The following is an excellent excerpt from the book “BUSH” by Jean Edward Smith from Chapter Twenty-Five: “Finis” on page 639 and I quote: “The president immediately invited Obama and Michelle to the White House, and did his utmost to insure a smooth transition. Several months earlier Bush had established a Transition Coordinating Council under Josh Bolten to manage the changeover, and on Thursday, November 6, met with the full White House staff and the cabinet to emphasize the importance of a smooth transition. Once again, Bush was gracious and congratulatory. “Over the next 75 days,” he told the staff, “all of us must ensure that the next president and his team can hit the ground running.” Bush then ticked off the steps being taken by Bolten’s team. “These measures represent an unprecedented effort to ensure that the executive branch is prepared to fulfill its responsibility at all times. . . . As January 20 draws near, some of you may be anxious about finding a new job or a new place to live. I know how you feel. But between now and then we must keep our attention on the task at hand, because the American people expect no less.”
True to his word, the changeover between the Bush administration and the incoming Obama team was the smoothest of any presidential transition involving different political parties in American history. Perhaps McCain deserves some credit for that, however inadvertently. Had he not been so hostile to Bush during the campaign, the president might have found it more difficult to establish cordial relations with Obama.
Responding to Bush’s invitation, Obama and Michelle arrived at the White House on the Monday following the election. Obama went with Bush into the Oval Office, and Laura gave Michelle a tour of the residence. Both couples hit it off. Laura invited Michelle to bring her daughters and mother back for another visit, and the president and Obama sat together for several hours. “Barack was gracious and confident,” Bush recalled. “He asked questions about how I structured my day and organized my staff.” Bush gave Obama a quick review of foreign policy issues, and mentally compared the president-elect to himself when he had met with Bill Clinton in 2001. “I could see the sense of responsibility start to envelop him,” said Bush. The financial meltdown was being brought under control, and Obama was aware of the issues, having stayed in touch with Paulson throughout the campaign. [FOOTNOTE: “When awoken by his wife on election night and told that Obama had won, Paulson said he “went back to sleep comforted by the knowledge that our president-elect fully understood the threat our economy still faced.” Henry M. Paulson, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System (New York: Business Plus, 2010), 392.”] But it was not clear sailing. The automobile industry was now in serious trouble. Bush assured Obama that he would not let the automobile companies fail, and the two parted on friendly terms. As for the auto companies, Bush told his staff, “I won’t dump this mess on him.”
Bailing out the American auto industry presented another difficult decision for Bush. He had opposed President Carter’s rescue of Chrysler in 1979, and believed the government had no business supporting the car companies. Once again, the magnitude of the impending disaster changed his mind. The president’s economic advisers, including Paulson, chairman of the Council of Economic Advisers, Ed Lazear, and Commerce Secretary Carlos Gutierrez, believed that the failure of the American auto industry would reduce the nation’s gross domestic product by hundreds of billions of dollars, cost a million jobs, and decrease tax revenue by at least $150 billion.
The crisis in the auto industry had been long in the making. To maximize profits, the Big Three–General Motors, Ford, and Chrysler–had shifted increasingly to the production of SUV’s and large pickup trucks rather than smaller fuel-efficient cars. The profit margin on an SUV was 15 to 20 percent, versus as little as 3 percent on a small car. That was fine so long as gasoline remained affordable, but an energy crisis had caused fuel prices to spike, reaching $4 a gallon in 2008. At that point the sales of SUVs and large pickups plummeted. In addition, many new cars were purchased with money from home equity loans; in 2007, about two million. Such funding dried up during the financial crisis, as did other forms of credit.
The annual capacity of the U.S. auto industry was seventeen million vehicles. In 2008, only ten million were produced. That was also a reflection of the inability of the U.S. automakers to compete with foreign companies. In 1998, Detroit’s Big Three commanded 70 percent of the American market. By 2008, their share had shrunk to 53 percent. U.S. production costs were uncompetitive as a result of the high wages and elaborate health care arrangements the carmakers had negotiated with the United Auto Workers, as well as high pension costs. Finally, the severe downturn in the stock market had significantly reduced the capital assets of the Big Three, and their cash reserves were dangerously low. Bankruptcy appeared inevitable.
Bush initially sought to provide the money the auto industry needed by tapping into a $25 billion fund that had been established earlier in the year to assist the car companies in producing more fuel-efficient vehicles. Under an arrangement negotiated with House speaker Nancy Pelosi, the Treasury would be authorized to loan $14 billion from the fund to General Motors and Chrysler until March 2009. (Ford said it had sufficient cash reserves and did not need federal assistance.) Bush would be authorized to appoint a financial director–a “car czar”–who would be empowered to ensure that GM and Chrysler restructured themselves to become commercially viable. If they failed to do so, the loans would be called and the companies would be forced into bankruptcy. As White House press secretary Dana Perino expressed it, “Long-term financing must be conditioned on the principle that taxpayers should only assist automakers executing a credible plan for long-term viability.”
