THE PROPOSED AUTO BAILOUT BILL [With Analysis] Part 2

McAuleysworld – AUTO BAILOUT BILL  POST #2 – The actual Congressional Bill (with analysis):

 Auto Bailout Bill Continued:

 (a) PRIORITIZING ALLOCATION

The President’s designee shall prioritize allocation of the provision of financial assistance under this Act to any eligible automobile manufacturer, based on—

(1) the necessity of the financial assistance for the continued operation of the eligible automobile manufacturer;

(2) the potential impact of the failure of the eligible automobile manufacturer on the United States economy; and

(3) the ability to utilize the financial assistance optimally to satisfy the operational and long-term restructuring requirements of the eligible automobile manufacturer.

[This is exactly what Bankruptcy Courts do every day – except the Bankruptcy Courts don’t hand out taxpayor money]

(b) ORDER OF PRIORITY; SECTION 4.

For purposes of allocating bridge loans or commitments pursuant to section 4, the President’s designee shall prioritize the considerations set forth in subsection (a) in the following order: paragraph (1), paragraph (2), and paragraph (3).

(c) ORDER OF PRIORITY; SECTION

For purposes of allocating financial assistance for restructuring pursuant to section 7, the President’s designee shall prioritize the considerations set forth in subsection (a) in the following order: paragraph (3), paragraph (2), and paragraph (1).

SEC. 10. FUNDING.

 (a) FINANCIAL ASSISTANCE.

 (1) IN GENERAL

Such sums are appropriated as are necessary for the purpose of providing funds to support up to $14,000,000,000 in loans under this Act. The Secretary of Energy shall make available to the President’s designee $7,010,000,000 of funds made available under section 129 of division A of the Consolidated Security, Disaster Assistance and Continuing Appropriations Act, 2009, relating to funding for the manufacture of advanced technology vehicles, which shall reduce the appropriation under this paragraph.

(2) RESERVATION FOR CERTAIN PURPOSES

The Secretary of Energy shall reserve $500,000,000 of the amounts made available under paragraph (1) for purposes of section 136 of the Energy Independence and Security Act of 2007 (Public Law 110-140; 42 U.S.C. 17013).

(3) CONTINUING APPLICATION PROCESS

No provision of this section shall be construed as prohibiting or limiting the Secretary of Energy from processing applications for loans under section 136 of the Energy Independence and Security Act of 2007.

 (b) AUTHORIZATION.—There are authorized to be appropriated to the Secretary of Energy, sums as may be necessary for the purpose of replenishing the funds made available to the President’s designee under subsection (a)(1).

available to the President’s designee under subsection a)(1).

SEC. 11. TERMS AND CONDITIONS.

(a) DURATION

The duration of any loan made under this Act shall be 7 years, or such longer period as the President’s designee may determine with respect to such loan. [A loan of unlimited duration? No time limit – competely open ended] 

(b) RATE OF INTEREST; TIMING OF PAYMENTS

 (1) RATE OF INTEREST

The annual rate of interest for a loan under this Act shall be— (A) 5 percent during the 5-year period beginning on the date on which the President’s designee disburses the loan; and (B) 9 percent after the end of the period described in subparagraph (A). [Are they kidding – they will give Taxpayor money out at this interest rate – when the American Taxpayor can’t get loans at this rate. You want to fix the property market – lower mortgage rates to 5% and see what happens – Why won’t the Professional lenders loan money to the “Detroit 3” at this rate]

2) TIMING OF PAYMENTS.—Payments of interest on loans under this Act shall be made semiannually.

(c) NO PREPAYMENT PENALTY

 A loan made under this Act shall be prepayable without penalty at any time.

(d) INFORMATION ACCESS

 As a condition for the receipt of any financial assistance made under this Act, an eligible automobile manufacturer shall agree—

(1) to allow the President’s designee to examine any books, papers, records, or other data of the eligible automobile manufacturer, and those of any subsidiary, affiliate, or entity holding an ownership interest of 50 percent or more of such automobile manufacturer, that may be relevant to the financial assistance, including compliance with the terms of a loan or any conditions imposed under this Act; and

(2) to provide in a timely manner any information requested by the President’s designee, including requiring any officer or employee of the eligible automobile manufacturer, any subsidiary, affiliate, or entity referred to in paragraph (1) with respect to such manufacturer, or any person having possession, custody, or care of the reports and records required under paragraph (1), to appear before the President’s designee at a time and place requested and to provide such books, papers, records, or other data, as requested, as may be relevant or material.

(e) OVERSIGHT OF TRANSACTIONS AND FINANCIAL

[But where is the concern about “transparency” to keep the public informed about how their money is being spent – Why are public meeting requirements being waived?]

(1) DUTY TO INFORM

During the period in which any loan extended under this Act remains outstanding, the eligible automobile manufacturer who received such loan shall promptly inform the President’s designee of

(A) any asset sale, investment, contract, commitment, or other transaction proposed to be entered into by such eligible automobile manufacturer that has a value in excess of $100,000,000; and (B) any other material change in the financial condition of such eligible automobile manufacturer.

 (2) AUTHORITY OF THE PRESIDENTS DESIGNEE

During the period in which any loan extended under this Act remains outstanding, the

President’s designee may (A) review any asset sale, investment, contract, commitment, or other transaction described in paragraph (1); and (B) prohibit the eligible automobile manufacturer which received the loan from consummating any such proposed sale, investment, contract, commitment, or other transaction, if the President’s designee determines that consummation of such transaction would be inconsistent with or detrimental to the long-term viability of the eligible automobile manufacturer.

 (3) PROCEDURES

 The President’s designee may establish procedures for conducting any review under this subsection.

