[Congressional Record (Bound Edition), Volume 154 (2008), Part 18]
[Senate]
[Pages 24447-24453]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    AUTOMOBILE INDUSTRY LOAN BAILOUT

  Mr. DORGAN. Mr. President, this week there will be a lot of 
discussion on the floor of the Senate about a bridge loan to the 
automobile industry in this country. I wish to speak about a bit of it 
here. It is quite clear that this country faces very serious financial 
problems--perhaps the most serious in my lifetime. We know that 
thoughtful leadership can help move this country past these problems 
and to address these problems, but they indeed are very serious.
  Here is a description of the jobs that have been lost since the first 
of this year. Nearly 2 million private sector jobs have been lost this 
year.
  This is kind of sanitary and doesn't mean so much in terms of 
numbers. But every one of those nearly 2 million people had to go home 
this year to tell a loved one or their family that they didn't have a 
job any longer. A job is what makes much of the other things that are 
good in our life possible. Nearly 2 million have lost jobs.
  Most Americans who have some sort of retirement savings, whether it 
is a 401(k) or an IRA, if they have looked--and some have not--they 
have discovered that 30 to 40 percent of that is now gone, washed away 
by a serious financial crisis. Millions of people have lost their homes 
and millions more will unless something is done. It is one thing to 
lose a home, it is another thing to lose a job; but to lose a job and a 
home is a devastating blow to the American family. This is more than 
some sort of normal contraction of the business cycle.
  I have said before that I taught economics in college. When you teach 
economics, you teach about the business cycle. There is a contraction 
phase and an expansion phase of the business cycle.
  This is not a recession that is a result of a contraction phase of 
the business cycle. This is something very different. This is a 
financial collapse, a financial crisis. This is manmade. This is not 
some force of nature that is visited upon a population. This is a 
result of reckless business practices by some of the largest financial 
firms in this country.
  Unfortunately, instead of dealing with the cause, there is much 
effort now to throw money at the biggest firms in the country that 
helped steer our economy into the ditch. I am not suggesting there is 
not a requirement to make a very significant investment in portions of 
the economy to try to provide buoyancy and some lift to steer this 
country out of the recession. But there is an old country saying that 
the water won't clear up until you get the hogs out of the creek. What 
I see day after day is the movement of money to the very interests that 
steered this country into the ditch and caused the wreck in the first 
place.
  This morning, I read in the Wall Street Journal about the CEO of 
Merrill Lynch, who is suggesting to the directors that he get a 2008 
bonus of as much as $10 million. Merrill Lynch is one of the companies 
that has been in some difficulty. In fact, Merrill Lynch has been 
purchased and, as you will note from this chart, the top five banks 
that received taxpayer funds--I have not only listed them, but I talked 
about the amount of derivatives holdings they have. A substantial part 
of this recklessness has been hedge fund and CDOs and credit default 
swaps. J.P. Morgan got $25 billion in bailout funds, with $91.3 
trillion in notional value as their derivatives holdings. Citigroup got 
$45 billion in bailout funds, plus we have guaranteed $306 billion of 
their toxic assets as well; and they have $37 trillion in derivatives 
holdings. The list goes on.
  Bank of America got $15 billion, and they have $39 trillion in 
notional value of derivatives. This is what I call ``dark money.'' 
Nobody knows where it is; nobody knows who is liable for it; nobody 
knows what kind of exposure this rancid, reckless dark money imposes on 
the balance sheets of America's financial institutions.
  We are discovering that some of the largest financial institutions in 
the country failed, and the Treasury Secretary came to the Congress 
about a month and a half ago and said: I want $700 billion, and I want 
it in 3 days; otherwise, the economy will collapse. He got the $700 
billion but not in 3 days.
  He said: I want the $700 billion in order to buy toxic assets from 
the balance sheets of some of the largest financial institutions. I 
said at that time that I would not vote for it unless provisions 
require rulemaking to regulate the kinds of institutions that have 
steered this country into the ditch.
  They said that was not possible. Then I said that it is not possible 
for me to vote for $700 billion if we are not putting regulations into 
place to give us the protection the American taxpayer needs. So what we 
have seen now in recent days and weeks is the Treasury Secretary 
decide: Well, I am not going to do what I said I was going to do with 
the $700 billion. Instead of buying toxic assets from the balance 
sheets of the largest financial institutions, I am going to invest 
capital in some of America's largest banks, with the thought that they 
will expand lending. The credit markets are frozen, and we can get the 
economy moving again. The Treasury Secretary said: I am not going to do 
what I told the Congress I was going to do. Instead, I am going to 
increase the capital in banks. He got $125 billion and put it into nine 
banks, some of which didn't want it. He didn't say that as a result of 
this you have to expand lending or as a result of this

