[Congressional Record (Bound Edition), Volume 154 (2008), Part 18]
[Senate]
[Pages 24073-24076]
[From the U.S. Government Publishing Office, www.gpo.gov]




                ECONOMIC AID TO THE AUTOMOBILE INDUSTRY

  Mr. SPECTER. Mr. President, I have sought recognition to comment on 
two issues relating to our current economic problems which are so 
widespread in our country. One is the proposed economic aid to the 
automobile manufacturers and the second is the proposed assistance to 
people who are threatened with foreclosure.
  The suggestion has been made that there should be very substantial 
Federal economic aid to the automobile manufacturers, focusing at the 
moment on General Motors. I am prepared to consider that issue 
providing we have a factual and evidentiary basis which would warrant 
such economic aid, with an analysis of the current financial situation 
of General Motors, with an analysis of what the proposals are to assist 
General Motors in a way which would be realistically calculated to keep 
General Motors in operation, and with an evidentiary base to show that 
there is not some preferable alternative with respect to letting the 
market take its course.
  It seems to me indispensable that if Congress is to undertake that 
kind of analysis that there is going to have to be regular order 
followed as to how we legislate in this body. And that was not done on 
the recent $700 billion proposal

[[Page 24074]]

which was passed by the Congress last month. Our regular order requires 
that there be a legislative proposal, a bill written down which can be 
read, studied, and analyzed. After there is a bill, to have hearings 
with the appropriate committee and to hear proponents of the plan and 
to hear opponents of the plan and then to have in regular order a 
committee markup where the members of the committee sit down--in this 
case the Banking Committee, which has jurisdiction--look over the bill 
and then mark it up--that is goes over the bill line by line. Then a 
report is written. The report comes to the full membership, the Senate 
has debate, amendments may be offered, and then the Senate works its 
will on passing a bill, if the Senate chooses to do so.
  A similar proceeding occurs in the House of Representatives, and then 
there is a conference with Members of the two bodies coming together 
for a presentation to the President, who then has ideas maybe involved 
in the legislative process, and he signs or vetoes.
  Regrettably, that was not done during the passage of the $700 billion 
economic aid proposal, and it was not done, I submit, much to the 
disadvantage of the country. When this issue was under consideration, I 
wrote to the majority leader and the Republican leader by a letter 
dated September 21 urging that we not rush to judgment; saying that we 
ought to follow regular order in the way we handle this matter.
  Mr. President, I ask unanimous consent to have inserted in the Record 
a copy of this letter following my remarks.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  (See exhibit 1.)
  Mr. SPECTER. On September 23, I wrote to Secretary of the Treasury 
Paulson and the Chairman of the Federal Reserve Ben Bernanke raising 
quite a number of issues looking to what the merits of the proposal 
were. On September 27, I wrote again to Secretary Paulson, Chairman 
Bernanke, also again to the leaders of the House and Senate, and also 
to the key members of the committee raising a series of questions. I 
have yet to receive an answer to any of these letters.
  On September 29, I was informed that we would have a session after 
the House of Representatives defeated the proposal, which was a 
surprise; that there would be a session on Wednesday, October 1, at 
7:30 in the evening, and the Senate was then confronted with a 
proposition to either take it or leave it. No amendments could be 
offered. By this time, the original proposal had expanded from 4 pages, 
which Secretary Paulson had initially submitted, and it had expanded to 
more than 100 pages, then to more than 400 pages. It was unknown 
generally that there was a good bit in the legislative proposal of what 
we refer to as grants or pork, which turned out to be very, very 
embarrassing. But faced with that kind of an emergency situation, my 
vote was cast in the affirmative.
  The vote was 474 to 25, a very heavy margin in support of the 
legislation, and it was a rush to judgment, without following regular 
order and without considering so many of the critical issues which 
should have been taken up in the regular course of Senate business.
  I traveled my State during the course of the month of October, as it 
is my custom to touch each of Pennsylvania's 67 counties each year, and 
the number one item on the agenda was the $700 billion economic aid 
program. And candidly, the temperature of my constituents was boiling--
212 degrees Fahrenheit--and the thermometer was broken. I see the 
distinguished Senator from Maryland, Senator Mikulski, nodding in the 
affirmative that that was the situation in her State as well. Now we 
are asked to have economic aid for General Motors. There has been a 
figure of some $25 billion which is talked about. I am prepared to 
consider that, but only if there is an understanding of what are the 
facts, what is the evidence; is there a factual and evidentiary base 
for Congress to do this?
  I am told informally that it takes $11 to $14 billion in cash to 
operate General Motors.
  But they now have $16.2 billion. They have $50 billion in bonds that 
are perhaps worth in the range of $20 billion or a little more in the 
market that yield 9 percent in interest. On the market value, that 
would put their borrowing somewhere over 20 percent. The question comes 
to my mind: Isn't that expensive? Couldn't that be modified? But I have 
yet to see any semblance of a plan for General Motors to become viable. 
What are the prospects?
  General Motors and the automobile industry generally--the industry 
has been on notice for a long time that they were in a very difficult 
competitive situation; that the standards on gas mileage were about to 
be imposed and were imposed in legislation last year. What have they 
done?
  We have been told it is not advisable to consider chapter 11 
proceedings under bankruptcy. But we know that Continental and U.S. Air 
have gone through that.
  We are told that the warranties would not be sustainable and that 
people would lose confidence. There may be ways to address that kind of 
issue with a fund set up for warranties to be funded.
  All of these are questions which, it seems to me, need to be 
answered. When we were informed through a variety of sources that we 
would be in a lame duck session starting today, there was a projection 
for a Senate vote on Wednesday. I wrote to Senator Reid and Senator 
McConnell, a letter very similar to the one I wrote on September 21, 
urging that we not rush to judgment and asking that there be 
consideration of a great many of these issues if we were to make some 
sensible determination as to financial aid to the automobile industry. 
I sent copies of this letter, again, to Treasury Secretary Paulson and 
to Federal Reserve Chairman Bernanke, and also to the chief executive 
officers of General Motors, Ford, and Chrysler.
  I ask unanimous consent that copies of these letters be printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                      U.S. Senate,


