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Facetime December 10, 2008, 5:21PM EST

Barney Frank on Detroit, Housing, and Executive Pay

"This [car czar] is going to ensure that a lot of people do things that are in everybody's interest.…Nobody wants to be the only sucker"

By Maria Bartiromo

Ford Fusion Hybrid: Frank says building greener cars will be part of the deal David McNew/Getty Images

Bailout aid to insurer AIG dwarves the sums Detroit has been asking for Everett Kennedy Brown/EPA/Corbis

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Chairman Frank marches in New Bedford's Veteran's Day Parade Brooks Kraft/Corbis

As BusinessWeek went to press on Dec. 10, the House passed a plan to provide the U.S. auto industry with a $14 billion bridge loan (to the Obama Administration, a wag might say). On Capitol Hill resistance was mounting from some Republican senators who said they were prepared to filibuster. But if you talk to Barney Frank of Massachusetts, the powerful chairman of the House Financial Services Committee—as I did on Dec. 9—the only question is whether Detroit will be bailed out while President Bush is still in office or whether the rescue must wait for Barack Obama.

MARIA BARTIROMO

The proposed auto bailout calls for the appointment of an auto czar. Doesn't that smack of nationalization?

BARNEY FRANK

No, because the czar will be monitoring what [car companies] do rather than taking the lead. They've got to submit a plan, and the czar can modify the plan. There's obviously greater national intervention…but the other point I would make is this: The purpose of this is to be able to get the federal government the hell out of it. They need us for now. But the federal government is there to try to make the federal role unnecessary within a few years.

How do you make sure the government doesn't meddle too deeply in day-to-day operations and bring politics—like a push for green cars—into the equation?

Oh, well, a push for green cars is very much a part of what we're involved in. We don't think that's politics.

Does Congress realize how few hybrids have been sold, as it pushes, Detroit to make them, and will Congress give consumers greater incentives to buy these cars?

That's a very fair point. And one of the things I've been saying is that some of my colleagues and the commentators who have been blaming the auto companies forget to blame somebody else—the consumers. In the recorded history of America, no one was ever forced at gunpoint to buy a Hummer. But we do believe that the combination of genuine concern about global warming and energy efficiency means people are now ready to buy these cars.

If several waves of car guys haven't been able to fix Detroit, why would an outsider do any better?

Of the three companies right now, the one that appears to be doing the best is being run by an outsider. Alan Mulally came to Ford (F) from Boeing (BA). Sometimes a fresher look can be helpful. But we're not talking about running the companies. You know, Harry Truman said once that being President meant getting people to do what they would've done in the first place if they were smart enough. This [car czar] is going to ensure that a lot of people do things that are in everybody's interest. That bondholders take less, that the auto workers make concessions, that dealers and suppliers accept some reductions. Nobody wants to be the only sucker in the game.

Who would be on your short list for czar?

I don't have a list because nobody's asking me to appoint a czar, and I have this rule: I don't think about things where nobody cares what I think.

If the economy weren't in such awful shape, would there be more political will to let these guys go bankrupt?

Yes. But we've lost 533,000 jobs. And the thing about bankruptcy is that you can break your agreement to pay people. The suppliers would be hurt. Yes, the union workers would be hurt. And there's another thing the car companies have been arguing: If you are going to buy a car, you want some assurance the company is going to be around.

Fair point. But if they don't buy cars from those companies, so what? An entrepreneurial company will take their place and build cars.

Well, in the first place, it's hardly the American way to just let people go bankrupt. You know, people tell me, "Oh, let's just let the market do it." We have American agricultural policy, for example, in which tens of billions of dollars are spent on helping farmers. Second, we are in the worst economic situation since the Great Depression. We are losing jobs at a fearful rate. People are frightened. People are not spending. It would be one thing to have a company collapse at a time of great prosperity when the people who lost their jobs could find other jobs, when the [suppliers] who couldn't sell to Chrysler could sell to somebody else. At this point, you are talking about a very weakened patient, and slapping that weakened patient around in the interest of proving some economic theory would cause even more damage. The CEOs of these companies are not likely to show up in any soup kitchens for many, many years no matter what happens to the companies. But there are workers. There are retirees. There are small companies that have sold [the automakers] things. There are auto dealers with their salespeople. It's having them thrown out of work through a bankruptcy and not getting paid that would be the problem.

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