[[Page 24448]]

you cannot provide bonuses or as a result of this you cannot provide 
dividends. He gave them the money with no strings attached. It made no 
sense to me at all.
  Some of this money is moving around into the dark crevasses of the 
financial institutions that were engaged in some of the most reckless 
financial practices I have seen in my lifetime, and with no conditions 
at all. It is interesting to me--and I am not here to make the case for 
the auto loan. I think the bridge loan to the automobile industry is 
probably something you have to do to avoid putting 2, 3, or 4 million 
people on the unemployment rolls at a time when the economy is 
teetering on the edge of a cliff. But the fact is, when the automobile 
industry executives came to this town, I came to the floor and said it 
was ham-handed what they did and that they ought to agree to work for a 
dollar a year. They have been making $2 million a month. They have been 
doing right well. I thought it was a ham-handed approach the first time 
they showed up here.
  But the discussion about any bridge loan to the automobile industry 
is a different discussion than the one that happened with all of the 
financial industries. When the Treasury Secretary anted up $45 billion 
in total to Citigroup--and they said, by the way, we will also 
guarantee $306 billion of bad assets that you have on your books--did 
he ask for any conditions on that? Were there any restrictions? Did 
anybody get fired or lose their job in this company? Were there any 
restrictions on the use of that money? Were there any restrictions that 
they cannot pay bonuses? Did anybody say that they ought to park their 
private jets? No, not at all.
  The biggest financial institutions have been showered with massive 
quantities of money, with no significant conditions. So today one of 
the failed institutions--at least one of the institutions that had to 
be purchased in order to be saved--the CEO says to the board of 
directors: I want a $10 million bonus for this year. This is a company 
that suffered $11.6 billion in losses this year, and the CEO says he 
wants a $10 million bonus. You talk about bone-headed. Are they not 
learning anything? We are talking about American taxpayer dollars being 
spent around this Wall Street crowd by the Treasury Secretary in 
massive quantities, without any restrictions that I am aware of. There 
is no accountability. By the way, you cannot even find transparency. 
Here is what we think is happening. By the way, this comes from pretty 
good reporting from Bloomberg and some others. So far, the federal 
financial bailout has put $8.5 trillion in taxpayer money at risk. The 
Federal Reserve programs, we are told at this point, guarantee about 
$5.5 trillion.
  As you know, they opened their window for the first time in history 
for direct lending to investment banks at the Federal Reserve Board. We 
don't know what the taxpayers are on the hook for. Here is what some 
people have been forced to dig up, after we were promised there was 
going to be complete transparency, that the American people are going 
to be part of it. Some reporters have done some work. The Federal 
Reserve Program has $5.5 trillion pledged; FDIC pledges $1.5 trillion; 
Treasury Department, $1.1 trillion; Federal Housing Administration, 
$300 billion. So that is $8.5 trillion put at risk so far.
  The question is, where is the accountability? Where is the oversight? 
Where is the regulatory schematic that says we are not going to allow 
this to happen again? I come from ranching country, southwestern North 
Dakota. We raise cattle and horses. I understand the notion about 
closing the gate. You cannot forget to close the gate. Nobody is 
closing the gate--nobody. I want to remind some folks that part of the 
origin of this goes back almost 10 years to the Financial Modernization 
Act. We were hopelessly old-fashioned, we were told. Senator Gramm from 
Texas led the effort. It was the Gramm-Leach-Bliley financial 
modernization bill. There were restrictions in place, such as Glass-
Steagall and others, relative to investments in real estate and 
securities. They said let's get rid of those restrictions. They are 