                                   Committee on the Judiciary,

                               Washington, DC, September 23, 2008.
     Henry M. Paulson, Jr.,
     Secretary of the Treasury, Department of the Treasury, 
         Washington, DC.
     Ben S. Bernanke,
     Chairman of the Board of Governors, Federal Reserve System, 
         Washington, DC.
       Dear Secretary Paulson and Chairman Bernanke: I write to 
     you because I am in the process of deciding how to vote on 
     legislation to deal with the economic crisis. I agree that 
     there is need for federal action; but I am concerned that we 
     not rush to judgment without giving sufficient attention to 
     the many complex issues which are involved.
       At the outset, the, or a, precipitating cause was the fact 
     that hundreds of thousands of people, perhaps as many as five 
     million, faced an inability to make their mortgage payments 
     and eviction from their homes. These mortgages were 
     ``securitized,'' divided up and sold in packages to many 
     people or entities. As a result, it was not always clear who 
     had the authority to adjust these mortgages, and when it was 
     clear, adjustments were not made quickly enough. Last 
     November, Senator Durbin introduced S. 2136 and I introduced 
     S. 2133 to give the bankruptcy courts authority to revise 
     homeowners' financial obligations. Keeping people in their 
     homes should be a, if not the, fundamental object of 
     congressional action.
       After assisting homeowners, a decision should then be made 
     as to what additional federal aid is necessary to unclog the 
     lending pipelines and restore confidence and stabilize the 
     economy. I am very skeptical about granting authority to 
     spend $700 billion on other aid without standards as to who 
     should get the funds and a requirement that there be 
     demonstrated necessity that such additional expenditures are 
     indispensable to stabilizing the economy.
       Then there is the question of oversight and regulation. 
     Obviously, there must be oversight and some regulation to 
     prevent a recurrence. As I see it, the regulation must be 
     calibrated to those objectives and not go too far. Vigorous 
     enforcement of our laws to prevent market manipulation, as 
     well as added transparency, should be a priority.
       I hear tremendous resentment from my constituents on this 
     matter. In a free enterprise society, entrepreneurs may 
     undertake whatever risks they choose to secure big profits, 
     but when there are losses, they should not turn to the 
     government for a bailout which puts the burden on the 
     taxpayers. The firms/corporations and their executives

[[Page 24075]]

     who created the crisis should not profit from a federal 
     bailout. If it is not already a part of your proposal, you 
     should consider structuring the funding in a way that gives 
     the Government a preferred creditor position and a share in 
     ultimate profits, rather than simply buying up debt which has 
     declined in value. And any aid should be conditioned on the 
     elimination of golden parachutes or large compensation 
     packages.
       Also, I am concerned about reports that foreign 
     corporations, with a United States affiliate, will 
     participate in a federal bailout. If foreign corporations are 
     to get funding, then foreign governments ought to bear their 
     fair share.
       I know there is concern that Congress must act promptly or 
     the economy may deteriorate further. It seems to me that Wall 
     Street should and would understand that legislation on this 
     complex matter requires some time. If it is seen that 
     Congress is moving as swiftly as practicable, that ought to 
     stem the tide. But we can only do it as fast as realistic to 
     work through the legislative proposals and resolve these 
     intricate issues.
       These are issues which come to my mind at the moment and I 
     am sure there will be more as the hearings progress and the 
     debate occurs. I would appreciate your responses as promptly 
     as possible.
           Sincerely,
     Arlen Specter.
                                  ____



