Reserving Judgment on Bush's Bailout Promise

Larry Kudlow is saying not so fast on the TARP bailout.

“Senate sources tell me that any TARP-money allocation might include the very same conditions proposed by Tennessee Sen. Bob Corker in legislation that broke down in a marathon session in the Senate list night.”

Given that no one seems to know if TARP funds can even be used for an auto bailout it’s hard to even speculate on possible terms and conditions that might be imposed on GM and Chrysler.

Kudlow also says,

“The Treasury wants to see the cash-flow data and get to the truth about GM and Chrysler. (Ford doesn’t need the money.) And nothing will happen until these numbers are properly crunched. And the Treasury may well want to arrange for a built-in monitor — something that might even look like a car tsar — if any TARP money is dispersed.”

My first question is, what cash flow? There is no cash flow unless, of course, Treasury treats legacy costs as described here by James Sherk at the Heritage foundation as a non operating expense. If Treasury chooses to exclude these legacy costs in their underwriting diligence then any potential loan from TARP could only be justified by mandating the terms of the Corker proposal.

Frankly, I was stunned by Bush’s apparent acquiescence after the failed negotiations last night. Now I’m left to hope that Kudlow’s warning may prove true.

We’ll see.

HughS

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