankruptcy to reduce debt and reject expensive contracts.

“It creates the environment to deal with GM’s problems but limits government financial commitment,” said bankruptcy lawyer Mark Bane of Ropes & Gray in New York.

This is what you get for electing a thinking person to the presidency. Marxist, or even Bushian, he ain’t.

Justin Gardner:

So what does this tell us about Obama?

First, he’s positioning himself as the anti-Bush right away. He has a preference, but if that’s not politically feasible, he’s not going to be stubborn.

Second, this is a signal that bi-partisanship won’t be lip service. True, we’ll have to see where this goes, but an encouraging sign nonetheless. And in times like this, there’s little room for ideological demagoguery.

Third, he could be willing to go against labor interests who may not budge on their contracts/pensions if the auto companies got a bridge loan. Chapter 11 would force the unions to make concessions or risk looking like they’re the ones who scuttled the deal.

I would add this: who knows if this idea pans out, but it’s refreshing to see someone actually exploring the issue rather than immediately devolving to demagoguery of one kind of another (“Bail them out unconditionally!” “Let them die no matter what!”). There were a lot of knocks on Obama during the campaign that his thinking begins and ends with just throwing money at stuff. I found no evidence of that then, or at least not to any extent beyond just regular mainstream left-of-center thinking. It seems increasingly evident that, if anything, the Obama team seems less inclined to do that than our current executive team (and I’m not just talking about the bailout; think tax cuts, think national security budgets, think Iraq, etc.).

But we’ll see. In any case, I take it as a positive tea leaf that Obama and his team seem to be thinking about this issue as if they were, you know, adults dealing with a complex and difficult issue for which, perhaps, bending over backwards to place it in an ideologically pure political context would be a disservice and a distraction more than an effective pragmatic paradigm.

4 Comments »

  1. This is what you get for electing a thinking person to the presidency. Marxist, or even Bushian, he ain’t.

    Hilarity.

    Comment by Adam — 11/22/2008 @ 12:48 pm

  2. I don’t see any Hilarity whatsoever.

    It is true Bush sets a low bar in the thinking department, and McCain would have plummed new depths, so you have to give Obama credit for thinking even if it would not be as deep as you yourself might do, Adam.

    Obama’s proposal is a reasonable example of new and out-of-the-box thinking that you just haven’t seen from Bush.

    And we saw that McCain just ran around looking like his head was cut off during the banking crisis, canceling debates and then uncanceling. Not much thinking going on their either.

    So, I think Brad’s point is valid here.

    Comment by daveg — 11/23/2008 @ 12:01 am

  3. I think it strikes a weird cord because we’re just coming off a two-year long presidential campaign, but I think part of the difference is Bush, and to a great extent McCain (and of course Clinton, Pelosi, etc.), think of these things primarily in political terms first. “What’s the angle?” sort of thing. Obama has never struck me that way; he appears to think in terms of problem-solving first, politics second.

    Comment by Brad — 11/23/2008 @ 12:30 am

  4. He’s looking at the problem less like a politician with an unlimited checkbook and more like a person that has to make ends meet at the end of the fiscal period.

    One of the most frustrating things to me as a business person is that the government has never had to balance the books. At the end of the day, if my books aren’t profitable, I go out of business. If government doesn’t break even, we just add another zero to the debt.

    Comment by Cruise — 11/23/2008 @ 11:27 pm

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