Now we'll see what kind of leader House Speaker Nancy Pelosi really is.
When the Big Three automakers came to Washington two weeks ago asking for a $25 billion bailout, she sent them home to produce a credible plan for long-term economic viability.
Now they're back with plans in hand – but asking for $34 billion. General Motors and Chrysler say they need immediate cash infusions just to stay afloat until January – and billions more to stay afloat until March. Ford, in better financial shape, has said it has enough cash to make it through next year without assistance, though a collapse of either of the other two could threaten its survival.
While Pelosi is right that some government intervention will be necessary, there are options beyond bailout vs. liquidation. Pelosi should take the lead in exploring them. Unfortunately, so far she has parroted the automakers in taking options off the table.
One credible option is a swift, prepackaged reorganization bankruptcy for GM and Chrysler. Another, for those who believe the word "bankruptcy" would worsen the downward spiral of the auto industry, is a bankruptcy-like process using a special advisory committee instead of a bankruptcy judge.
This would be like the Chrysler package of 1979-1980 when shareholders, bondholders, car dealers and employees all made bankruptcy-like concessions in return for federal financial support.
In both options, government financing would make the transformation possible – and provide help for workers.
Pelosi seems uninterested in such options. "We reject those who are advocating bankruptcy for the industry," she has said. This is not helpful. It removes all pressure for automakers to deliver change.
As Congress considers solutions, it needs to answer two basic questions: Without bankruptcy or a bankruptcy-like process, how do you get creditors, debtholders, vendors, workers and management to restructure as promised? And if Congress authorizes a $34 billion cash infusion to prop up the automakers until the end of March, what will prevent them from collapsing after that or returning for more public funds?
How the House answers those questions will tell a lot about Pelosi's leadership.
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