TARP funds are now going to be used to bail out the auto industry. Whether or not this is ultimately a good or responsible idea is something that I will reserve comment on for now. The loans' term sheet isn't out yet, but it's outlines are being reported: $13.5bn now, callable on March 30 (conveniently on the Obama administration's watch) if the automakers haven't reduced their debt by 2/3s (including via deb/equity swap–shareholders will get diluted) and worked out a competitive labor deal.
The idea animating these bridge loans is that the exploding deadline will force the automakers and their major creditor constituencies–labor, secured creditors, suppliers, dealers, and bondholders–to work out a restructuring. That's a nifty move, but it is a gamble, and as I explain below, it is a very risky one for taxpayers. The Times reports that the loan will have priority over other creditors, which should protect taxpayers/ Only problem is that I don't know how that would be possible under existing law.