The question really shouldn’t be “Do you support the government bailout?” Instead, the public should be asked “Do you think Barack Obama, Nancy Pelosi, Harry Reid, Barney Frank and the rest of our gang on Capitol Hill are qualified to run the U.S. auto industry, banking industry, insurance industry and other sectors of the American economy?”
If you think big business is best managed and overseen by politicians with no business experience, then the bailout, particularly the bailout of the auto industry, must seem like a pretty good idea. If however you haven’t lost your mind, then throwing $25 billion (on top of the already approved $25 billion for plant retooling) at a business model that is broken might seem, lemme’ see, insane.
Before we go further, I should point out that I have nothing against Detroit, am saddened at the thought of the potential job losses and disheartened at the demise of the once iconic U.S. auto industry. But none of that changes the overriding concern that the only thing $25 billion would do is postpone by a factor of months the inevitable Chapter 11 of one, two or all three of the big three auto companies.
Lest you think that I’m singling out the auto industry while tacitly approving the $700 billion approved for God knows what and the $100 billion plus handed over to AIG, I’m not. Having lived and worked overseas for years and having been exposed to systems ranging from communist to socialist to dictatorial, I feel pretty comfortable saying that massive government involvement in private business eventually results in a big steaming pile of crap. Now that might not be as eloquent as some of the business theories you’ve read, but hopefully the meaning is clear.
While the PWB staff is light on sophisticated economists, it does seem that using a band-aid, even one that costs $25 billion clams, on a sucking chest wound isn’t going to save the patient. Perhaps the leaders of the big three, along with their newest best friend forever Ron Gettelfinger (head of the United Auto Workers union) think they can convince the Congress that if they just had $25 billion they could save the day by restructuring their costs, business model and product line. As opposed to watching the $25 billion go down the drain over the next few months as they continue to pay enormous legacy costs, suffer declining sales and deal with the continued credit crunch. Apparently Nancy Pelosi, using her extensive business management experience, thinks that sounds about right.
In normal political times we might get a good old fashioned difference of opinion on the Hill over an issue as important as the proposed auto industry bailout. But these aren’t normal times. During this blessed honeymoon period as we await the change in administrations, anyone voicing concern over the bailout is viewed as an obstructionist … someone who doesn’t have the best interests of the nation at heart. What a load of crap.
A few Republicans have stood up and suggested that throwing good money (should I point out, our money) at the wheezing GM and inevitably Ford and Chrysler amounts to buying a few more months on life support. The auto chieftains and BFF Gettelfinger (not related to Goldfinger) have marched on Washington to explain that failing to prop them up will result in millions of job losses, the collapse of the free world and the end of the industry that makes those pine tree shaped air fresheners that hang from our rear view mirrors.
This is the same tactic used by AIG and the financial industry. I know we have collective attention deficit disorder as a nation, but does anyone remember Hank Paulson running around the Hill with his hair on fire claiming a huge comet will hit the earth if he didn’t get $700 billion? That was a trick question. Hank is bald; a hair fire is out of the question.
But Hank did get his $700 billion, which as far as I can tell is being dispensed with all the transparency of a Russian off shore company. Some of that $700 billion was mine… some of it was yours … don’t you want to know where the hell it’s going? It’s like handing money over to my teenage daughter … not only do I not know where it’s going, but the next day she’s standing in front of me asking for more.
And AIG? Remember them? Apparently, much like people are saying about the auto companies, AIG was just too big to fail. At last count they’ve received two massive infusions of cash. We’ve all heard about their crazy getaway trips to resorts for spa treatments and super boozeups. But does anybody think they could’ve possibly spent the entire $150 billion (give or take a few billion, who can freakin’ keep track) on facials and Cold Duck, or whatever insurance folks throw back on vacation? Even if they spent 10 percent of the bailout money on special executive massages (15 percent with happy ending), that still leaves $135 billion to account for.
