Today, Elizabeth Warren and Republican Jeb Hensarling of Texas are here to conduct a day of oversight panel field hearings into the oversight of TARP assistance to the auto industry. I have a full day of other activities, so was only able to sit in on the panel's first session with Ron Bloom, the Senior Advisor in the Treasury Department dealing with this matter. It was an interesting and informative exchange. Bloom was careful with his words, but not a question avoider, which was good to see.
Warren focused on where the TARP aid for GM and Chrysler is going, how we'll know whether it was successful or not, what benchmarks will need to be achieved before an exit is possible, how the government plans to play its hand as an equity owner of such a significant industry. Her questions were incisive, and Bloom's answers appeared fairly open and clear. The government is going to appoint directors but avoid a day-to-day role in decisionmaking. The industry will eventually file SEC-type reports, even before the IPO exit of part of the governnment's interest, but it probably won't happen for one or two quarters. IN the meantime, the companies will try to be as transparent as possible.
Hensarling focused on the past. Why help GM and Chrysler when they'll now have government subsidies to compete with Ford? Answer--Ford could have had aid as well if it had asked for it, Ford's public statements were supportive of federal aid to its competitors, in part because they use the same suppliers and a complete liquidation of GM and Chrysler would have had ripple effects through the industry that would have hit Ford hard. Wasn't it unfair to bondholders to let the union have such a sweet deal? (The tone of Hensarling's questions was clearly anti-union and pro creditors. He consistly claimed that the deal was unfair even if legal, unprecedented, and hurt mostly little guys, reading a couple of letters from small bondholders who had lost a lot in the bankruptcy deal (a man and his mother each with $100,000 invested in Ford bonds--maybe not so small, I mean, how many of us really have $100,000 invested in one company's bonds?)) Answer--the company made decisions based on commercial needs, and bondholders got a good bit more out of this than they would have gotten out of a liquidation. Everybody suffered compared to what a solvent industry what provide, but the companies simply weren't solvent. Question--but why couldn't you have done another deal with another financer? Answer--because there wasn't one willing to put forward the amount of money needed.
Hensarling, in other words, appeared more interested in scoring the same old anti-union Republican talking points that have been hashed around this issue for months. Warren seemed really interested in understanding how the TARP funds were working and expected to work, and how decisions would be made going forward. I came away thinking that the idea of making her the head of a new consumer financial protection agency--assuming we can get one created over the objections of the too-powerful banking industry and AICPA and others--is a good one.
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