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Why Democrats gave Big Three a reprieve

A look at the political reasoning behind the decision by Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi to give the Big Three auto makers another shot at a $25 billion loan.
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One thing professional politicians are expert at judging is public relations.

The bipartisan consensus here at the Capitol Thursday was that the Big Three auto executives had failed spectacularly in their testimony this week to House and Senate committees. And by flying to Washington on private, corporate jets they created a monumental public relations fiasco.

In the wake of this disaster, it would have been political poison for the Democratic-controlled Congress to hand them a $25 billion subsidy to stay afloat.

Senate Majority Leader Harry Reid knew he did not have the 60 votes needed to overcome a likely filibuster against the bailout.

He also knew that any "bailout" is likely to be unpopular right now. The $700 billion bailout, or rescue plan, for financial firms has become even more unpopular than it was when Congress passed it last month.

There are some members of Congress, such as Sen. Roger Wicker, R-Miss. who won their elections Nov. 4 partly because they voted against the Wall Street bailout. Sen. Saxby Chambliss, R Ga., was forced into a runoff election partly because his vote for the bailout gave his Democratic opponent, Jim Martin, a stick with which to beat him.

Risk of rejection
Reid did not want to put the proposed $25 billion loan to a vote and have his colleagues reject it because that would have further spooked the stock markets. As it was, the stock market tumbled Thursday after congressional leaders announced the bailout vote had been delayed.

“We don’t need to go through a bunch of votes here that fail,” Reid told reporters. “The stock markets, the credit markets are having a lot of difficulties. What kind of message do we send to the American people by having a bunch of failed votes here? We do not have the votes.”

Alluding to the PR fiasco, Reid summed up the obvious: “What happened here in Washington this week has not been good for the auto industry.”

Executives flying to the Capitol on corporate jets to seek a loan “doesn’t send a good message,” he said.

What the Big Three leaders utterly failed to do this week, said Senate Banking Committee chairman Sen. Chris Dodd, D-Conn., was to give “any willing admission of their own culpability in the situation they’re in.”

But while Democratic leaders wanted to be tough on the CEOs, that inevitably entailed hurting workers as well.

The Democrats didn’t want to appear as if they were shrugging their shoulders in indifference about the jobs at stake in Michigan and other states. “We are here to help," said Reid. "We are not against the auto industry. We want to help those people keep those jobs.”

So Reid reverted to the practical rule in politics: “When in doubt, delay.”

How to define 'viability'
Reid and House Speaker Nancy Pelosi insisted in a joint press conference that executives of Ford, General Motors and Chrysler must present a business plan after Thanksgiving.

On Dec. 2, Democratic leaders will begin hearings to judge those plans. The buzzword that Reid and Pelosi kept using as they faced a horde of reporters Thursday was “viability.”

Reid said it would be up to Dodd and House Financial Services Committee chairman Rep. Barney Frank, D-Mass., to judge what “viability” was and whether the automakers had it.

When a reporter asked Dodd if he and Frank had a common understanding of how “viability” could be determined, Dodd joked, patting his heart, “It’s all right here.”

Dodd said the plans that will be submitted by the Big Three would be analogous to a firm approaching a venture capitalist and presenting a business plan. The taxpayers are the venture capitalists, Dodd said. “They are coming to us to submit a plan on what they’re going to do if we decide to invest,” he told reporters. 

But how to define “viability”?

Dodd replied, “Well, I don’t know; that’s a great question. Obviously those are the important issues and we’ll have to sort that out ourselves.”

Asked whether GM for example, would have to tell Congress what product lines it would phase out and what new models it would unveil over the next few years, Dodd replied, “Certainly we want to hear about retooling and reorganization. There will be some detail to this. We are going to want to get as much of a sense (as possible) of where this industry is heading.”

But the decision by Democratic leaders to insist on the auto industry executives proving viability raises this question: if most members of Congress found the Detroit executives so unskillful in their presentations this week, are these really the men whom Congress trusts to chart the future of their firms?

If they cannot manage PR, can they manage retooling, market strategy and all the other challenges of competing with Honda, Toyota and Hyundai?

Those questions will be waiting when Dodd and Frank return to the Capitol after Thanksgiving.