Senator_John_Ensign@ensign.senate.gov
toIng210@gmail.com

dateTue, Dec 16, 2008 at 7:57 AM
subjectCorrespondence from Senator Ensign
mailed-byensign.senate.gov

hide details 7:57 am (2 days ago) Reply




This is an official communication from the Office of Senator John Ensign. Any tampering or alteration of this communication is prohibited and may result in criminal investigation or prosecution.

December 16, 2008



xxxxx
xxxxxxxxxx
Henderson, Nevada 89044

Dear Ms. xxxxx:

Thank you for contacting me regarding the proposed financial bailout of the "Big Three" domestic automobile manufacturers. I value the opinions of every Nevadan and am always grateful to those who take the time to inform me of their views.

American automobile company executives at GM, Chrysler, and Ford ("the Big Three") have made many poor decisions over the past few decades. Those decisions combined with a poor economy have put them in a desperate position. As you may know, Congressional Democrats and the Bush Administration put forth a proposal to bail out the Big Three with $14 billion in loans. In addition, this bill would have required some restructuring of the Big Three and would have created a "car czar." This car czar would have been responsible for facilitating the restructuring of the automakers and for administering the government loans. Because of the unwillingness of the United Automobile Workers union to compromise on this legislation, the Democrat bill ultimately failed.
A taxpayer-funded bailout will not solve the Big Three's problems; it would only delay the inevitable. Rather than throw money at the probÂ*lem to little effect, the automakers should take advantage of the same legal process to reorganize that thousands of other businesses use each year, Chapter 11 bankruptcy. When I say bankruptcy, I am not referring to liquidation. That is Chapter 7 bankruptcy. Chapter 11 bankruptcy provides struggling companies with the opportunity to reorganize responsibly, to protect both the company and its employees, and to transform into efficient and profitable firms.

I introduced legislation that would have helped the Big Three successfully restructure through Chapter 11 by providing them with significant federal assistance. The Big Three are concerned that today's financial environment would prevent them from securing debtor-in-possession (DIP) financing from the private sector. This financing is crucial for the companies to operate while in bankruptcy. They also worry that consumers would be hesitant to buy a car from a company that might not be around in a few years to guarantee the car's warranty. My proposal would have had the warranties guaranteed by the federal government and would have provided up to $25 billion in DIP financing to ensure that the automakers had the funds necessary to complete the Chapter 11 process. This plan would have benefitted the companies and their employees while ultimately protecting the American taxpayer.

The car czar that the Democrats and the White House wanted to create would not have had nearly the same sort of restructuring powers that a bankruptcy court judge would have under Chapter 11. A bankruptcy judge has far more tools than the proposed car czar would have had. Furthermore, a judge is not influenced by the political process. A government bailout just encourages interference from lawmakers to have these companies carry out their own pet policies. Also, the automakers' creditors and stakeholders would just lobby Congress or the car czar to avoid having to make the sort of concessions that would be required of them under bankruptcy. My legislation would have avoided these huge problems.

With a bailout, the government is choosing which individual companies deserve help and which do not. This is not what the government should be doing. Government should not be picking winners or losers. A bailout of the Big Three would be a dangerous precedent for the long-term health of the country's economy. The economy of the United States is rooted in free-market principles. These principles, coupled with our nation's entrepreneurial spirit, have helped America become the richest and most innovative country in the world. Even though our economy is struggling right now, we cannot abandon those principles.

Thank you again for sharing your thoughts with me. Rest assured that I will continue working closely with my colleagues as we deal with this difficult and important issue. Please feel free to contact me in the future on matters of importance to you. Should you have any other questions or comments or would like to sign up for my newsletter, please do not hesitate to either write or e-mail me via my website at http://ensign.senate.gov.

Sincerely,

JOHN ENSIGN
United States Senator

JE/u1


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