On December 10, the Bush-Pelosi proposal passed the House of Representatives 237-170, largely along party lines. Thirty-two Republicans, mainly from states with auto plants, joined 205 Democrats voting in favor, while 20 Democrats voted with 150 Republicans against. But in the Senate the bill immediately ran into trouble. Republicans balked at supporting the bill without steep cuts in pay and benefits for the autoworkers. The bill was flawed, said minority leader Mitch McConnell, because “it promises taxpayers money today for reforms that may or may not come tomorrow.” When Harry Reid asked for cloture to bring the bill to a vote, he could muster only fifty-two of the sixty votes required. Just as with their initial consideration of the TARP legislation, Congress once again turned the president down. Only this time it was the Senate that wielded the ax.
Once again, Bush responded to the defeat by pledging to take action. After expressing his disappointment that Congress had failed to pass the rescue legislation, the president emphasized the consequences of failing to respond to the crisis in the auto industry. “A precipitous collapse of this industry would have severe impact on our economy, and it would be irresponsible to further weaken or destabilize our economy at this time.” Speaking through the White House press office, Bush said that “under normal economic circumstances we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the U.S. economy, we will consider other options if necessary–including the use of the TARP program–to avert a collapse of troubled automakers.”
The day after the Senate vote, Bush left the White House for Texas to deliver the commencement address at Texas A&M, and then undertook his final visit to Iraq and Afghanistan. The question of what to do about the auto industry remained unresolved. When the president returned to Washington in mid-December, he immediately took up the issue. Several on the White House staff, as well as vice president Cheney, argued that the question was not as serious as the Wall Street meltdown and that the auto companies should be allowed to fail. Others including Paulson, Gutierrez, and Lazear, argued that without federal funds the auto companies would be forced to liquidate. Bankruptcy was not an option because there was no private financing available to permit them to restructure. Having listened to the arguments for an hour and a half, Bush said he would think about it. Paulson urged him to think fast, because time was running out.
Bush wrestled with the questions for two days. Appearing at an open forum of the American Enterprise Institute at the Mayflower Hotel on the morning of December 18, he was frank about what was involved. “I haven’t made up my mind yet,” Bush told the audience.
“This is a difficult time for a free market person. Under ordinary circumstances, failed entities–failing entities should be allowed to fail.
I have concluded these are not ordinary circumstances, for a lot of reasons. Our financial system is interwoven domestically, internationally. And we got to the point where, if a major institution were to fail, there is great likelihood there would be a ripple effect throughout the world. . . . And so I analyzed that and decided I didn’t want to be the president during the depression greater than the Great Depression or the beginning of a depression greater than the Great Depression.”
As for the automobile industry, Bush said,
“The autos obviously are very fragile and I’ve laid out a couple of principles. One, I’m worried about a disorderly bankruptcy and what it would do to the psychology and the markets. They’re beginning to thaw, but there’s one other consideration, and that is, I feel an obligation to my successor. I’ve thought about what it would be like to become President during this period. I believe that good policy is not to dump him a major catastrophe on his first day in office.”
Bush’s oral presentation clarified his thinking. That afternoon he instructed Paulson to proceed with the bailout using money from TARP. Under the plan that Bush approved, General Motors would be provided with federal loans of $13.4 billion and Chrysler $4 billion. The money would carry the companies through March. GM and Chrysler would have to come up with viable structuring plans by then, but there would be no “car czar” to oversee the operation. If the companies failed to produce, the loans would be called and the companies forced into bankruptcy.
Bush announced his decision before the markets opened Friday morning, December 19, 2008. “If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. Under ordinary economic circumstances, I would say this is the price that failed companies must pay, and I would not favor intervening to prevent the automakers from going out of business. But these are not ordinary circumstances.” The president went on to describe current economic conditions and how the auto industry had been affected. He then laid out what he had decided to do, and what the auto companies would be required to do in return. “The actions I am announcing today represent a step that we wish were not necessary. But given the situation, it is the most effective and responsible way to address this challenge facing our nation. By giving the auto companies a chance to restructure, we will shield the American people from a harsh economic blow at a vulnerable time. And we will give American workers an opportunity to show the world once again they can meet challenges with ingenuity and determination and bounce back from tough times and emerge stronger than before.”
