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Senate Republican Whip Jon Kyl on the Big 3 bailout prospects

Friday, December 5, 2008
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HH: Joined now by United States Senator Jon Kyl, our favorite Senator from the great state of Arizona. Senator Kyl, welcome back. I know you’re headed back to D.C. today in time to talk about this GM bailout. What are your thoughts on this?

JK: Well thanks, we’re going to head back for the first part of next week. Congress will be in session to consider some form of bailout for the auto companies. I have not favored it, and after the testimony today, I didn’t hear all of it, but from what I did hear, I would not be supportive of the bailout of the kind that they’re asking for. And I don’t know what the Congress is likely to do. There are several different options, and we can get into the details of those, but my own view is that they would be much better off using a law that we already have on the books that would enable them to reorganize their business by shedding a lot of their obligations, and coming out of, it’s called reorganization under Chapter 11 of the bankruptcy code, in a much more competitive position. And that’s really what I think they ought to try to do.

HH: Now Senator Kyl, before we go into the specifics of that option or other ones, do you expect that Republicans or bailout opponents will join together to filibuster any bailout?

JK: I don’t know that that’ll be necessary, but your point is well taken, because in an effort to get this done in one week, next week with the holiday coming on and so on, it is not likely that it could be done without a lot of cooperation of the members in terms of procedure. There would be a lot of time that would be, a lot of procedural shortcuts that would need to be taken in order to complete it by the end of the week. And so if even one member objected to the process, then it would bring it to a halt, and probably mean that it couldn’t be done. So it would almost have to be something that everybody agreed to.

HH: And that’s almost impossible given the hundred members of the Senate, isn’t it?

JK: Very, very difficult with a contentious issue like this, yes.

HH: All right. Now Senator Kyl, in terms of the objections to going the Chapter 11 route, we hear, and I hear from a lot of suppliers, a lot of auto workers, no one will buy a car from a bankrupt company, and that therefore, there is no reorganization, will crash and burn the auto industry. What’s the best response to that?

JK: Well, I don’t agree with that. First of all, it’s not a bankrupt company. It’s, you’re using a section of the bankruptcy code, but it’s exactly the section that prevents you from having to go bankrupt. You reorganize your business, and come out after a year or eighteen months, and you’re still the same company. You’ve been doing business during all of those months, and you come out in a much more competitive form, because you’ve been able to shed many of the legal obligations that otherwise would have put you under. The second answer is that I would be very willing if the argument is well, people won’t buy a Ford Taurus because they’re afraid that Ford Motor Company wouldn’t be around anymore to back up the warranty. All right, if that’s the objection, then I’d say fine, let’s have the government provide some kind of backup during the time that they’re in this Chapter 11 to the warranty, in effect having the government guarantee the warranty. That is not a big deal. And to use that as the argument against doing what they really need to do, I think is frankly disingenuous.

HH: Now there are a lot of retirees in your state of Arizona, I’m sure you’ve been hearing from the, probably a lot of UAW retirees, there are a half million of them out there. What about them, Senator? Do you think they come out of this in fairly good shape if they go BK?

JK: Let me answer the question this way, Hugh. Over the course of the next several months, probably close to a year, a lot of Americans that have jobs today aren’t going to have that same job. A lot of companies that are in business today are not going to be in business. In other words, we’re in a recession. Unemployment is going up, bankruptcies are going up, companies are going out of business. That’s what happens in a recession, and it’s not good. It’s bad. But auto workers, or retired auto workers, are no better than any other American when it comes to being protected by the free market. They should be just as susceptible to the vicissitudes of the market as anyone else. And if you argue that they’re somehow better than everybody else, then you have to tell me where I as a policy maker draw the line and say we’re going to help these people, but we’re not going to help those people. Bottom line is there are legal procedures, and if their pensions get cut by 10% or 15% or whatever the amount of it is, that may be the price that they have to pay to have any pension at all.

HH: Now Senator Kyl, at this point, my guess is that the Republicans have leverage that they will not have in a new Congress…

JK: Correct.

HH: …because you’re going to go from 49 to 41, maybe 42, depending on how Norm Coleman does. By the way, what do you think about Norm Coleman? Do you think that’s…

JK: If the recount is done fairly, as it appears to be done right now, he’ll win. But what they’re going to try to do, I suspect, is get it into court where they will argue that a lot of, that a bunch of votes that were not actually included in the recount should be counted, votes that were discovered in the back of somebody’s car, and that sort of thing. If they get into that sort of thing, then it could totally change the dynamic, and it could end up in the U.S. Senate. That would be very unfortunate. But the pure recount, I think, Norm Coleman will end up winning.

HH: Would the Republicans stand against any attempt to seat Al Franken on a basis of a push by Senator Reid and colleagues?

JK: If it appeared to be unfair, I think you could bank on it. And I think it would be a grave mistake for Democrats as the first thing that they do in a new Congress to try to steal an election from a Republican where they’re still going to have 58 votes. I mean, I think most Americans would see that as unfair, overreaching, and could be the beginning of the end of the honeymoon for the new president as well.

HH: Now let me ask you, Senator Kyl, if you have the leverage I referred to, why not bargain for what will be an inevitable bailout after the new Congress comes in, and go to the Democrats and say we’ll get you the GM and the Ford and the Chrysler money, but we want you to cut corporate income taxes in Michigan and Ohio to 12 1/2%, just like they are in Ireland. Let’s really help the state. Why not be bold?

JK: Well, we’ve been proposing ideas like that. There’s simply no willingness on the other side knowing that in 45 days or thereabouts, they’re going to be in very dominant control. Why would they concede anything to us at this point?

HH: Only if they believe GM is telling the truth that they can’t make it until next January. So I guess they must not believe GM if they’re not willing to deal on it.

JK: Well, there’s several options. One option is that they think the administration might, at the end of the day, throw enough money their way just to tie them through until that period of time, roughly $9 billion dollars, GM has said, would tie them through until sometime in January. Another option is there is a bill that they might try to get passed that’s been put together with both Democrats and Republicans that represents a very slight compromise, but frankly it’s not at all something that I could support.

HH: Jon Kyl, always a pleasure, we’ll talk to you next week in D.C., I hope.

End of interview.

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