As we’ve just reported, the Senate’s OK’ed a big ass appropriations bill which included $25b low-interest federal loans for Detroit [via the Department of Energy, with an initial five-year payment holiday]. While the bill passed by a convincing margin, and the lame duck President is sure to sign it, the increasingly vociferous fiscal conservatives are starting to make themselves known. Automotive News [sub] reports the dissent. “Sen. Jeff Sessions, R-Ala., warned that loans to the industry could violate international trade agreements that restrict government subsidies for private businesses. Sen. Jon Kyl of Arizona, the Republican whip, said that features of the loan program are ‘eerily familiar’ to easy-credit practices among home lenders that led to the nation’s current financial crisis.” In a pre-written acceptance speech (’cause the suits are home for the weekend), GM highlighted the loans’ non-bailout, PC nature. “Congress clearly recognizes the need to move forward at this critical time to make available this source of capital for automakers and suppliers. Authorized nearly a year ago, these direct, federal loans will support advanced technology development and implementation and will help speed the transition to cleaner, more fuel-efficient vehicles.” As would a consumer credit for consumers who bought a fuel efficient vehicle from ANY automaker.
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Is that bacon kosher?
So how would a credit like that work?
They’ll give you a tax credit for some amount (say $5K) so that come tax time you would get $5K of your taxes back?
Would you get money back even if you didn’t owe any taxes?
That’s something I noticed in the Prez debates last night. McCain said something about a tax credit for health benefits.
From my amateur point of view if your tax liability is low enough then you get no benefits from the tax break.
If I’m correct then this confirms that a rich guy like McCain either doesn’t understand how the concept of a tax credit would not really help a poorer person than him, he really doesn’t care about helping the working poor, or somebody in gov’t is greedy and only wants to help their tax bracket and collect taxes from the poorer people.
Not slamming McCain as much as I am just pointing out that he aid something about tax breaks.
I figure I misunderstand how tax credits work. Please add your ten cents.
Am wondering about this $700B bailout plan (that might be dead now, dunno). Why couldn’t the gov’t payoff credit card debt and mortgages to the tune of $25K per household vs handing out a bunch of cash for the banks. Smart people will fix their problems with this money (gov’t could directly payoff debts rather than just sending $1500 checks to people). Debts would only be valid if they existed as of August 31st of this year.
Very fuel efficient cars like the Fit should be given the same preferences as similarly efficient hybrid, natural gas, etc. cars (i.e. tax credits, HOV lane use, preferential parking at some greenwashing stores). However, if someone “pimps” their Fit, like above, then any preferences they are given should be taken away.
joeaverage
Dude, healthcare savings accounts are awesome. You get hurt in an accident, a hospital treats you and then charges you whatever they want, their attorneys convince a court that the charges are reasonable, and then you go bankrupt. Much better than having an insurance policy that has negotiated emergency medical treatment prices with the hospital beforehand.
I’m an independent contractor that pays a lot for BCBS PPO coverage, and I love it when they take my hospital bills and, with their market power, force the hospital to reduce the bill an average of 66%. Things that the hospital would charge me $1500 for if I had a healthcare savings account cost BCBS $500.
There are a lot of issues with private insurance, but private insurance is way better than healthcare savings accounts.
This is related because if you have an HSA you can’t drive a Fit. You need an Excursion, minimum. The gas will be less than the healthcare.
That Fit looks exactly like the Honda Civic SI from 2005 or whatever. :)
wabbout strings? Like giving them 1/2 and the rest contingent upon actually producing a greener car?
where can you get a Murgen Fit?
Let us see. Build cars no one wants to pay a premium for, lose business, go broke…er, get a pipeline from the Treasury.
Privatize Profit, Socialize Risk.
I never thought I’d cheer on the House Republicans, but they appear to be the only group who has it correct.
Just like making crap loans to folks who don’t financially deserve them, sell the garbage loan to a “greater fool”, and then have the greatest fool of all, the Govt, bail them out.
No missed payments, the Ferrari still arrives on time, and the Paris Apartment is still safe !
With a scam of this magnitude going on, the Automakers are now just “tag alongs”.
You never hear of bailing out the common man, because he lives to service the “interest engine” and work for the bankers. The prior poster is correct that the loans, paid off, would infuse capital to the banks, but the problem is that then the “slaves are freed”. Granted you sign on for that loan so it’s not slavery, but you can’t give relief at the bottom. The big boys passed a bankruptcy bill designed to screw the middle class, and so far have made sure congress does not give the Bankruptcy Court power to modify the mortgages.
Sorry, this is all about the Fortune 500 running the USA. Who gets elected November does not really matter to them. McCain would be Bush III and Obama might be annoying but they’ll find a way to co-opt him.
