It appears that there may be an agreement to bail out the auto industry is close to fruition. Being discussed is providing a $15 billion loan to the three US auto makers.
The term “Bail out” has gotten an increasingly negative response from the American public. It probably has something to do with the fact that Hank Paulson threatened and then lied to the American public and seems unsure of how to spend the rest of his piggy bank; “To buy mortgages or not to buy mortgages, that is the question.” As a result, Congress has come up with a new term to describe their steps toward socializing our economy, “Bridge Loan.”
In normal finance and banking arrangements, a “Bridge Loan” is just what it sounds like; it is a loan for a limited period of time. Bridge loans are often provided during the riskier parts of a project for example during the construction process, when collateralization is difficult and day to day value of the asset is difficult to determine. For this reason, providers of bridge loans generally have tight controls over what they are financing and often require that there is assurance of permanent financing for the completed process before they offer the interim financing. In other words, Bridge Loan providers generally know exactly what the plan is, and how it will be executed, before a bridge loan is provided.
Leave it to Congress to turn normal business terms on their head! With their “Bridge Loan” Congress has no idea what they have or where they are going to with their “project.” They are loaning money to enterprises who have no reliable plan that allows them to pay it back.
Of course “not knowing where they are going” doesn’t stop Congress from making demands along the way. Rather than ensuring a reorganization of the automakers that would focus on developing a profitable business, Congress is focused on enforcing their “Green Dream” on the industry and thereby ensuring that the money lent to them will never be repaid.
Barney Frank had a moment of candor regarding the farcity of calling the $15 billion a “bridge Loan”:
“We don’t think the $15 billion is enough to get them into March, but given the administration’s insistence "¦ that’s where we are now,” Frank said.
Frank said that in the new Congress, which will have stronger Democratic majorities and a friendlier White House, the funds taken from the energy loans this year to prop up the ailing industry would be restored.
“Once we get a new administration we will replenish that money,” he said. “We will not see a diminution of funding available for energy efficiency.
“The reason for that is that then you get the new administration "” the Obama administration "” able to take it up from there and make the longer-range projections,” he added.
Yup, a new administration with longer-range projections with even greater demands for greenery and even less concern about financial viability. It seems like the only bridges that Congress is able to finance are bridges to no where.
You may also recall several “bridge loans” which were made by Citi, Chase (and others). They were made to hedge funds to assist in purchases (of Chrysler, e.g.) and those bridge loans were meant to be repackaged into long-term bonds, then sold to the public.
Heh. Those ‘bridge loans’ remained on the books of the banks b/c nobody would underwrite the l/t bonds.
Thus, they became “pier loans.”
Bridge to nowhere, short pier…
Just wish Congress would walk off that pier, instead of taking guns to OUR heads and making us do it…