[Congressional Record (Bound Edition), Volume 154 (2008), Part 18]
[Senate]
[Pages 24537-24539]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           AUTOMOBILE CRISIS

  Mr. HARKIN. Madam President, I come to the floor to talk a little 
about the so-called auto bailout bill that is someplace out there 
wandering around. We don't know where.
  I was in Iowa last week and traveling around and talking with people. 
A couple things kept coming up from time to time. One was the money we 
put into the so-called TARP program, the money we gave to Secretary 
Paulson before we adjourned in October and went home for the campaign, 
the $700 billion. As we know, they got $350 billion of that, and now 
there is some talk that they will come back for the other $350 billion 
sometime, probably not this year but early next year.
  As we look at what happened to that $350 billion, a lot of people are 
quite disturbed, and count me among them. Rather than using the money 
to put out to banks to help extend credit, some of the banks were using 
it to buy other banks and get bigger. Some banks are using this money 
to invest in private equity firms, buy up businesses. One came to my 
attention last week when I was in Iowa--a company I don't need to 
name--a company that had gone into bankruptcy. The owner of the company 
had wanted to buy it out of bankruptcy for a certain amount. His bank 
was Bank of America. They wouldn't extend him the credit. So a private 
equity firm came in and bought the company, and their bank is Bank of 
America. So here is a small businessman who couldn't get his own 
company out of bankruptcy, but a private equity firm could. And they 
both had the same bank, Bank of America.
  If this is what is happening with that TARP money, count me out. No 
more. I voted for that so-called bailout. The more I look at it, the 
more I wonder if I did the right thing. I wonder where that money is 
going. Is it going to help anyone? Quite frankly, at the time I had 
suggested that an important thing we ought to do is extend the Federal 
Deposit Insurance Corporation ceilings on independent banks from 
$100,000 to 1 million or to 2 million. Then the compromise came in. 
They extended it from $100,000 to $250,000, which was not much of 
anything except keeping up with inflation from the time the $100,000 
was set.
  My thought was always that these independent banks, quite frankly, do 
a much better job of investing your money and my money than those big 
city banks in New York. They do a better job. They are investing in 
small business growth, modernization of companies. To the extent they 
are in mortgages, they are good, solid mortgages, not tightening 
anything out there. So I wanted to make sure that more money would flow 
to independent banks around America that could get credit out to 
someone who wants to buy a car or perhaps refinance a house, expand a 
small business, invest in new technology. These are the independent 
banks. This is what they do. But, no, we kept that at $250,000 and put 
all that money into the big banks.
  Well, I hope we get to address this issue again early next year, 
because I wish to see more of this directed to the small, independent 
banks. It doesn't quite seem as though the money we gave to the big 
banks is trickling down much. It is sort of staying in New York City, 
places such as that. That is where it is staying. It is right there. 
And private equity firms are using that money to buy up companies at 10 
cents on the dollar, companies that they know, when we are through this 
recession and things start getting better again, are going to be good 
companies, have good products. But right now, because of the recession, 
they are in dire straits. So they are being bought up. Of course, 3 or 
4 or 5 years from now, they are going to be great companies, and people 
bought them at 10 cents on the dollar. Quite frankly, from all 
appearances, it seems that some of this TARP money is going into that. 
We need more investigation to find out how much.
  That is a prelude to what I wanted to talk about. I wanted to talk 
about the auto deal, this auto bill that is going around. I got to 
thinking about our approach earlier on the big bank bailout. We gave 
money to the big banks and nothing to the little banks. Not much is 
going out to help the consumer. Then I looked at this automobile 
bailout. It started at $25 billion. Then it went to $34 billion. Now I 
hear it is $15 billion and some billions later. The more I read about 
it, they are going to be back next spring for more, and it might take 
as much as $100 billion to get them through this period of time.
  So what do we do? The first inclination is to take a big bunch of 
taxpayer money and put it in at the top, as we did last fall with the 
big banks. So now we are going to give the manufacturers all this 
money. I am not certain giving these manufacturers all this money is 
going to help them for long. We can give them all the money we want, 
but if no one is buying their cars, what good does it do? Quite 
frankly, people aren't buying cars, which is one of the major reasons 
we are in a recession. If we look at this chart, this is total U.S. 
light vehicle sales annual rate. You don't need to read all the 
numbers. What you can see is from November of last year until now, it 
is a steady decline, especially in the last couple of months, a 
tremendous drop in the adjusted annual rate of sales of cars. It has 
been coming down, down, until now it is just about dropping off the 
chart.
  Or we can look at the monthly rate, the big three 2008 sales per 
month. You see kind of the same thing. My figures say that sales of the 
big three auto companies--GM, Ford, and Chrysler--fell from 895,000 in 
January to 363,000 in November. People aren't buying cars. So is the 
answer to give more money to the manufacturers? I got to thinking about 
that and thinking about what we had done last fall. I got to thinking, 
why don't we take some of this money we are talking about and put it in 
at