This $25 Billion is good money after bad. It does nothing to solve the fundamental problems which plaque GM, Ford and Chrysler and will not result in their vehicle offerings magically mirroring that of Honda overnight. This may only delay the inevitable.
joeaverage:
In the campaign of 2008, McCain proposes to eliminate the tax exemption workers get for the health benefits their employers provide. In its place, he would enact tax credits of $2,500 for individuals and $5,000 for families to help them buy insurance on their own.
This system of employer-sponsored health insurance has its shortcomings — many small businesses can’t afford to offer it — but killing the tax exemption will likely lead to a stampede of large employers discontinuing their more affordable, group health plans. Those comprehensive plans cost more than $12,000 a year for the average family; with a tax credit of just $5,000, they’d be left to find $7,000 a year to buy comparable coverage. Put simply, the tax-credit scheme won’t work. Its also worthy to note that Obama’s scheme is flawed, too. It looks like the “average” American is going to take it on the chin again.
I love it when politicians like to give up our sovereignty to “international trade agreements”.
Yeah, they have been such a benefit to the average American.
It also doesn’t hurt that Sessions has a large Honda plant in his state.
Lichtronamo :
This $25 Billion is good money after bad. It does nothing to solve the fundamental problems which plaque GM, Ford and Chrysler and will not result in their vehicle offerings magically mirroring that of Honda overnight. This may will only delay the inevitable.
There. Fixed it for you.
RF
You never hear of bailing out the common man,
The common man is part of the problem. Who do you think was taking out the loans in the first place? Congress has a role, Wall Street has a role, but this all rests on people taking out some very risky mortgages. Once the credit faucet was opened up wide, it wasn’t just the poor and minorities who took advantage, plenty of mcmansions were built, and plenty of construction workers and contractors benefited. Also, a lot of the foreclosures are investment properties, with both existing landlords and new entrepreneurs using the easy credit to buy rental properties and other real estate they planned on flipping as property values went up.
It started with Jimmy Carter and the Community Reinvestment Act, which outlawed “redlining” and forced mortgage companies to offer mortgages throughout their geographic areas. In the mid 1990s, the Clinton administration used the CSA and Fannie Mae / Freddy Mac to not just encourage mortgage availability to those entering the middle class, but foster a secondary market in securities based on those mortgages. As long as the FMs were willing to buy up the mortgages and securitize them, the mortgage lenders were willing to make riskier and riskier mortgages.
Everything was cool as long as property values kept going up. Once the foreclosures started, the increasing inventory of homes further depressed prices. The homeowners are upside down on their mortgages. The mortgage companies are upside down on the value of the homes even if they foreclose.
I suppose that unlike the Chinese banking system which hides a 25% non performing loan rate by carrying a bunch of worthless paper assets on the books, the saving grace is that much of the toxic debt that is logjamming the financial system here in the US actually is collateralized by real estate that actually has some worth. The debt may be worthless but the property still has some value.
The common man is part of the problem. Who do you think was taking out the loans in the first place? Congress has a role, Wall Street has a role, but this all rests on people taking out some very risky mortgages. Once the credit faucet was opened up wide, it wasn’t just the poor and minorities who took advantage,…
Which is why the credit industry is supposed to enforce proper oversight on who gets a loan and who does not. But with the rise of property values, there was too much money to be made and the industry abandoned its system of controls for short term gain. Think GM’s management style and SUV only mentality as a good analogy. There will always be people who are financially irresponsible – the charge card industry thrives on it – but we have to be able to have confidence that those who can put us in this mess would have the foresight not to allow it to happen. Obviously, with so much money to be made, intelligent decisions can’t be counted on. Now, we have the opposite problem. Good credit has all but dried up.
When I bought my house in the mid nineties, I had to meet certain requirements to make sure my household mortgage expense did not exceed a certain percentage of my total income. I made the threshold, but had I not, the only real alternative would have been to get somebody -like my father-to be a co-owner.
RF: C11 is a given for one or more of these companies, its just a matter of when. The rate at which each of them is burning cash is alarming. SO, when I used “may”, it is because I’m not even sure the bailout will delay C11.
The money is nothing other than corporate welfare.
And yes, if you own a company, insurance is great. You get to choose the plan! OTOH, the whole structure of the system of having your insurance based at your job is just stupid.
The health savings accounts and the tax credits to individuals are just means to a desirable end of separating health insurance from the work place. Most people hate it when their company tells them what cell phone and service to use, yet they really want the boss to pick their health insurer? Right.
$25 billion in loans isn’t going to help considering the big wall street bailout just failed – meaning nobody’s going to be able to borrow money to buy ANYONE’s cars.
It will just delay the inevitable.