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NINETY EIGHT REGENCY

Internal debate showed advisers split on how to proceed

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Internal debate showed advisers split on how to proceed

Christina Rogers / The Detroit News

Excerpts from the upcoming book, "Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry" by Steven Rattner, the Obama administration's former top auto adviser:

On a gift for President Bush

At 9:01 on that overcast, drizzly Washington morning, George Bush made it official, announcing the biggest industrial bailout in American history, with $17.4 billion of TARP money headed to Chrysler and GM. The announcement happened to fall on the same day as the annual White House senior staff dinner.

...about one hundred diners gathered that evening in the East Room.

At the end of the meal, (Chief of Staff) Josh Bolten rose to address the President and his colleagues. "As everyone here knows, each year the senior staff chips in to buy the president a Christmas gift," he began. "One year we bought him a high quality chainsaw. Another year we bought him an underwater camera. Last year, we all pooled our funds and bought him a top-of-the-line weed whacker for the ranch. Mr. President, this year for Christmas your senior staff chipped in and bought you... Chrysler!" The group burst into laughter and applause.

On personality conflicts

Bad chemistry with GM added to everybody's stress. Less than a week before the deadline, (GM Chief Financial Officer) Ray Young called (auto task force member Brian) Deese to ask for a postponement on meeting the restructuring benchmarks -- GM wanted two more weeks. Making that call did not show great judgment, but Young's attitude was even worse. He suggested to Deese that if GM missed its benchmarks, the government would look bad. To Larry, (Summers, President Obama's top economic adviser), these were fighting words. Had GM somehow forgotten that taxpayers were footing its bills? He called two of GM's Washington advisers the next day and received assurances that Young would not attempt any direct communication with the White House again.

On the UAW

It was when we tentatively aired the notion about Chrysler that Rahm (Emanuel, White House chief of staff) turned and uttered his shocker: "Why even save GM?" Seated to his right, David Axelrod, the President's principal political advisor, pulled out polling results and reeled off statistics showing how much the public hated bailouts.

Ron Bloom (the administration's top auto adviser) was the first to shake off surprise and make a counter argument. He reminded them of the tens of thousands of auto workers' jobs at stake. But that didn't deter Rahm. "F--- the UAW," he growled.

From the opposite end of the table, (Treasury Secretary) Tim Geithner pushed back, drawing on his experience with the fickle nature of public opinion. I had seen this myself, most starkly with Lehman Brothers. Right up until Lehman declared bankruptcy, public opinion, including opinion on Wall Street, had overwhelmingly favored letting the firm go down. But in the ensuing chaos, the consensus had shifted overnight, and the government was believed these days to have made a terrible mistake by acquiescing in Lehman's collapse.

On how far to go

That still left the question of how far the auto industry bailout should go. "We're already in Vietnam," Larry (Summers) said in a separate meeting, referring to the all but certain decision to provide more aid to the automakers. "I can imagine doing something in Cambodia." By that he meant indirectly helping a few key suppliers, the equivalent of fighting from Vietnam and not sending ground troops across the border. But there he drew the line: "There's no way we're going into Laos." He wasn't about to commit the government to a full-scale invasion that involved bailing out the entire supply chain.

From The Detroit News: http://detnews.com/article/20100903/AUTO01/9030370/1148/auto01/Internal-debate-showed-advisers-split-on-how-to-proceed#ixzz0yTJWsYxP

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