hopelessly old-fashioned. So Congress got rid of all those 
restrictions. President Clinton signed it. A good number in his 
administration supported getting rid of those restrictions. I was one 
of eight Senators on the floor of the Senate who voted no. I said I 
think we will see massive taxpayer bailouts within a decade. When you 
put together real estate, securities and insurance with banking, you 
are asking for trouble. By the way, add to that a new administration 
that came in and, for the last 8 years, said we are interested in being 
willfully blind with respect to regulation. So the Financial 
Modernization Act was passed, and it was let them do what they want. 
They loaded up companies with massive amounts of risk.
  One other thing, and I have described this before. I want to remind 
people. This is Countrywide, the biggest mortgage bank in the country. 
They told people this: Do you have less than perfect credit? Do you 
have late mortgage payments? Have you been denied by other lenders? 
Call us. They said: Come here if you have bad credit. We will give you 
a loan.
  Milennia Mortgage said: 12 months, no mortgage payments. That's 
right, we will give you the money to make the first 12 months' 
payments. We will pay for it.
  Here is Zoom Credit: Credit approval is seconds away. At the speed of 
light we will preapprove you for a loan. Even if your credit is in the 
tank, Zoom Credit is like money in the bank. We specialize in credit 
repair and debt consolidation. Bankruptcy, slow credit, no credit, who 
cares. Come to us.
  They will all be making a fortune. Mr. Mozilo ran Countrywide, and he 
left with $200 million when the whole thing collapsed. They said: Get a 
loan from us. It is called a subprime loan. It is called a no-
documentation-of-income loan, or a no-doc loan. If you want a no-doc 
loan, we have it. How about a loan where you don't have to pay any 
principle at all? Or, even better, you don't have to pay on the 
principle or even all of the interest. We will put it on the back side 
of the note. Isn't that unbelievable? Why did they do that? They were 
making a massive amount of money. They put these loans out, and then 
they would securitize them and slice them and dice them like sawdust in 
sausage and then sell them up the line. The mortgage banks sell them to 
a hedge fund, or an investment bank sells it to a hedge fund. They are 
all making big fees, grunting and shoving like hogs in a corn crib, 
massive amounts of money, big bonuses.
  They built a house of cards. Meanwhile, regulators are dead from the 
neck up, content to be willfully blind. The house of cards began to 
collapse. When it began to collapse, it caused a significant problem 
with this entire economy. As I have described, millions of people lost 
their homes, millions are out of work, and there will be more in the 
future. Unfortunately, the question is, What do we do next? I am all 
for doing emergency things, and I believe it is very important to do as 
President- elect Obama has suggested. You need to invest to try to get 
the economy moving again. It makes a lot of sense to me to invest in 
the kinds of things that produce an asset for the future. We should 
build roads and bridges and repair infrastructure and schools and 
libraries and water projects--the kinds of things that invest in this 
country's future--because all of that puts American people back to 
work, on payrolls. And when people are working again, people are 
consumers again and they are going into the stores and creating an 
economy that is vibrant and expanding once again. That is what we have 
to do.
  There are more things I think that would make some sense, and one of 
the things I think, in addition to the stimulus program the President-
elect is talking about, which I intend to be very supportive of, are 
some tax incentives we should also consider. These things, if you put 
an end date on them, if you make these investments before the end date, 
they can stimulate economic activity in the short term. For example, a 
temporary 15-percent investment tax credit for manufacturers and 
producers in order to buy crucial equipment and machinery purchases;

