The ball’s in the White House’s court; there’s no chance of Congress passing a Detroit bailout bill before it reconvenes next year. The White House has TARP funds, but only $15 billion remains from the first $350 billion tranche; that’s barely enough for Detroit, and in any case it’s needed as to backstop Treasury commitments to the financial sector. So here’s one question:
What does this all mean for the probability that Paulson will get the second $350 billion?
On the one hand, if Congress won’t give Detroit a fraction of that amount, it’s really hard to see why they will be so generous to Wall Street. Clearly any bailout is supremely unpopular among both voters and their representatives, and of all the bailouts to attempt, Wall Street is probably the most unpopular.
At the same time, however, Congress has already passed the $700 billion TARP bill, and clearly something needs to be done: maybe a case can be made that now it’s obvious $700 billion is not nearly enough, it would be silly to block the release of the second tranche. But I’m not hopeful.
I do wonder whether the White House might be able to find Detroit bailout money (or, at the very least, debtor-in-possession financing money) somewhere other than TARP — a bit like Bob Rubin managed to find Mexico’s bailout money in some hidden corner of the Treasury, using a dusty old piece of legislation for a purpose it was never designed for. Paulson’s quite open about the fact that he’s happy to make decisions first and worry about their legality later — can’t he do that now, with Detroit?
The problem is that it might be a stretch even for Paulson to decide that Detroit really falls under his purview. Congress has spoken, unambiguously: it doesn’t want a bailout. (Or, rather, a minority of Senators has managed to block a bailout.)
And while the stock market is down this morning, it isn’t plunging in the way it did after TARP failed the first time around. I don’t believe that the stock market is pricing in some kind of Deus ex Machina from the White House, which would imply that maybe it’s not as worried about the fate of Detroit as many of the rest of us are. And if Wall Street isn’t worried, then the chances are that Paulson isn’t worried, either.
Which is bad news for Detroit, I fear.