(f) CONSEQUENCES FOR FAILURE TO COMPLY

 The terms of any financial assistance made under this Act shall provide that if—

(1) an evaluation by the President’s designee under section 5(b) demonstrates that the eligible automobile manufacturer which received the financial assistance has failed to make adequate progress towards meeting the restructuring progress assessment measures established by the President’s designee under section 5(a) with respect to such recipient;

[AND WHAT IS THE PENALTY FOR COMING BACK TO WASHINGTON WITHOUT A “RESCUE PLAN” – WILL CONGRESS HAND OUT TAXPAYOR MONEY BEFORE THE “DETROIT 3” SUBMITS A SURVIVAL PLAN?]

(2) after March 31, 2009, the eligible aumobile manufacturer which received the financial assistance fails to submit an acceptable restructuring plan under section 6(b), or fails to comply with any conditions or requirement applicable under this Act or applicable fuel efficiency and emissions requirements; or (3) after a restructuring plan of an eligible automobile manufacturer has been approved by the President’s designee, the auto manufacturer fails to make adequate progress in the implementation of the plan, as determined by the President’s designee, the repayment of any loan may be accelerated to such earlier date or dates as the President’s designee may determine and any other financial assistance may be cancelled by the President’s designee.

[AND EXACTLY WHERE DOES CONGRESS THINK THE MONEY WILL COME FROM – THE MONEY TO REPAY THE TAXPAYOR – THE “DETROIT 3” WILL BE SPENDING THE BAILOUT MONEY AS FAST AS IT COMES IN THE DOOR – ONCE IT IS SPENT IT IS GONE] 

SEC. 12. TAXPAYER PROTECTION.

(a) WARRANTS

 (1) IN GENERAL

The President’s designee may not provide any loan under this Act, unless the President’s designee, or such department or agency as is designated for such purpose by the President, receives from the eligible automobile manufacturer

(A) in the case of an eligible automobile manufacturer, the securities of which are traded on a national securities exchange, a warrant giving the right to the President’s designee to receive nonvoting common stock or preferred stock in such eligible automobile manufacturer, or voting stock, with respect to which the President’s designee agrees not to exercise voting power, as the President’s designee determines appropriate; or

(B) in the case of an eligible automobile manufacturer other than one described in sub-paragraph (A), a warrant for common or preferred stock, or an instrument that is the economic equivalent of such a warrant in the holding company of the eligible automobile manufacturer, or any company that controls a majority stake in the eligible automobile manufacturer, as determined by the President’s designee.

(2) AMOUNT

[I find this insulting – insulting to my intelligence – if The “Detroit 3” doesn’t successfully restructure – none of the “financial ijntruments” listed above will be worth a damn when the “Detroit 3” – Taxpayors would never be repaid – and the individuals who drafted this Bill know that full well]

(A) IN GENERAL.—The warrants or instruments described in paragraph (1) shall have a value equal to 20 percent of the aggregate amount of all loans provided to the eligible automobile manufacturer under this Act. Such warrants or instruments shall entitle the Government to purchase  (i) nonvoting common stock, up to a maximum amount of 20 percent of the issued and outstanding common stock of (I) the eligible automobile manufacturer; or (II) in the case of an eligible automobile manufacturer, the securities of which are not traded on a national securities exchange, a holding company or company that controls a majority of the stock thereof (in this section referred to as the ‘‘warrant common’’); and (ii) preferred stock having an aggregate liquidation preference equal to 20 percent of such aggregate loan amount, less the value of common stock available for purchase under the warrant common (in this section referred to as the ‘‘warrant preferred’’).

(B) COMMON STOCK WARRANT PRICE

The exercise price on a warrant or instrume described in paragraph (1) shall be—

(i) the 15-day moving average, as of December 2, 2008, of the market price of the common stock of the eligible auto mobile manufacturer which received any loan under this Act; or

(ii) in the case of an eligible auto mobile manufacturer, the securities of which are not traded on a national securities exchange, the economic equivalent of the market price described in clause (i), a determined by the President’s designee.

 (C) TERMS OF PREFERRED STOCK WARRANT

 (i) IN GENERAL

The initial exercise price for the preferred stock warrant shall be $0.01 per share or such greater amount as the corporate charter may require as the par value per share of the warrant preferred. The Government shall have the right to immediately exercise the warrants.

(ii) REDEMPTION.—The warrant preferred may be redeemed at any time after exercise of the preferred stock warrant at 100 percent of its issue price, plus any accrued and unpaid dividends.

 (iii) OTHER TERMS AND CONDITIONS

 Other terms and conditions of the warrant preferred shall be determined by the President’s designee to protect the interests of taxpayers.

[Warrants , Stocks and Notes issued by a Company that goes out of Business are worthless and the Taxpayors will not be repaid] 

(3) APPLICATION OF OTHER PROVISIONS OF LAW

Except as otherwise provided in this section, the requirements for the purchase of warrants under section 113(d)(2) of the Emergency Economic Stabilization Act of 2008 (division A of Public Law 110 – 343 shall apply to any warrant or instrument described in paragraph (1), including the antidilution protection provisions therein.

http://www.house.gov/apps/list/press/financialsvcs_dem/autobill.pdf

PART ONE OF BAILOUT BILL HERE:  https://mcauleysworld.wordpress.com/2008/12/11/the-proposed-auto-bailout-bill-with-analysis-part-1/

PART THREE OF BAILOUT BILL HERE:Ththttps://mcauleysworld.wordpress.com/2008/12/11/the-proposed-auto-bailout-bill-with-analysis-part-3/tp://mcauleysworld.wordpress.com/2008/12/11/the-proposed-auto-bailout-bill-with-analysis-part-3/

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