Bush’s decision to intervene on behalf of General Motors and Chrysler was popular at the time, [FOOTNOTE: “According to a CNN/Opinion Research Corporation poll, only 37 percent of Americans supported the decision of the president at the time. By 2012, it was supported by 56 percent. Elspeth Reeve, “Most Americans Now Think Auto Bailout Was a Good Idea,” The Atlantic Wire, February 2012. In 2008, Mitt Romney, who was to run against Obama in 2012, wrote an op-ed for The New York Times (October 19) entitled “Let Detroit Go Bankrupt.”] but saved the auto industry. It also avoided another financial meltdown and the follow-on ripple effect that would have damaged other parts of the manufacturing sector. Bush was not happy about the decision but recognized its necessity. “It was frustrating,” he wrote, “to have the automakers’ rescue be my last major economic decision. But with the market not yet functioning, I had to safeguard American workers’ families from a widespread collapse. I also had my successor in mind. I decided to treat him the way I would like to have been treated if I were in his position.”
Obama, for his part, immediately embraced the president’s decision. “I do want to emphasize to the Big Three automakers the people’s patience is running out, and they should seize this opportunity over the next several weeks to come up with a plan that is sustainable. And that means they’re going to have to make some hard choices.”
In many respects, and despite his unpopularity, 2008 was the high point of Bush’s presidency. His approval ratings may have hovered in the high 20s, but his decisions to rescue Wall Street and the auto industry were essential to the survival of the American economic system. Bush was very much along at this point. Cheney had become simply another vice president and was no longer the president’s principal adviser. Rove and Gonzales were gone, and most of the White House staff was new. Bush wrestled with the problems on his own. Contrary to his deeply held belief in free enterprise, he intervened with TARP to provide liquidity to the financial markets and then bailed out GM and Chrysler with bridging loans to keep them afloat. In both instances, he was opposed by the majority of his own part in Congress. He also concluded an agreement with Iraqi prime minister Nouri al-Maliki to withdraw all U.S. forces by 2011. This too was contrary to his long cherished belief in American global leadership, but was essential to preserve the independence of Iraq. And he went out of his way to insure a smooth and orderly transition with the incoming Obama administration. In all four instances, Bush deserves credit for addressing the issues head-on, regardless of ideology.
The year 2008 brought pleasures as well as challenges. In May, Bush’s daughter Jenna was married at the ranch in Crawford to Henry Hager, a former aide to Karl Rove. Jenna did not want a White House wedding, preferring the informality of the Texas setting. The ceremony was conducted by Bush’s old friend the Reverend Kirbyjon Caldwell from Houston, and a mariachi band played the wedding march as the president, with tears in his eyes, walked Jenna down the aisle. The wedding was strictly a family affair and none of the White House staff attended. Jenna’s sister, Barbara, was the maid of honor, her grandfather, George H. W. Bush, read from the scriptures, and Hager’s parents spoke briefly about the joys of marriage. After the ceremony there was a festive dinner under a large tent that had been erected at the ranch, guests danced to music provided by local musicians, and then gathered around a firepit to savor the experience. Bush remained up until the last guests departed about 1:00 a.m.–a remarkable testament to his enthusiasm. As he noted, “After my eight years in the presidency, our family had emerged not only stronger, but bigger, too.””
(WHEN GEORGE BUSH, WHO WAS SUPPOSED TO BE WATCHING THE BANKING INDUSTRY, BUT WASN’T, TREAS SEC HANK PAULSON TOLD HIM THE CONDITION OF THE BANKS WAS WORSE THAN IN THE 1930s, THE PRESIDENT, TO HIS CREDIT, SAID, WE HAVE TO SAVE THEM AND HE TOLD PAULSON TO BEG TO THE DEMOCRATS TO PASS THE $700 TARP BANK BAILOUT BILL. THE DEMOCRATS OBLIGED AND DID HELP, MAKING PRES BUSH LOOK A LOT BETTER THAN HE SHOULD HAVE, CREDIT WISE, SINCE HE TOOK OVER FROM PRES BILL CLINTON WITH THE BIGGEST SURPLUS THIS COUNTRY EVER HAD. OUR NEXT BOOK THAT WE’RE GOING TO BE READING, WILL FOLLOW UP WITH SOME OF THE DETAILS THAT WEREN’T TALKED ABOUT IN THIS BOOK, IN THE FACT THAT THE DEREGULATION OF THE BIG BANKS COULD HAVE LED TO A LOT MORE SERIOUS PROBLEMS THAN 2008, AFFECTING ALL THE FOOD AND MINERAL COMMODITIES AND WORLD STARVATION. THE NAME OF THE BOOK IS “MAKERS AND TAKERS: THE RISE OF FINANCE AND THE FALL OF AMERICAN BUSINESS” BY RANA FOROOHAR. AFTER LEAVING THE WHITE HOUSE, GW BUSH GAVE 140 SPEECHES AND EARNED OVER $15 MILLION IN TWO AND A HALF YEARS, CHARGING BETWEEN $100,000 AND $150,000 FOR EACH APPEARANCE.
LaVern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer and Public Citizen Member and USAF Veteran