Superintendent Richard H. Neiman's Opening Statement at the Congressional Oversight Panel
Hearing with Treasury Secretary Timothy Geithner
July 27, 2009
Good morning. Thank you all for appearing at this hearing of the Congressional Oversight Panel on the automotive industry and financial stability efforts taken through the Troubled Asset Relief Program (TARP).The financial crisis and credit contraction that has occurred over the last two years has had a very severe impact upon the real economy. The consequences for U.S. auto manufacturers in particular have been devastating, greatly exacerbating the long-standing challenges facing the auto industry.
A downturn in auto sales was already underway when the financial crisis exploded last fall, and conditions for the auto industry have continued to deteriorate. Auto sales in 2008 were at their lowest point in a quarter-century, and have fallen even further in 2009. Treasury acted to avert a more systemic economic impact from a collapse of auto manufacturers and suppliers by using TARP resources to address resulting shortfalls at two of the most severely affected auto companies, GM and Chrysler. We are glad to be here in Detroit today to take a more in-depth look at important policy and implementation issues involved in the use of more than $80 billion in TARP funds.
While there may be ample justification for two Administrations to have used the TARP to address the crisis in the U.S. auto industry, such targeted assistance to one particular economic sector involving two major corporations --- three if we include GMAC --- and their suppliers raises important public policy issues.
- How much involvement in the day to day operations of those companies should Federal officials have?
- Should the government take advantage of its dominant ownership positions to influence key decisions about the future direction of those companies, their product lines and their competitive positions?
- What exactly should be the roles of the government appointed directors of the successor companies and how can the government and the American people best obtain the information they need to effectively monitor their investments?
The impact of the rapidly declining auto industry upon the economies of the states in the Midwest has also been severe, and is another key reason why government assistance in this instance may have been uniquely justified. Unemployment in Michigan is now the highest in the country. This, in turn, has aggravated the home foreclose problem in this region, with Michigan having the seventh highest rate of foreclosures in the country during the first half of this year. Other states in the region close behind. I have been particularly concerned about the lingering mortgage foreclosure crisis in this country and its impact upon millions of American families. I hope that the stabilization and restoration of the American auto industry can bring needed relief to those families here in Michigan and elsewhere.There is much to discuss this morning. I look forward to hearing from the panels of witnesses and to participating in a lively and constructive dialogue with each of you.