                                                  U.S. Senate,

                               Washington, DC, November, 14, 2008.
     Hon. Henry Paulson,
     Secretary of the Treasury, Washington, DC.
     Hon. Ben Bernanke,
     Chairman, Federal Reserve Board.
       Gentlemen: With this letter, I am enclosing a copy of a 
     letter which I am sending today to Senate Majority Leader 
     Harry Reid and Republican Leader Mitch McConnell.
       I would appreciate your views on the issues which I have 
     raised in that letter. By letter dated September 23, 2008, I 
     wrote to the two of you asking questions about the September 
     bailout proposal and have never received an answer.
           Sincerely,
     Arlen Specter.
                                  ____



                                                  U.S. Senate,

                                Washington, DC, November 14, 2008.
     Hon. Harry Reid,
     Majority Leader,
     U.S. Senate.
     Hon. Mitch McConnell,
     Republican Leader,
     U.S. Senate.
       Dear Harry and Mitch: In considering what action, if any, 
     to take on financial aid to General Motors and the other auto 
     manufacturers, I urge that the Senate follow regular order 
     and not rush to judgment.
       By letter dated September 21, 2008 I wrote to you two 
     leaders with the same recommendation on following regular 
     order on the bailout plan then under consideration, and then 
     Congress proceeded to act precipitously without appropriate 
     consideration for all the complex issues involved. It is true 
     that the Senate was faced with an emergency situation on 
     October 1st when the Dow had plunged 777 points after the 
     House of Representatives rejected the proposed legislation on 
     September 29th. Senators were then faced with voting yes or 
     no without having the customary hearings, committee markup, 
     floor debate and an opportunity to offer amendments. As a 
     result, the legislation was filled with pork since no one had 
     an opportunity to strike it and the Congress endorsed a plan 
     which had not been given appropriate consideration.
       There are many complex questions which need to be answered 
     before the Senate can even begin to make a preliminary 
     assessment on aid to the auto manufacturers. We need to know 
     the specifics on General Motors' financial situation. It is 
     reported that GM has sufficient cash to keep it afloat for a 
     substantial period of time so that immediate financial aid is 
     not indispensable.
       It has been further reported that General Motors has 
     sufficient cash and liquidity to continue to operate if it 
     was not for the servicing of the debt estimated to be about 
     $50 billion. That debt is said to have a market value perhaps 
     as low as $20 billion and currently calls for an interest 
     rate of 9% annually so that General Motors is paying well 
     over 20% on the realistic value of the bonds. Some 
     readjustment on that debt and interest might alter 
     significantly General Motors' need for federal aid.
       We further need to know what are the realistic prospects 
     that financial aid will solve the problem without having GM 
     and the other automakers come back for more. The automakers 
     have certainly had sufficient notice for years, if not 
     decades, that they had to make major changes to become 
     competitive and yet failed to do so. It was well known that 
     at some point Congress would mandate mileage standards but 
     the automakers did not act aggressively until faced with a 
     congressional mandate. We have now approved $25 billion in 
     federal aid to assist in meeting mileage standards. Why 
     couldn't there be a change in legislation to allow those 
     funds to be made available faster and to broaden their use 
     beyond retooling factories? It would be preferable from the 
     taxpayer point of view to utilize funding already available 
     in a more efficient manner, rather than devoting additional 
     resources to this industry.
       Beyond these surface questions, there needs to be a great 
     deal of analysis through the hearing process of many other 
     complex questions.
       If the federal government had not bailed out Bear Stearns, 
     AIG and passed the $700 billion bailout, the auto-makers 
     might not now be asking for the same treatment. If the auto-
     makers are bailed out, it is a virtual certainty that 
     Congress will next hear bailout requests from other sections 
     of the economy. Insufficient consideration by the Treasury 
     Department and the Federal Reserve followed by the rush to 
     judgment by Congress on the $700 billion has left my 
     constituents perplexed about the competency of the federal 
     government to respond rationally to the current problems. In 
     a series of town meetings in October, I found the temperature 
     of my constituents at 212 degrees Fahrenheit over the $700 
     billion bailout legislation. In extensive discussions with 
     economists, bankers and other financial experts, I have heard 
     a virtually unanimous adverse reaction to bailing out General 
     Motors and/or other automakers. My constituents are 
     frustrated with the lack of transparency in doling out the 
     $700 billion and the change of course from purchasing 
     ``troubled assets'' to one of injecting funds directly into 
     banks. What assurances would we have that these funds for the 
     auto industry would be spent wisely, and as intended by 
     Congress? Isn't it wiser to let the market make those 
     decisions?
       I will be looking for answers to these and other questions 
     when the Senate returns for the lame duck session next week. 
     I voted for the bailout on October 1st because of the ominous 
     prospect of a domino effect and its severe impact on our 
     economy. I am prepared to give fair consideration to economic 
     aid to General Motors and other automobile manufacturers 
     because of the national interest including the many jobs at 
     stake in Pennsylvania; but I am not prepared to vote for 
     another massive bailout unless a solid case is made following 
     regular Senate order with hearings, committee mark-up, floor 
     debate and an opportunity to offer amendments.
       I am sending a copy of this letter to Treasury Secretary 
     Paulson and Federal Reserve Chairman Bernanke. When the 
     September bailout was under consideration, I wrote to Mr. 
     Paulson and Mr. Bernanke by letter dated September 23, 2008 
     raising a number of questions. I have yet to receive an 
     answer to that letter. I would like the views of Mr. Paulson 
     and Mr. Bernanke on the issues raised in this letter.
       I am also sending copies of this letter to General Motors 
     Chairman and CEO Rick Wagoner, Ford President and CEO Alan 
     Mulally, and Chrysler Chairman and CEO Robert Nardelli with 
     the request that they give me their views on the issues 
     raised in this letter.
           Sincerely,
                                                    Arlen Specter.

