Think Congress matters when it comes to Detroit and the bailout? Or maybe the White House is in the lead?
Turns out, Treasury Secretary Hank Paulson is in charge, thanks to complicated connections between the Big Three automakers and finance companies.
Here’s what happened: Senate Republicans scuttled the bailout last week, so the White House directed Treasury to fund a rescue with money from the TARP program.
TARP, of course, was designed to aid Wall Street banks. But the Big Three have large finance companies of their own. Ford has Ford Motor Credit, for example.
GMAC Financial is where it gets tricky. GMAC was wholly owned by General Motors until 2006. GM still has a stake, but Cerberus Capital, the private equity fund that owns Chrysler, has the majority stake. So, GM and Chrysler already are in bed together.
GMAC also has other lending divisions, including the home lender Ditech Mortgage.
That makes auto companies a kind of vertical monopoly, where one owner provides related products to the same customer. In this case, automobiles and auto finance.
Which should give Paulson license to allocate TARP money to the Big Three.
Of course, his powers were written so broadly into the TARP legislation that Paulson probably could give the automakers TARP money even if they had no connection to financing.
Paulson clearly doesn’t want to do that. He’s said so many times, even right up to the failed Senate vote.
But, bottom line now is this: Paulson is running the auto bailout, one which the Bush administration originally opposed and remains indecisive on, and that the Senate seems very unlikely to approve soon.
Your serve, Henry.
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