[[Page 24449]]

extending for 18 additional months enhanced 50-percent bonus 
depreciation; extending enhanced $250,000 business expensing--all of 
these things are incentives to say, in this case to businesses, if you 
make this investment now, there is a tax incentive for doing so.
  That is also what tends to kickstart this economy--a program that 
would provide an opportunity for a stimulus investment and a program of 
directed tax incentives that would get this country moving once again.
  Mr. Arthur Levitt had a piece in the Wall Street Journal a while back 
titled ``How to Restore Confidence in Our Markets. A Unified Regulator 
Would Be a Start.'' Let me quote it for a minute.

       Our Nation's financial markets are in the midst of their 
     darkest hour in 76 years. We are in this situation because of 
     an adherence to a deregulatory approach . . . Our regulatory 
     system failed to adapt to important, dynamic and potentially 
     lethal new financial instruments as the storm clouds 
     gathered. Trust in our institutions and faith in the system 
     are . . . imperative to the functioning of our markets. 
     Creating a regulator that stands on the side of investors and 
     oversees the broad market will help restore that trust.

  We don't have a choice. We cannot continue to allow that which has 
happened in the past to happen in the future. Yet there is no urgent 
discussion here about what kind of regulation is necessary. He talks in 
this piece about the new financial instruments. What has happened in 
recent years is we have a lot of financial engineers on Wall Street who 
create these exotic products. It is all about making money. They create 
all these exotic products that turn out to be unregulated, many of 
which you cannot even understand. The question is, are we going to 
continue to allow that or will we do something that requires a reform 
of that system.
  I think we need a financial reform commission that would report back 
in 6 months on how you reconstruct this system, because we can't 
continue to allow the system that existed to exist going forward. We 
have to make changes; otherwise we will be back here in another decade 
with the same kind of problems.
  Obviously, we have to pull this country's economy out of the hole. 
There is no question. That is going to be a hard lift, but I am 
convinced this country will do that. And it won't be so much what 
happens in this Chamber as it will be out in the country. I have 
described previously many times that this economy, in my judgment, is 
all about confidence. When the American people are confident in the 
future, they do the things that manifest that confidence. They buy a 
suit of clothes, they take a trip, they buy a car or buy a house. They 
do the things that represent their confidence in their job, their 
family, and their security. That is the expansion side of this economy. 
It is very hard for people to be confident right now in this economy 
and in the future. We have to do the things that will say to people: 
You can be confident. We will stop the hemorrhaging of job loss, we 
will put in place regulations to make sure this never happens again.
  We have to find a way to make these reforms and changes that are 
significant and will give people some confidence about the future. The 
things we have seen over a long period of time are pretty disgusting. I 
have described on the floor of the Senate one of the companies--I know 
one should perhaps not always use company names. I try not to, but from 
time to time it is worthy to do so. One of the companies that got in 
trouble here was a bank called Wachovia; a big bank, as a matter of 
fact. They loaded themselves up with lots of bad assets and had to be 
purchased. They got in a lot of trouble. Well, you know what, this 
wasn't the first time. Wachovia, at the same time it was loading up 
with bad assets, was buying sewer systems in Germany.
  Now, why would an American bank want to buy a sewer system in a city 
in Germany? Why? Because they did a sale-leaseback. They bought a sewer 
system of underground sewer pipes in a German city and leased the pipes 
back to the city. So there was never any change in the way the sewer 
was used, but it allowed an American bank to depreciate sewage pipes in 
a German city and save themselves hundreds of millions of dollars on 
their U.S. tax bill.
  You know, if you have that kind of mindset going in, it is not 
surprising to me you are going to buy a bunch of bad assets in pursuit 
of maximum profits. If your pursuit of profits as an American company 
is to buy a sewage system in a German city, it is not surprising to me 
that they ran into the ditch with bad assets. It is the kind of thing 
that destroys any confidence people have about this system of ours.
  This economic system has been a miracle. This economic engine of ours 
has been the envy of the world. But we simply can't continue in the 
direction we have seen in recent decades. It is not all one party's 
fault, for sure, but those who have counseled self-regulation of some 
of the biggest financial institutions in this country have done the 
American people no favor. Regulation is necessary with respect to the 
marketplace. That's just a fact. I know of nothing more important to 
allocate goods and resources than the marketplace. And I am a big 
advocate of the free market, but the free market needs a regulator. It 
needs someone who wears a striped shirt with a whistle and calls the 
fouls. What we have seen is some of the biggest financial institutions 
in this country engage in the most reckless, bizarre behavior I have 
ever seen. Now the American taxpayer is stuck with the bill and the 
economy is in the ditch, and we are trying to figure out how to pull it 
out.
  Let me conclude by talking for a moment about the automobile 
industry. I want to show a chart. This chart shows what has happened to 
auto industry sales this month versus the same month a year ago. 
General Motors is down 41 percent, Ford down 31 percent, Nissan down 42 
percent, Toyota down 34 percent, and Honda down 32 percent. As I 
indicated earlier, I am not a big fan of the automobile industry. I 
don't think they have been particularly innovative or on the cutting 
edge in some areas. I think in some areas they have made some real 
progress. But I think it is very difficult, when you go into this kind 
of economic trouble with a pretty weak balance sheet, and then face the 
loss of 40 percent of your product sales, to then skate through that. 
So the question is this: Does this industry matter to the country? I 
don't think you long remain a world-class economic power unless you 
have a world-class manufacturing capability, and a significant part of 
that capability in this country is in the automobile industry.
  I am not someone who would support saying: Yes, let us provide money 
to the auto sector, such as the money that has been provided to the 
financial sector. This is a small fraction of what has been provided to 
the biggest banks in the country, with no strings. We have not seen one 
of those people in front of a committee being questioned about how they 
got here, what airplane they took to Washington, DC, who is going to 
lose their job, who is accountable, how much of a bonus did you get, 
and how much do you want for next year. None of those questions for the 
big financial industries. But the auto executives have been here and 
they have been told there is no bridge loan for you unless there are 
specific plans, a roadmap, of how you are going to get out of this.
  The only question I ask is this: In a country where we have lost 
nearly 2 million jobs since January of this year, and are teetering on 
the edge of a cliff with our economy, if we see a bankruptcy, or a 
series of bankruptcies here, and we see 2 or 3 million more people on 
the unemployment rolls, what does it mean to this economy? How much 
deeper will this recession be? How much more difficult will it be to 
pull this country out of a steep decline? That is the question.
  When Secretary Paulson came to us saying he wanted $700 billion in 3 
days, I was one of those who said no, and I am glad I did because I 
don't think that money has been used appropriately. I don't think there 
is any accountability or transparency with respect to the use of that 
money. That has to change. We are going to decide

[[Page 24450]]