[[Page 24538]]

the bottom rather than putting it in at the top--$34 billion, $25 
billion, pick your number.
  What if we said, rather than giving it to the auto manufacturers, 
let's say we are going to make a deal. We are going to provide to low-
income and modest income Americans something almost like a voucher 
where they can go buy a new car. Why don't we give a lot of people in 
America $10,000 and say: Here, go buy a car, put it in at the bottom 
rather than the top? So I am working on legislation which I will be 
introducing shortly which will do that. Basically it says, if you have 
an adjusted gross income of $40,000 for a household, $25,000 for an 
individual, and if you have a car that is over 10 years old which you 
have had registered in your name, titled in your name before now, then 
you can go to an automobile dealer anywhere in the country, buy a new 
car, and you will get $10,000 from the Government towards buying that 
car. So if you bought a car for $15,000, a new car, $10,000 of it is 
paid for by the taxpayers of this country. Now think about this.
  Also in my bill I am stipulating that to do this, you have to have a 
car that is older than 10 years, the new car you buy has to get at 
least 5 miles per gallon more than your old car, and the new car has to 
get at least 25 miles per gallon adjusted; that is your average fuel 
mileage. Look at this: 2008 vehicles sold by the big three that get 25 
miles per gallon. Seventeen percent get more than 25 miles per gallon; 
83 percent get less than 25 miles per gallon. I am interested in these 
cars in here: those getting more than 25 miles per gallon. I am 
interested in the low-income and modest income Americans who can't even 
afford to buy a new car. I am interested in helping the automobile 
companies.
  You tell me: Is it better to take all of our taxpayer money and put 
it in at the top, or how about getting rid of that inventory out there 
of all these new cars that no one is buying? We need to build the 
market for cars, putting more people to work at the big three and all 
of the parts manufacturers and all of the others that get jobs when 
cars are sold. Think about the benefits of this. Let's say you are a 
low-income person and you are going to work and you have an old jalopy 
you are driving and it breaks down all the time. This happens every day 
in America.
  You cannot afford a new car, so can you keep repairing your old one, 
fixing it up, patching it up? It is putting out all kinds of bad 
emissions. It is getting low mileage. You want to get it off the road, 
but you cannot afford to buy a new car. You cannot afford it. But we 
would like to get those old cars off the road. We would like to have 
people have a new car that is more fuel efficient.
  How do we do it? Well, this is one way of doing it. And look at it 
this way: In terms of what we might see here, for example, as shown on 
this chart, right now a six-cylinder Chevy Malibu gets 20 miles per 
gallon, but the four-cylinder gets 26 miles per gallon. So it is 30 
percent more--30 percent more. So people could buy a Chevy Malibu under 
this proposal. Those that can use the program will select the more 
efficient motor and will have lower fuel bills year after year. And, we 
will have lower pollution and we will need to import less oil.
  Now, there is one other piece of this proposal: that if you do 
partake of this program, you need three things. You need to show your 
1040 about what your adjusted gross income is and you need an old car 
that is at least 10 years old and you need to buy a car that gets at 
least 5 miles more per gallon than your old car and gets a minimum of 
25 miles per gallon. It needs to be from one of the big three and made 
in America. If you do that, you get $10,000 towards that new car.
  There is one other stipulation. That old car you have? You have to 
turn it in to the dealer. The Government takes possession and the 
Government destroys it, smashes it up, destroys it, chops it up, sells 
it for scrap, so we get millions of these old cars off the road. They 
will not be put back into the used car market.
  Low-income Americans can get a new car, and it helps the auto 
industry. Isn't that what we want, a demand pull? We have a demand 
pull, and they start selling all these cars they have in inventory they 
cannot sell right now.
  My bill would stipulate this program could run from enactment through 
all of next year and end on December 31 of next year. So if we are 
going to be throwing $100 billion at the automobile companies, or $55 
billion--no one knows--why don't we take those billions of dollars and 
give it to consumers, low-income consumers, to buy a new car that is 
