The Democrats want to loan the Detroit 3 in part because they owe the UAW big for the recent election victories. If the Detroit 3 slide into Chapter 11, the UAW will be hurt very badly, as an oganization. The Democrats, and Obama in particular, have a goal of making unions stronger (card check). Says Newt Gingrich:
To reward the unions that helped produce its electoral victory, the newly empowered Democratic Congress is proposing that American taxpayers pony up $25 billion to bail out the Detroit Three automakers, Ford, GM and Chrysler.
The House Democrats have written loan legislatio which has strings attached (you can read it here), which require the Detroit 3 to make "greener" cars:
‘‘(1) achievement of the fuel efficiency require10The House legislation also bans excessive executive compensation and "golden parachutes", which is more populist pandering and soak-the-rich, as usual.
ments and commencement of domestic advanced
technology vehicle manufacturing as authorized in
the Energy Independence and Security Act of 2007;
The Republicans don't want to loan the money outright, but instead keep demanding that the Democrats re-write the already passed (and previously commented on by me) Advanced Technology Vehicle Manfacturers Assistance Plan to remove the environmental requirements, and spend the money as aid right away. This is because they want to jam the environmental lobby, I suspect.
The Democrats want the original $25 Billion ATVMAP left in place, and another $25 Billion carved out of the TARP funds. So, sort of unmentioned in all of this, is that the Democrats are really advocating for $50 Billion in low-cost loans--$25 Billion now, and $25 Billion later.
Some Republicans and conservative commentators are saying that Chapter 11 protection is a smarter choice for the Detroit 3, so they can shed their legacy obligations. What this really means is, "let's stick it to the UAW".