  The PRESIDING OFFICER (Mr. Webb). The Chair has been asked to note 
that the Senate is in a period of morning business, with comments 
limited to 10 minutes. The Senator from Pennsylvania has spoken for 11 
minutes and the senior Senator from Maryland is on the floor.
  Mr. SPECTER. Mr. President, I ask unanimous consent to continue for 5 
more minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SPECTER. I thank my colleague from Maryland.
  Mr. President, it seems to me these are key questions which need to 
be answered. The automobile industry obviously is of enormous 
importance in our country. Not to have the automobile industry would 
have very severe economic consequences. But we do have to have answers 
to these questions in regular order. We need to take these matters up 
so we can cast an intelligent vote on this kind of economic aid. The 
question I would supplement is--I heard it from my constituents--Who is 
next? Bear Stearns was given economic aid, Lehman Brothers was not, and 
perhaps that was a mistake--perhaps not. AIG was given considerable 
economic aid. Fannie Mae and Freddie Mac were given considerable 
economic aid. If we are to make an intelligent decision, we are going 
to have to take a look at these important questions.

                               Exhibit 1


                                         United States Senate,

                               Washington, DC, September 21, 2008.
     Senator Harry Reid,
     Majority Leader, U.S. Senate,
     Washington, DC.
     Senator Mitch McConnell,
     Minority Leader, U.S. Senate,
     Washington, DC.
       Dear Harry and Mitch: As you project the Senate's schedule, 
     I urge that we not rush to judgment and take whatever time is 
     necessary on any proposed legislation to deal

[[Page 24076]]

     with the nation's economic problems. The public, our 
     constituents, have a great deal of skepticism, which I share, 
     about legislation which will let Wall Street ``off the hook'' 
     and pay insufficient attention to Main Street, middle class 
     Americans.
       It is important to focus the legislation on the hundreds of 
     thousands of homeowners who are at risk of losing their 
     residences to foreclosure.
       In deciding what additional powers to give to the federal 
     regulators, I believe we should give careful consideration to 
     not extending those powers beyond the current crisis and take 
     steps to prevent a recurrence.
       I have read reports that some Wall Street firms, whose 
     conduct has created the crisis, will benefit from a 
     congressional legislative fix. We should do our utmost to see 
     to it that those responsible for the crisis bear the maximum 
     financial burden on any bailout in order to minimize the 
     taxpayers' exposure.
       There are reports that the bailout might be extended to 
     foreign firms with United States affiliates. In my view, the 
     legislation must be carefully tailored for United States' 
     interests and if foreign firms, even if United States 
     affiliates are to be involved, then consideration should 
     given to appropriate contributions from those foreign 
     governments.
       I realize there is considerable pressure for the Congress 
     to adjourn by the end of next week, but I think we must take 
     the necessary time to conduct hearings, analyze the 
     Administration's proposed legislation, and demonstrate to the 
     American people that any response is thoughtful, thoroughly 
     considered and appropriate.
           Sincerely,
                                                    Arlen Specter.

  (The remarks of Mr. Specter pertaining to the introduction of S. 3686 
are located in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')
  The PRESIDING OFFICER. The Senator from Maryland is recognized.
  (The remarks of Ms. Mikulski and Mr. Bond pertaining to the 
introduction of S. 3684 are printed in today's Record under 
``Statements on Introduced Bills and Joint Resolutions.'')
  Mr. BOND. I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. NELSON of Florida. Mr. President, I ask unanimous consent that 
the order for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. NELSON of Florida. Mr. President, as I understand it, we are in 
morning business?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. NELSON of Florida. Mr. President, I would like to be recognized.
  The PRESIDING OFFICER. The Senator from Florida is recognized.

                          ____________________