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December 06, 2008

Detroit Bailout to Cost $400 Billion

That's because part of the Detroit deal, apparently, is that Congress also approve the next installment of $350 billion to bail out the banks. That's how you get a consensus in Congress – something for everybody and, before you know it, you have a majority. If the auto bailout isn't approved, then congresspeople (rightly) will have a hard time explaining why they're continuing to shove huge sums at the banks – even without public humiliation of their CEOs and a requirement that they sell their jet fleets.

From the New York Times:

"By breaking that impasse, the lawmakers could also clear the way for the Treasury secretary, Henry M. Paulson Jr., to request the remaining $350 billion of the financial industry bailout fund knowing he will not get bogged down in a fight over aiding Detroit…

"Under the financial system rescue law approved by Congress in October, the Treasury secretary must request the second $350 billion, and Congress then has 15 days to disapprove the disbursement. Congressional leaders, upset over Mr. Paulson's management of the bailout program, have warned him that if he wants the money, he must ask for it by the end of next week.

"Until the breakthrough Friday evening, it had appeared unlikely that Mr. Paulson would be able to persuade Congress to release the funds. Of the first $350 billion portion of the rescue fund, only $15 billion remains uncommitted."

"No" would have been a good answer since the original $350 billion was not spent as advertised – and was a bad idea to begin with. But the administration gets a green light on the continuing bank subsidy for the small price of including the car manufacturers as well. It's actually true that it's hard to explain why Detroit doesn't get bailed out when Wall Street does. Bailing them both out is consistent but the wrong answer.

Let's do the tally. Some or all of the $25 billion that was supposed to pay for retooling for fuel efficient cars – but only for going concerns who could pay it back – will go as short-term survival aid instead. But Nancy Pelosi said she only agreed to that on the promise that the retooling funds would be replenished "within a few weeks". So another $25 billion is going to come from somewhere; that's $50 billion for Detroit even forgetting that they'll soon be back for more. And then there's the second $350 billion for the banks. Altogether $400 billion. This should put enough incentive pay in lobbyists pockets so they can buy new houses and pull us out of the housing crisis (trickledown, you know).

We don't have much leverage over our Congresspeople with the next election two years away. They're pretty sure they can count on us forgetting. In fact, they voted against our wishes for the original bank bailout with an election pending. Still doesn't hurt to write them but I'm discouraged. Would like to believe in change.

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