Senator Bob Corker Reacts to White House Bailout Plan

U.S. Senator Bob Corker (R-TN), a member of the Senate Banking Committee, made the following statement today in reaction to the administration’s decision to give $13.4 billion in loans to General Motors and Chrysler to help the automakers avoid bankruptcy. The $13.4 billion will be given through the Troubled Assets Relief Program (TARP), with another $4 billion to be added later for a total of $17.4 billion.

“The best solution would have been definite terms, within in a finite time period, committed to law, that protected taxpayers,” said Corker.

“Instead, we have ended up with an agreement open to interpretation, that eliminates the sense of crisis, where taxpayer dollars are expended and we are left to hope that the next administration has the will to enforce the tough concessions necessary to make these companies viable for the long term. 

Unfortunately, it is clear that stakeholders are already working to undo those tough concessions.”

When the original White House plan failed to garner the necessary support from the U.S. Senate last week, Corker offered an alternative proposal that would have imposed specific conditions on the automakers to ensure their viability and competitiveness for the long-term while protecting taxpayer investment.

The Corker plan included three major components, which had to be met by a date certain in 2009:  

·         One, give existing bondholders 30 cents on the dollar to help reduce their overall debt load.

·         Two, bring wages immediately in line with companies like Honda, Nissan, Toyota, and BMW.

·         Three, GM owes $23 billion to the United Auto Workers' VEBA (voluntary employees' beneficiary association) account. The union must agree to take half of that payment in GM stock.

In negotiations between representatives from the automakers, their debt holders, and the United Autoworkers Union (UAW), Senator Corker was able to reach an accord on most of these concessions, but the deal fell apart when UAW officials refused to agree to make their labor costs “competitive” (“competitive” as determined by Pres. Obama’s Labor Secretary) with Honda, Nissan, Toyota, and BMW by any date in 2009.

“These are the same types of conditions a bankruptcy judge might require but without the stigma and problems that accompany a formal bankruptcy,” said Corker.

“There's an old joke that if someone says ‘We're from the federal government, and we're here to help,’ you should run for the hills. But in this case, I believe a ‘big stick’ by the government could have actually brought all parties to the negotiating table and ensured that concessions were made quickly and fairly.

This would have allowed taxpayer dollars to be protected and used responsibly, while giving confidence that this is not just a short term solution to a deeper problem.

“No one enjoys a crisis but sometimes it is the best opportunity to bring real reform. It is my sincere belief that requiring fundamental changes as part of a loan package is in the long-term interests of Michigan, Tennessee and our country.”

Tennessee has an extensive automotive manufacturing presence with a GM plant in Spring Hill that is one of the most modern facilities in the world. Nissan and Volkswagen are also invested in Tennessee, making it an industry hub with a huge supplier base that could be affected as a result of the current situation.