in the coming couple of days whether we are going to do something here 
with a bridge loan for the auto industry, with substantial conditions. 
And if those conditions are appropriate, I believe there is a road to a 
better future for this industry. I want us to come down on the side of 
preserving millions of jobs. But that responsibility rests with this 
industry to give us the plans that provide us with some assurance and 
some confidence about the future.
  These are extraordinarily difficult times. When I started, I talked 
about a debate on Wall Street once again about $10 million bonuses for 
a failed firm executives. Imagine, there is no culture change here when 
we have had the kind of financial wreckage that exists in this country, 
and a company that lost $11 billion last year has a CEO asking for a 
$10 million bonus. I ask: Have you lost all common sense? Are you 
totally disconnected from the world? It makes no sense to me. We have 
to have a deep reservoir of common sense in the way we deal with these 
issues if we are going to get through this, and I believe we will get 
through this.
  Mr. President, I yield the floor, and I suggest the absence of a 
quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. SESSIONS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. SESSIONS. Mr. President, I am worried about the process we have 
been undergoing here in the Senate in recent weeks, and I expressed 
that concern. I know Senator Dorgan indicated he voted against the $700 
billion bailout, and I did, too, for a lot of reasons, one of which was 
I thought it was unthinkable that the Senate, the one body in this 
Government that is supposed to look at the long-term effect of a piece 
of legislation on America, was stampeded. I think my colleague from 
Alabama, Senator Shelby, said we panicked and we threw $700 billion at 
one man, the Secretary of the Treasury, and basically allowed him to 
utilize it in any way he chose, although he told us explicitly that he 
desired to use it to purchase toxic assets--that is, bad mortgages--
from banks so those banks would not have the economic threat of a bad 
mortgage on their books and could be able to lend money and this would 
fix the financial crisis. There was a superhighway and a big truck 
laying across it, and all we had to do was get this truck off and the 
financial markets would be open again. Within a week or 2 weeks, 
Secretary Paulson had changed his mind. Directly contrary to what he 
told us he wanted to do, he bought stock in 10 banks at hundreds of 
millions of dollars, the likes of which this country had never seen 
before, and we never talked about that one bit in the Senate.
  Mr. President, $700 billion is an incredibly large sum to commit this 
country to. I hope we will get most of it back. I do not believe we 
will get all of it back. I hope we at least get some of it back. But I 
would note to my colleagues that 5 years of the Iraq war cost this 
country $500 billion. In a few days, we authorized $700 billion. But it 
really was not just $700 billion because they had added in there a lot 
of pork items. This followed appropriations for $25 billion in loans 
for the automobile companies that was included in the Continuing 
Resolution in September, which was hardly even discussed. It was put in 
the bill, to my knowledge, with virtually no real discussion in the 
Senate about how to help them transition their plants to make more 
energy-efficient automobiles--just tacked it in there.
  But you remember the fear if we didn't pass the bill the first day 
they brought it up. It had to be passed before the Asian markets opened 
the next day. It didn't happen. We went a week or 10 days later, and 
the world didn't collapse. We finally passed the thing, and a lot of 
people have doubts whether it has helped much at all.
  Regardless, I just would say that this Senate has responsibilities to 
the taxpayers of America. When we are talking about tens of billions of 
dollars or hundreds of billions of dollars--the largest expenditure of 
funds on any one project in the history of this Republic, $700 
billion--we need to ask ourselves what this means. One of the things it 
means is that everybody else will want to get into the act. Before the 
ink was dry on that, here come the automobile companies.
  Let me say briefly, Americans are going to have to think about this. 
After 9/11, we had a little stimulus package--it was little compared to 
the one we have now--but we sent out checks then. The economy was in a 
state of nervous exhaustion and a spasm of economic disturbance. Our 
deficit hit about $412 billion in 2002. I think that was the highest 
deficit in dollar terms this Nation had ever had. In the ensuing years, 
through fiscal year 2007, the deficit fell to $161 billion. Then, 
earlier this year, it was decided it would be a good idea to have 
another stimulus package, and we sent out these hundreds of dollars in 
checks to all Americans. It was about $100 billion, a little over $100 
billion. We just sent out the checks, and that was supposed to help fix 
the economy. In that economic slowdown, this September 30, when the 
fiscal year for 2008 budget was ended, the fiscal year, the debt was 
$455 billion--the deficit, for one year.
  What is going to happen next year? Without counting the $700 billion 
as a loss to the Government, experts are now telling us the deficit 
will exceed $455 billion. It will exceed $1,000 billion--$1 trillion. 
But we have to pass another $34 billion or $15 billion, or whatever the 
number is, right now because we have to act. We cannot ask too many 
questions, we cannot have too much debate because things might happen 
fast, and if we do not act you will be blamed for a company failing. I 
wish to say that somewhere along the line this Senate is the body that 
is supposed to ask the questions and slow this train down and actually 
go through the details and figure out what to do.
  But I know my good friend Senator Reid, who has the toughest job in 
Washington--they have all been meeting with the Banking Committee and 
the automobile industry and the White House and special interests and 
labor unions--all through the weekend, they say. They didn't invite me. 
They didn't invite a lot of other Members of this Senate. So today they 
plopped down a bill that is supposed to move forward with a temporary 
fix of $15 billion, and we are supposed to say thanks for saving us so 
much. One of our Members has said we have to do something in a hurry; 
we have 48 to 72 hours. Why 48 to 72 hours? We have plenty of time, if 
we want to, to work at this thing.
  I know you have heard this statement, that bankruptcy is not a good 
way for the companies to go. Most people, when they think of 
bankruptcy, think of chapter 7 in bankruptcy, which is a liquidation of 
a company and its assets. All the people to whom that company owes 
money come in and line up, and the bankruptcy judge sells all the 
assets and parcels out what money is left--usually not very much--to 
those claimants.
  But there is another very common bankruptcy procedure called chapter 
11; it is called reorganization in chapter 11. You have heard the 
phrase ``They sought protection in bankruptcy.'' If you file for 
bankruptcy under chapter 11, your company continues to operate. Delta 
Airlines--I flew them yesterday--Delta Airlines in 2005 was in 
bankruptcy for over a year. They came out of bankruptcy leaner, having 
confronted many of their difficulties. They actually bought Northwest 
Airlines. They are doing very well today. They didn't disappear. They 
didn't lay off all their workers. They didn't shut the airline down, 
they continued to operate. The automobile companies, if they seek 
reorganization and protection under chapter 11, will then be in a 
position to confront their excessive legacy costs to deal with 
contracts that are pulling them down.
  I think it was Mitt Romney whose father, in Michigan, was active in 
the automobile industry. He wrote an op-ed, and he calculated--others 
have used a similar figure, but I remember his--that an average 
American automobile