And there in lies the rub. Or in AIG’s case, the rubdown. With Hank handing out briefcases full of dosh like Howie Mandel (minus the attractive briefcase ladies), AIG already $150 billion into the trough and the auto companies snuffling around looking for their feedbag, you and me have next to no idea what the hell is happening to our money, our children’s money and, frankly, our grandkid’s money. Once again, if you owned a pitchfork and/or one of those old fashioned torches, now would be a good time to pull them out of the shed and go demand that the monster be killed.
What’s that you say? If we don’t bailout the auto companies millions will lose their jobs and the economy will be wrecked? That’s one scenario and I agree, along with everyone that it’s a frightening scenario. And it’s that fear that the auto industry and Mr. “Read my lips, no concessions” Gettelfinger are preying on in the hope that Congress and the White House will pull out the billfold.
What we do know is that, without a bailout, GM will in all likelihood head in to Chapter 11. As with many other large companies before them, that entails restructuring and an actual hardnosed effort to return the company to profitability by making hard choices and changes. Easy? Painless? Absolutely not and no one should underestimate that.
But I’ll bet Bobo the talking intern’s pay for the next six months that a government bailout of $25 billion or more will in all likelihood result in GM eventually heading in to Chapter 11. Which would you rather do? Deal with the problem now, or throw $25 billion on the fire and deal with the problem later?
If the Republicans hold the line I’ll be amazed. The Obamatrons have marched on Capitol Hill and the pressure to display your commitment to blind bipartisanship is building.
Politicians, I hear, aren’t necessarily known for hanging their butts out in the wind and taking a stand. While they may believe it’s the right thing to do, the pressure to go along and, more germane, to not be viewed as responsible for job losses and the pain that will follow a move into bankruptcy, will likely prove too great.
Agreeing to an unsound (political speak for stupid) idea in the name of bipartisanship makes you not only weak but unprincipled as well. I think it’s time we show some fiscal responsibility and save the $25 billion. Frankly, we’ve got to think to the future. We’re going to need the extra cash when AIG heads off for their next out of town conference.
---------------------------------------
A $25-billion lifeline to American automakers appeared hopelessly tangled by partisan fighting Tuesday, making it unlikely Congress could move to help the cash-starved industry by the end of the week.
Some leaders in both parties and the White House signaled an impasse that could be tough to break during a week set aside for the special congressional session to address the industry's woes.
One House leader said lawmakers may have to try again next month, while Michigan's two Democratic senators said the seriousness of the situation demanded a compromise, if necessary, to get the money to the automakersimmediately.
The sticking point is this: The White House and some congressional Republicans want to rewrite rules on $25 billion in already authorized loans —intended to retool auto plants to make more fuel-efficient cars —to make the money available to the automakers to pay operational costs. Democrats, especially in the House, say the industry needs operational funds now, from the $700-billion bailout of the financial industry, on top of the $25 billion to make more fuel-efficient vehicles, which has yet to be disbursed.
Looked at another way, opponents want to keep the auto bailout to $25 billion, and they say the Wall Street rescue bill is no place to look for help for the carmakers.
Supporters, on the other hand, want to make a total of $50 billion available to the auto industry and see no reason why a sliver —4% of the total —from the financial bailout shouldn't go to help a sector as vital to national security and employment as auto manufacturing.
“We're just going to draw the line at the $25 billion that's been authorized,” rebutted White House spokeswoman Dana Perino.
The commitment to that $25 billion for retooling plants remains deep in the House. Democratic Majority Leader Steny Hoyer of Maryland said Tuesday in a speech at the National Press Club that he couldn't see the House reversing itself — even thoughDemocratic President-elect Barack Obama likely wouldhave an easy time getting a new Congressto fund bothwith more Democrats in both chambers.
Hoyer mentioned the idea of a December session, saying he wasn't even sure the House would come in this week. It would depend, he said, on whether it could result in “anything productive.”
The automakers say they can't wait until Obama's inauguration.