more fuel efficient, has better emissions controls?
  It seems to me that is what I call percolate up economics--percolate 
up--not trickle down economics. But no one is talking about this. Why 
shouldn't we be talking about it? Think about all the elderly people in 
this country who are retired who are driving old cars, but they cannot 
afford a new one. So they are stuck driving an old car they have put a 
lot of money into, to repair this and repair that, paying more for 
gasoline.
  Well, here is a chance for an elderly person, a couple on a fixed 
income, to get a new car. Think about it. You can buy a new car. I do 
not know what a Chevy Malibu car costs. But you can buy a new car for 
about $15,000, $16,000, and $10,000 of it will be paid for by the 
Government. That is not a bad deal.
  Quite frankly, more credit would be available for that purpose. Well, 
you can understand that. If I am going to buy a car for $15,000, and 
$10,000 of it is going to be paid for by the Government, and I only 
have to finance $5,000, you can get all kinds of credit for that 
because the car's asset is going to be worth more than that. It is 
going to be worth a lot more as you go down in years. So credit will be 
available easily for something such as that.
  So, again, this bailout plan the Bush administration and 
congressional leaders--I have not been involved in that--this plan they 
are drafting fails to answer these two very big questions. In the midst 
of a severe recession, how do we boost demand for new cars? And, 
secondly, how do we give consumers compelling incentives to purchase 
fuel-efficient cars, especially at a time right now when gas prices are 
plummeting? We know they are going to come back, but right now they are 
plummeting.
  So, again, I will be introducing the Selling Fuel-Efficient Cars Act 
of 2008--it might be 2009, by the time we get back in January. That is 
my proposal. Do not put it in at the top. No, do not give it to the big 
boys. Let's let the consumers--low-income and modest income Americans--
buy millions--millions--of new cars made in America, made here. Get rid 
of all that inventory. I tell you what, I think you would see that the 
automobile companies could probably get lines of credit if something 
such as that happened. Then they could get back into the market without 
relying upon the taxpayers anymore.
  So I guess I would sum it up by saying this: Go to your average 
taxpayer out there and say: Look, we are probably going to do something 
to save the automobile industry. Now, the taxpayer may say: I don't 
want to do anything to save them. Well, OK, fine. That is a legitimate 
point. But let's say that is not your choice. Your choice is: We are 
going to put money into the automobile industry. How would you like it 
done? Would you like it done by taking your tax money and putting it in 
at the top--there will be some restrictions on it; they have to do 
certain things such as that--putting it in at the top, or would you 
rather have your money go out so the little guy, the little woman, the 
little poor people, the retired people can buy a new car, have a little 
more of an asset, get the old clunkers off the road, have more fuel-
efficient cars, with less bad emissions, and we will destroy all those 
old cars they turn in? We will destroy them, chop them up.
  You take that to any average taxpayer out there, and I will bet you 
my bottom dollar, if given that choice, if those are their two 
choices--put it in at the top or put it in at the bottom for 
consumers--they will pick the second choice. They will want to put it 
in for consumers, not just give it to the big boys.

[[Page 24539]]

  So I do not know why no one is talking about this. We should talk 
about it. We should talk about it more. I do not know. The bill they 
bring up may not be amendable. That is what I hear. But we ought to 
offer this. We ought to have the chance of saying: We can have a 
different approach to bailing out the automobile companies than just 
putting it in at the top.
  I believe the plan I am proposing will work. It will be better for 
America. It will help a lot of low-income people and elderly people in 
our country to have a new car and we will get millions of old clunkers 
off the road and we will destroy them and we will have a better system 
for our consumers.
  So for those who say we have to help the automobile companies, I say, 
OK, but is there only one way or is there another way? Well, I think 
there is another way, and I think the proposal I have laid out is the 
way we ought to go.
  With that, Madam President, I yield the floor.

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