[[Page 24451]]

is carrying a $2,000 legacy cost, the cost that is a burden on them and 
keeps them from being competitive in the marketplace. How do you get 
out of that? They say we will meet and we will talk about it and we 
will appoint a czar and that czar will make these companies concede 
these contractual provisions. But contracts are not something you have 
to concede. A contract is a binding document against the company or 
against an individual. An individual doesn't have to concede that 
contract, and many of them may not. Many of them will say: You guys can 
concede. You can cut your salaries, unions, but I am not cutting my 
health care benefits because I retired 10 years ago, and I still expect 
a health care benefit that exceeds 95 percent of the American workers' 
health care benefits today; I want mine kept. Who is going to make them 
give that up? It cannot be done voluntarily. What about a dealer and 
other groups, leaseholders who have claims against these companies? Why 
should they give up?
  But in bankruptcy, the whole purpose is to create an environment in 
which a judge can make some decisions about what it is going to take to 
save the company, to save the jobs. The judge has the power to amend 
these contracts and to say: The only way this company is going to 
survive is you health care guys are going to have to give some; you 
salaried people are going to have to give some; you executives are 
going to have to give some; the dealers are going to have to give some. 
Otherwise, this company is going under. They have witnesses, they take 
testimony, and they all have the right to have their lawyer there and 
to present evidence. It is under oath, in detail, subject to cross-
examination. Certified financial statements have to be produced. All of 
these things happen in bankruptcy. At the end, a bankruptcy judge, 
after hearing all of these arguments, will have as his or her goal the 
creation of a bankruptcy order that will allow the company to operate 
and to keep operating, keep making cars. They will not have to stop 
making cars during this whole process. They will continue. But if 
people cannot make claims against them, they can't file lawsuits. All 
the lawsuits against the companies, if they can't pay their debts, are 
stayed. It all stops. Nobody can levy against any of the property until 
the bankruptcy judge says so. I am amazed we are not going in that 
direction. For some reason, it seems that certain interests are 
objecting to the normal course of how a company should go about dealing 
with financial problems.
  I also believe a responsible Senate should be taken aback about the 
way this has all come about. First, $25 billion was slipped in to help 
these companies move to more fuel-efficient automobiles--that program. 
But the automobile executives came back a couple of weeks ago, about 2 
weeks ago, and they asked for $25 billion on top of that--$25 billion 
more. They say: Just take it out of the $700 billion. We are not able 
to access this $25 billion you have already set aside for us. We have 
to do certain things on environmental issues, and we are not able to 
access that now. So if we want to do that--and we need $25 billion. 
They flew in in their big jets. They didn't have any kind of coherent 
plan. Congress and the American people were aghast. They couldn't 
imagine this $25 billion.
  My State of Alabama is about an average size State--4 million people; 
we have 7 Congressmen. As I recall, our basic budget for the State is 
$6 billion or so a year, and that includes education and everything 
else a State needs. So I would say to you, $25 billion or $34 billion 
is a lot of money.
  These executives go home chastened, and their advisers whispered in 
their ears: You guys have to be humble. Don't you understand? You were 
too arrogant. You have to go up there--you can't fly. You have to drive 
up in your fuel-efficient automobile before you go back to Congress, 
and grovel a little bit, tell them you did something wrong. If you tell 
them you did something wrong and grovel and act humble, maybe you can 
get the money.
  So what did they do? They came back and they groveled and they say 
they made mistakes and they are so sorry. They want $34 billion. How 
humble is that?
  What the problem is--President-elect Obama said it: We want to make 
sure the money we are putting into this company is worth something. It 
is not supposed to be a gift, it is supposed to be a loan.
  Once you start putting money in a sinking company, as any banker will 
tell you--they refer to it as putting good money after bad--the more 
money you put into a corporation, the deeper they have you. You are the 
one who is hooked. You are the one who is stuck now because you are in 
$25, $34, $50, $100. What about if we just have another $50 after this 
$100, and maybe we will make it. If you don't help us with another $50, 
you are going to lose the hundred--right? That is how these things go. 
That is the way bankers look at this situation, and they will not loan 
them the money. Bankers are not going to loan them the money because 
they are too worried about it. The numbers don't add up. Since the 
bankers will not loan them the money, they want to come to us and get 
us to loan them the money and take risks a reasonable banker would not 
take.
  Somebody says: Maybe it will not be a lot more than that; maybe this 
will be enough. It is pretty clear that nobody says the $15 billion 
would be enough, what we are apparently going to be asked to look at 
with the bill that was just plopped down a little while ago. But at the 
Banking hearing last week, an independent analyst predicted that it 
would be $75 billion to $125 billion to avoid them going into 
bankruptcy.
  So if they are going to go into bankruptcy, how much money do we need 
to help them avoid that? Well, this analyst said it would be $75 to 
$125 billion. That is a lot of money. Maybe they should go into 
bankruptcy first, and then maybe we could see what the real facts are 
and have a judge and a hearing and evidence taken and decisions made. 
Maybe tough decisions could be made and maybe the Government can help a 
little bit and help them come out of there and keep these companies 
going at a reasonable price.
  So I would certainly like the competition. We certainly want these 
companies to be successful. But it has to be done consistent with the 
value and principles of America.
  There is no reason for us not to assume that we are going to be asked 
for more and more money to keep these companies alive under the 
circumstances we are in today.
  I would ask a couple questions then. First, what certainty do we have 
that they will not be asking for many times the amount of money that is 
being asked for today? I think we are virtually certain. We know there 
is more. Within the bill, I would note, is a statement that we are 
authorizing--it is not putting up the money yet, it is a big step 
toward it--we are authorizing the full replenishment of the $25 billion 
fuel efficiency loan program.
  So the $15 billion that comes out, we are authorizing it, to put in 
more. The way the language is written, it is pretty clear that it goes 
further than that. What it does is it authorizes, on page 3, excuse me 
on page 11, the Secretary of Treasury--``is authorized to be 
appropriated to the Secretary of Treasury sums as being necessary for 
the purpose of replenishing the funds available to the President's 
designee under this section.''
  So first of all it says: Yes, we take the $15 billion out of the 
existing loan program, but we are putting it back in immediately. The 
$700 billion is not reduced, neither is the $25 billion we have already 
appropriated. Both of those have already been authorized and 
appropriated. We take this money out and we put every penny of it back 
in this same bill. A little slight of hand there; is it not? Sounds 
like it to me.
  Then it goes on to have other language that indicates, the way it is 
written, it authorizes up to another $25 billion. So authorized in this 
bill, I think it is fair to say, based on our reading of it a few 
moments ago, since it just now appeared, that we are talking about 
$49.5 billion being authorized for this problem. That is a lot of 
money.