By then, one or more of them could have collapsed under the weight of poor sales, frozen credit, dwindling cash reserves and high costs.
Should that happen, it could send a huge shock through the national economy.
On Tuesday, a group of mayors from Michigan, Ohio and elsewhere pleaded for immediate help for the industry, which is said to directly or indirectly support 3 million jobs andaffects thousands of retirees across the nation.
Even before the current crisis, the automakers were struggling with deep retrenching through plant closures and job cuts that have plagued Michigan's economy for years.
At a news conference in Washington, the mayors said they prefer both retaining the $25 billion in loans to retool plants — money authorized as part of Congress' decision last year to increase thefuel efficiency standard to 35 miles per gallon by 2020 —and an additional $25 billion to help the industry immediately.
But if it had to be one or the other, they said, they'd like a compromise.
“Right now,” said Lansing Mayor Virg Bernero, one of those meeting with senators Tuesday, “it's a matter of survival.”
Today, Detroit Mayor Ken Cockrel Jr. visits Washington to lobby for the bailout as well, as a House committee takes up its version of the auto bailout, which would take a $25-billion slice of the $700-billion bailout of Wall Street.
There may not be enough time to reach a compromise this week, anyway. The White House, Senate Republicans and some Democrats have plainly predicted that Senate Majority Leader Harry Reid of Nevada and Sen. Carl Levin of Michigan don't have the votes to pass the bill, which authorizes 10-year loans, with restrictions on executive compensation and dividends to shareholders for the life of the loans.
Sen. Max Baucus, D-Mont., said “there's too much opposition from the” Bush administration to get the bill through.
Perino reaffirmed the Bush White House's commitment to automakers but said flatly that $25 billion in authorized funds is enough.
Today, the Senate is expected to take up the bailout bill —along with an unemployment benefits extension —on the floor, though Republicans likely will signal their desire to subject the legislation to extended debate. That would probably result in a test voteFriday to determine whether the Democrats have the 60 votes necessary to break a filibuster.
Meanwhile, the House Financial Services Committee chaired by Rep.Barney Frank, D-Mass., was expected to take up the House version of the bill today with auto executives talking to that panel.
The House legislation is different, with 7-year loans, stricter oversight regulations and stock warrants worth at least 20%ofthe cost of the loans. That could mean the government could end up controlling a big portion of the automakers.
House members are in the nation's capital for organizational meetings this week, so it would be easy for House Speaker Nancy Pelosi to call them into session.
On Tuesday, Senate Minority Leader Mitch McConnell, a Kentucky Republican who has auto plants in his state, said he had heard there was some Democratic support for using the retooling loans and that “hopefully Sen. Reid and I can discover a way forward.”
Michigan's Democratic senators, too, said they were less concerned about where the money came from and more focused on getting aid before the end of the year. General Motors Corp. has said it needs immediate aid, and analysts estimate the company could run short of cash to pay its bills by January.
“If, in the short run, the only way we have is to take a portion of that” retooling loan, I would “very reluctantly do that,” said Sen. Debbie Stabenowof Michigan,“but only because President-elect Obama will be focused on retooling and a manufacturing strategy next year.”
Said Levin: “If we can't get it done next week, we'll get it done the week after. … How we get there is not as important as getting there.”
Iliving App Review from the heart
-
I originally posted this on one of my TLD's but I figured it was a great
fit for this blog, seeing as the topic is really kinda about stupid human
tricks. ...
11 years ago
1 comment:
To reduce costs GM should consider bankruptcy. For those concerned about their retirements the Pension Benefit Guaranty Corporation (PBGC) protects the retirement incomes of nearly 44 million American workers including those at GM. Dumping the retirement cost is one way to reduce legacy costs. A bankruptcy would also give workers an incentive to take the buyouts that they have been offered. The two changes alone would save GM $24 billion a year..
1 \Who Killed GM? Will it rise again?
Post a Comment