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Open Letter to Congressional Leadership on Automakers Bailout by Ralph Nader

Monday, September 15, 2008 at 12:00:00 AM

Press Release
Contact: Toby Heaps, 202-441-6795, toby@votenader.org


Open letter to Speaker of the House Nancy Pelosi, House Republican Leader John Boehner, Senate Majority Leader Harry Reid, and Senate Minority Leader Mitch McConnell

Dear Leaders,

    Once again, self-styled big corporate capitalists are all over Congress in the form of General Motors, Ford Motor Company and Chrysler for a $25 to $50 billion subsidized interest loan to ostensibly retool their plants in order to produce more fuel efficient vehicles. The stampede is on. Deciding just before your adjournment provides the rationale for panic legislation without due deliberations, without even having public Congressional hearings.

    This letter is being addressed to leaders of both major Parties because it is unlikely that either of you will be much different than one another as auto company lawyers and your staff hustle to draft the concessionary legislation. Having been around Capitol Hill and in Congressional hearing rooms during the now quaint $1.5 billion loan guarantee bailout of Chrysler in the late Seventies, I offer some recommendations.

    First, you owe the public a "finding" as to why the rush, why you cannot deliberate this loan bailout after you return post election?

    Second, given the detailed hearings and debates on the Chrysler bailout, how can you give into the industry's demands -- an industry that fought victoriously for thirty years against any upgrades of mandatory fuel efficiency standards and obtained waivers during the Reagan years (except for Chrysler) -- without availing the public and your own reputations through public hearings in the House and the Senate?

    Third, what are the unintended consequences of this auto industry proposal beyond "moral hazard?" Are there no ways to raise the funds in the capital markets of capitalism? What other industries will come to the Congressional taxpayer troughs, besides the costly nuclear power companies? If your artful drafters, huddling with industry attorneys, cut out the better managed foreign car companies building plants in the U.S., will there be a World Trade Organization (WTO) violation?

    Fourth, what are the reciprocal binding obligations by the subsidized auto companies regarding worker wages, worker safety, motor vehicle safety, fuel efficiency, emissions controls and timetables? What cuts in bloated top executive compensation will you demand as a modest sharing of the sacrifice with the beleaguered taxpayers of America? Who will monitor compliance? See what a coming miasma is unfolding with the rush to judgment and adjournment?

    Fifth, what can be learned from the Chrysler example of thirty years ago? Certainly, the Treasury Department of that period demanded and received stock warrants in Chrysler as a reciprocal for the loan guarantee. When Chrysler recovered and profits soared, the appreciation of the warrants netted a $400 million return to the Treasury when they were sold.

    With Senators John McCain and Barack Obama issuing knee jerk blanket support for the subsidized interest loan, the stage is set for the auto industry, declining by its own mismanagement, arrogance and miserable planning (in contrast to its major foreign competition), to insist that there be no conditions, that there be no stock warrants, that there be unconditional surrender because they are too big to fail, they have to have what they are demanding NOW, quick, before adjournment.

    Given the contrast between the "free market" ideology of the Republicans and the corporate or state socialism that is their increasing practice, the time is ripe for full Congressional hearings next year on the following subject. Aside from small business, is there much left of a capitalism that disenfranchises its owner-shareholders, on the one hand, and hastens to Washington to socialize its risk through disenfranchised taxpayers?

    And what about legal standing of taxpayers? Is there anything left in this country that cannot be assigned a taxpayer subsidy, other than the direct building of a place of religious worship? Is there anything left for taxpayers to decide regarding the use of their dollars by the "corporate-government complex?"

    A decent respect for Congressional procedures, democratic processes and taxpayer rights would call for the deliberate pause until after the elections before moving toward any decision.

    I look forward to your individual responses.

    Sincerely yours,

    Ralph Nader