[[Page 24452]]

  It is somewhat different than the pitch that all we are doing is 
putting up $25 billion or $15 billion. And they are at least honest 
about this. They say the $15 billion is just a bridge loan, and that at 
least by March they will be back asking for more. How much more, $75, 
$125 billion, without once having to submit themselves to the rigors of 
a reorganization process that current law provides for big corporations 
and little ones in America under chapter 11.
  Now, the legislation calls for the appointment of a car czar. That is 
what they are calling it. It says this about the car czar. The guy is 
supposed to be able to meet with these executives, many of whom have 
spent their lives in the automobile industry, and it is going to tell 
them that: This is not a good idea. This is a good idea. Yes, you can 
do that. No, you cannot do that. We will not give you money unless you 
do such and so and tell them how to run their business.
  This is what it says on page 3, section 3:

       The President will designate one or more officers of the 
     Executive Branch, [a Federal Government bureaucrat] having 
     appropriate expertise in such areas as economic 
     stabilization, financial aid to commerce and industry, 
     financial restructuring, energy efficiency, and environmental 
     protection, to carry out the purposes of this Act, including 
     the facilitation of restructuring to achieve long-term 
     financial viability of the domestic automobile manufacturing 
     industry, and who shall serve at the pleasure of the 
     President.

  Which means the new President will remove the one President Bush puts 
in, I presume, and put another one, or certainly have the authority to 
do so.

       This designee shall direct the disbursement of the bridge 
     loans or enter into commitments for lines of credit for each 
     automobile manufacturer that has submitted a request.

  Well, does it say anything about the person that is going to tell 
these companies, you know, we are going to tell them how to do this 
right? What would you tell them? Would you tell them: We are never 
going to make anymore big pickups, cancel all SUVs, put all your money 
into hybrid cars. We do not know how well they are going to sell and 
how people are going to continue to buy them, but you can only use the 
money for these kinds of things.
  That is a dangerous action for a politician to do. It is odd to me 
that the provisions of the act call for expertise in financial aid to 
commerce and industry, environmental protection and energy efficiency 
and not one requirement that the person knows anything about the 
automobile industry. I know I do not know much about it. I do know 
this. My father ran an International Harvester, a little town 
dealership, hardly made a living for us. I worked in his shop. I was a 
parts person in his office. He only had four or five employees. They 
squeezed him out because he was too small, lucky to get out with his 
shirt.
  I was in high school. I remember that vividly. Well, certain things 
are not financially doable. He was not able to continue to operate an 
International Harvester truck and tractor dealership when he could only 
sell to so few customers, that he could not maintain the parts and the 
mechanics and the equipment necessary to maintain a viable business.
  Things change. He did not ask for a bailout. So the person who is 
supposed to be working on this is not required to have any knowledge 
whatsoever of the automobile business but is going to tell them how to 
run it, apparently. It looks like, does it not, that this would give 
another unelected official the ``maximum flexibility'' to appropriate 
taxpayers' money as they see fit.
  Is this not the same mistake we made with the Secretary of the 
Treasury when we gave him $700 billion to parcel it out to his friends 
on Wall Street, however he felt like giving it.
  Now, the jobs bank, which is a very perverse problem the automobile 
industry has. It was an agreement they made that would pay employees up 
to 95 percent of their pay not to work. If they have been laid off, 
they get 95 percent of their pay. It defers health insurance payments. 
Unions have said they would make concessions. That has been touted 
about. But they were only temporary concessions that the union has made 
on this. I am not sure what power a union has to tell a company that 
you no longer have to pay an employee who agreed by contract to pay him 
95 percent of his salary. How can they abrogate that contract? You can 
do it in bankruptcy. You cannot do it by voluntary agreement.
  So I have my doubts about how this can be fixed short of a 
bankruptcy. So I would ask: How can we reach an agreement that would 
bind the union or any other group that has contracts with the 
automobile industry to follow those agreements?
  I ask this question, even supporters of the deal admit that a 
bankruptcy may still be needed in the end. So does not this 
multibillion dollar bailout just delay actual productive restructuring? 
Is it not just a delay? I am afraid it is. It absolutely is unless we 
put more than $15 billion in, because with $15 billion, everybody knows 
that is not going to be enough to keep them liquid throughout the next 
year. It is pretty well conceded. So are not we delaying the 
inevitable?
  I would also add, experts agree that to be successful, everyone makes 
concessions, must make concessions. So what concrete steps does this 
legislation require of creditors, suppliers, unions or automobile 
dealers? It does not require any. I will answer that.
  Also, the legislation calls for the development of a long-term 
structuring plan by the end of March. Doing so would require that 
various groups agree. Why do we think they will be able to accomplish 
this 3 months from now, when they have not been able to accomplish it 
in the last 3 months? How can these parties be forced to agree when 
they hold valid contracts for the automobile companies?
  Now, as I indicated earlier, we are taking a big risk without 
ensuring that reform is going to occur that would make these companies 
viable. Everyone knows major restructuring needs to be done, that they 
need to emerge from this process, as I say, as Delta did from 
bankruptcy, chapter 11 reorganization, leaner, more competitive, 
keeping their employees, giving them a future, providing for their 
retirement and health care as they committed to do but to be able to 
shed unnecessary costs that had the danger of sinking the entire ship.
  So we know that a banker today would not make a loan to these 
companies under these conditions of vague promises of improvement in 
the future. You think they are not telling their bankers: Oh, we are 
going to make progress, if you just loan us money. Companies know more 
than that. They want some assurance. We represent the taxpayers of 
America. Should we not be more concerned about the assurances too?
  So we do have a regular order--I will conclude with this remark--a 
regular order in America. If a company gets to the point where they 
cannot meet their payroll, and they cannot pay all their debts, because 
they have a liquidity, a financial cash flow problem, the procedure is 
perfectly simply, you seek reorganization, you seek protection under 
chapter 11 in bankruptcy.
  The company continues to operate, the employees continue to be paid, 
and, in fact, one of the highest, I believe the highest, priority of a 
bankruptcy judge is to see that the employees are paid. That is the 
first thing that comes with the limited money in a company that is in 
financial problems, is to pay the workers for their work, and 
throughout that process the company can be reorganized. Witnesses are 
under oath, can testify to the real facts that we in Congress have no 
capability of ascertaining, and they will be able to present evidence 
that sheds light on some of these matters. The unions would have their 
lawyers, the dealers would have their lawyers, the suppliers would have 
their lawyers and argue a case and a judge is going to have to say: Mr. 
Supplier, you are going to have to take 75 percent of what they owe; 
they cannot pay you the whole amount. We have to keep this country 
going. Mr. Union, you are going to have to accept less. Mr. Dealer, you 
are going to have to accept less. Then we will try to pay this back 
once we pare this company down and get it leaner

