Rep. wants banks to forgive auto debt

One Michigan lawmaker is upping the pressure on bailed-out banks to cut the auto companies a break.

Rep. Gary Peters (D-Mich.) has written to four of the nation’s largest banks — all recipients of billions in taxpayer money and all major holders of Chrysler’s debt — urging them to negotiate with the troubled automaker and forgive the vast majority of the automaker’s debt.

The White House has given Chrysler, which is headquartered in Peters’ district, a 30-day stay of execution, during which the American company must strike a merger deal with Italian automaker Fiat to survive.

Peters is seeking to leverage popular anger at Wall Street to pressure the reluctant debt holders to forgive Chrysler’s debt. A press release announcing his letters to the CEOs of JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley scolded that the banks “should stop seeking more tax dollars through automakers.”

In his letters, Peters listed the amount each of the four firms has taken from taxpayers. JPMorgan, for instance, has taken $25 billion through the Troubled Asset Relief Program and $400 million when American International Group used some of its $180 billion bailout to pay off counterparties in full.

“These banks hold the key to Chrysler’s survival,” Peters said in a statement. “Despite taking billions in taxpayer support to keep themselves solvent, these creditors are unwilling to reach a fair deal to keep Chrysler alive and to protect hundreds of thousands of American families. These financial institutions are already leading recipients of taxpayer support, and any money received from Chrysler will simply be more tax dollars.”

“The banks that hold Chrysler’s debt were provided federal support for the good of the economy, and they should negotiate in good faith with automakers for the same reason,” he said.

But relying on public anger to shame the big banks into debt forgiveness may not be an effective strategy. Polls show little sympathy for the automakers’ plight. Sixty-three percent of Americans say the automakers’ problems are their own fault, according to a March 17 CBS News poll.