MR. INSKEEP: One man willing to put down the chips in the House is Barney Frank. He's chairman of the House Financial Services Committee. He drafted a bill for an auto industry bailout and now the executives appear today before his committee. Congressman Frank is on the line.
Welcome back to the program!
REP. FRANK: Thank you.
MR. INSKEEP: I want to ask you about something that was mentioned in that report from an economist from the University of Maryland. What makes you think that $25 billion would even be enough?
REP. FRANK: Well, we don't think it would be enough. The way we have this structured, they will get $25 billion if the bill passes with a lot of conditions -- no dividends can be paid, no bonuses for people over 200,000 (dollars) and some other things. But they would have to prepare and file by March 31st a plan that shows how they plan to get much more efficient and to get cars that can be marketed.
MR. INSKEEP: But let me ask you about the first you thing you said, Congressman, because you said you don't think $25 billion is enough.
REP. FRANK: I was just trying to explain to you how it works.
MR. INSKEEP: Okay.
REP. FRANK: They get 25 billion (dollars). The federal government would be in the first position to be repaid. We will come ahead of the debt holders, the shareholders, et cetera. They file this plan on March 31st. If on March 31st the president does not believe that this is going to get them to viability with energy efficiency cars, they have to repay the loan and they get no more money.
If they can show by March 31st a plausible way to go forward, then we would consider giving more money under, again, equally stringent conditions.
MR. INSKEEP: So this could be 50 billion (dollars), 75 billion (dollars), 100 billion (dollars)?
REP. FRANK: Well, AIG -- AIG, which I don't think anyone would think was as important to the American economy as the auto industry --
MR. INSKEEP: Oh, the insurance company. Yes.
REP. FRANK: Yeah. They got $40 billion just now to make it up over 100 billion (dollars). To some extent, let's not have a white collar/blue collar bias in our public policy. You know, those who say, hey, go bankrupt so you can cut back on what the unions have won -- the unions have already made some concessions.
But you know, we've had enough anti-union activity and enough increase in income inequality in this country, I don't want to set a precedent that bankruptcy now is a way in which you undo what gains unions have been able to hold onto.
MR. INSKEEP: Congressman, if you're advocating 25 and maybe later 50, 75 more billions of dollars to the auto industry; you're urging Treasury Secretary Henry Paulson to use more of the financial bailout to help homeowners; Paulson is trying to reserve some of the money for the next administration.
Are we actually going to get in a position where $700 billion is not going to seem like very much to fix all these problems?
REP. FRANK: No, not even close. We are talking about a proposal by a Bush administration appointee -- Sheila Bair -- and some others to put may 20 to 25 billion (dollars) into reducing foreclosures. Nothing could be more important for reducing the economic crisis that we're in.
The secretary has 410 billion (dollars) left. I agree that he should withhold some so that the new president can make some decisions, but $20 to $25 billion to solve the foreclosure crisis, which it could do! It could make foreclosures no longer the central factor in driving the economy down. That's not a problem.
MR. INSKEEP: So there's plenty for foreclosures, plenty for banks, plenty for --
REP. FRANK: Can I just say one thing?
MR. INSKEEP: -- auto industry -- there's plenty for everybody, Congressman?
REP. FRANK: Well, there would be -- especially if we end the Iraq war.
I'm always struck when I'm asked to defend spending that people just take the Iraq war and the enormous Defense spending as a given.
We have a new president coming in and I believe he will have the opportunity to save us, frankly, almost as much as the 700 billion (dollars) over the past few years by putting an end to the Iraq war.
So this is a wealthy country! If we spend things well, we can spend them. But I'm not prepared to say, you know, what? Hundreds and hundreds and hundreds of billions for a war that we never should have been in, but we don't save an important industry and protect workers from having gains that they've fought hard for taken away.
MR. INSKEEP: We're talking with Congressman Barney Frank about a proposal that he supports to provide a bailout for the auto industry.
And Congressman, one thing I want to understand: You're saying that under your plan, you're going to require and urge the auto industry to come up with a better plan for the future over the next several months. If it doesn't work, they have to pay back the loan. If it does work, they get more -- they get more money from the federal government to try to --
REP. FRANK: No! They don't automatically --
MR. INSKEEP: They get a chance for more money.
REP. FRANK: They don't automatically get more money. If they can come up with a plan, people will look at the time. The money, by the way, is a loan. And again, of the 700 billion (dollars) you've talked about so far, the 250 (billion dollars) that that has been committed is clearly going to be a loan. We're going to get the money back.
The secretary bought preferred shares in Bank of America. We will get that money back. So when you talk about running out of money, the fact is that we have made some loans. There will be some losses on the loans, but far less than the overall amount.
MR. INSKEEP: They'll be paid back.
We've just got a few seconds. I want to understand this about the auto industry. You're hoping that they come up with a better plan for the future.
REP. FRANK: No. We're requiring them to and if they don't, they've got to pay the money back.
MR. INSKEEP: Okay, we'll put it your way. But if you're requiring this -- you've just got a few seconds now -- if --
REP. FRANK: Well, don't raise a complicated issue with only a few seconds --
MR. INSKEEP: I will try to make it --
REP. FRANK: It's not --
MR. INSKEEP: (Laughs.) I will try to make it simple.
But if they've just got these fundamental problems with labor and health care costs, isn't this just going to be one more goal that they can't quite meet?
REP. FRANK: No. You seem determined to kind of distort this. Health care, by the way, is also on the agenda. Yeah, health care is a real problem and we have burdened all American industry with a bad health care system that's tied to your employment.
One of the things I very much look forward to is working with the new president so we change the health care system. And going forward, if they have to stay with health care the way it is now, yeah, that's bleak. But what I am hoping is that we will get a change in the health care system that will reduce the burden that we put not just on the American auto industry, where it's more expensive to build a car in American than in Canada because of health care.
MR. INSKEEP: Congressman, thanks very much. You did do a complicated issue very briefly. Thanks -- always a pleasure.
Barney Frank is chairman of the House Financial Services Committee.
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