[[Page 24453]]

and more efficient and more competitive and we are going to send it out 
there and we believe we can make this work.
  But if you liquidate the company today, you are not going to get half 
of what you are owed. You are not going to get a fraction of what you 
are owed. That is not the right thing. The whole motivation for a 
reorganization of procedure under chapter 11 would be to save the 
company, to save the jobs and save the industry. This Senate has no 
business trying to act as some sort of super bankruptcy judge in a 
reorganization. Our action in sending out money enables the 
continuation of bad behavior. It pretty closely approximates that 
psychological syndrome called enabler where the person who is drinking 
too heavily, instead of confronting the problem, the person's problem, 
you give them more money which allows them to continue to drink and 
they don't confront their problem and the problem continues to get 
worse.
  It is time to confront the problem. Let's save this industry, and 
let's do so within the legal procedures the Nation has. And at some 
point if we can help them financially, let's do so. But we need to be 
sure, on behalf of the taxpayers, that we know exactly what the 
circumstance is, that a full examination of these companies has been 
undertaken. The idea of giving them billions of dollars based on a very 
poor statement of need is not acceptable to the people of the United 
States.
  I yield the floor and suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. SESSIONS. I ask unanimous consent that the order for the quorum 
call be rescinded.
  The PRESIDING OFFICER (Mr. Cardin). Without objection, it is so 
ordered.
  Mr. SESSIONS. Mr. President, I was in error earlier in saying that 
there was a $15 billion line item in this legislation that we saw. In 
looking at it with my staff, basically this legislation, if it were to 
pass, would authorize the expenditure of $25 billion--really $24.5 
billion--to the car companies. It also at the same time states that 
even though that money is coming out of the energy efficiency $25 
billion, it also says that $25 billion will be available for 
expenditure in addition. So that is how I would say that as we read the 
legislation, it is an authorization of over $49 billion, in reality, to 
the automobile companies. It would take an additional appropriation for 
$25 billion, but that would be a single step instead of the normal 
legislative process. It enhances the ability for that to be expended. I 
think that is a correct statement. There is no reference, as has been 
discussed in the papers, about $15 billion. But it authorizes the full 
25.
  It says: There are authorized to be appropriated to the Secretary of 
Energy sums as may be necessary for the purpose of replenishing the 
funds made available to the President's designee under this section. It 
also says: No provision shall be construed to prohibit or limit the 
Secretary of Energy from processing applications for loans under the 
section. That is the existing $25 billion. So they still will get the 
loans under the $25 billion plus the other. I think in all fairness, 
the way we read this is a $49 billion authorization, not 25, and 
certainly not 15.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Virginia is recognized for 10 
minutes.

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