Yet another “this must be some weird dream” moment happened today:
During a hearing in the U.S. Senate, the chiefs of General Motors Corp. (GM), Ford Motor Co. (F) and Chrysler LLC were responding to a question from Banking Committee Chairman Christopher Dodd, D-Conn. Dodd asked whether they would be willing to work within a structure similar to that established for the federal bailout of the former Chrysler Corp. in 1979-1980.
GM’s Rick Wagoner, Ford’s Alan Mulally an Chrsyler’s Robert Nardelli said they would.
While there’s been a lot of Sturm und Drang over whether the auto companies deserve a bailout, both from the rump remains of the allegedly free market Republican Party and from consumers frustrated by decades of shoddy products and environmental destruction, it’s kind of hard to see how it is in the national interest to allow that sector to go belly up. I think we really would be talking about the Second Great Depression at that point. And while I freely admit to engaging in hyperbole at times, in this case I don’t think that’s an exaggeration.
Arguments that we might need the assembly plants for national defense strike me as a bit naive. We’re not in wars that require tens of thousands of tanks, we’re in wars that require smart intelligence, smart diplomacy and a nimble military. The argument over the fate of Detroit is an economic one more than a military one, although of course nothing happens in isolation. If we hollow out what’s left of our manufacturing capacity, what exactly is it that we do as an economy? There is unrealized potential in green power, and high-tech is often beneficial, but are we really going to be able to continue buying cheap plastic shit forever on credit from overseas?
Anyhow, supposedly one in ten American jobs are directly or indirectly related to the automotive industry. If those go away in short order, we’re left with having tried to bail out the financial sector to little effect, which raises questions about exactly whose money we are going to manage. Even the Saudis and the Chinese have their limits.
Could we have a deflationary spiral from hell? Don’t know, but if Congress can bail out AIG and the rest of the financial sector to the tune of (potentially) trillions of dollars, they might want to think long and hard about doing nothing to help the auto industry. There’s plenty of blame to go around here, but in the end fixing the underlying economy (which was wrecked in the first place by the financial industry) has to be the top priority.
I don’t like it anymore than the next person, but there it is. Bail out the automakers, Congress, and let’s get on with the next thing. Maybe we’ll get lucky and a small South American military junta will foolishly invade an obscure island or something.
This stuff goes way over my head, but the people that seem to make the most sense are the ones talking about a post bankruptcy cash infusion for GM and Chrsyler.
It might be pointed out that GM built the innards of those fancy new hybrid buses Metro has running around.
While poor leadership and over-reliance on gas-guzzling SUVs have crippled the auto industry, the financial crisis that put the industry on the brink of bankruptcy was not caused by the Big Three.
In the present, the auto industry is as much a victim of the financial crisis as are the Wall Street firms. And unlike these Wall Street firms, the auto industry is not responsible for the current recession and they are willing (along with the unions) to make significant sacrifices in order to receive the loan from the Feds.
Many average Americans don’t know much about companies like AIG and Lehman Brothers but they do know Ford, Chrysler and GM. And in the same way that the near-collapse of AIG has radically altered the psychology of the financial elites, the bankruptcy of the whole domestic auto industry can have a disastrous effect on the mood on Main Street.
What’s lost in the debate about the best way to bring about an economic recovery is the fact that the recovery depends on simple people making a simple choice, “to buy or not to buy?”
If the nation wakes up to the news of the whole auto industry filing for Chapter 11, the answer to the question will be “not to buy.” And it will apply not only to American cars but a myriad of other products. The collapse of these universally known brands will shock the consumer into a conservative mood which will spell a decrease in spending and a further slump into a prolonged recession… or worse.
Franken Pulls Ahead In Minnesota
The Franken campaign announced today their candidate has a 10-vote lead with about 56,000 ballots remaining to be recounted. Franken has steadily gained on his unpopular and ill-tempered GOP opponent* throughout the recount, so this is no surprise, and because of the huge number of meritless GOP ballot challenges, Franken’s lead should expand substantially after the state canvassing board meets on Dec. 14. In all probability, Al Franken will become Democratic senator #59, and the only reason President Obama won’t have a filibuster-proof Senate is because Georgia’s voters have their heads up their asses.
* This is a generic description that fits nearly all Republican candidates, but in this case it refers to that Coleman guy.
Blackwater Killers To Be Indicted
Insiders at DOJ have leaked word to the media that Blackwater security contractors who gunned down 17 Iraqi civilians in 2007 will be indicted under a federal law imposing a mandatory 30-year sentence on anyone who commits a homicide with a machinegun.
My heart says let them fail. If we keep bailing out businesses they will never learn to run their business properly.
My head says we have to bail them out or risk a depression.
This bailout should include change at the top for any company that takes the money, strict oversight MONTHLY and any company who is not in compliance with the rules should lose the funding.
“1 in 10 jobs associated with the automative industry”
That’s more marketing speak than a true statistic. This, of course, includes Americans who work for foreign automakers, and those jobs aren’t really in jeopardy.
But more ridiculous, it includes a bunch of groups like taxi drivers and rental car companies that would just change suppliers.
1 in 10 is a wild distortion when the domestic auto industry uses it to justify the huge negative impact they claim will occur if they fail.
Not saying it wouldn’t have a big negative impact. But taxi drivers and car rental companies and the like aren’t going anywhere.
“if Congress can bail out AIG and the rest of the financial sector to the tune of (potentially) trillions of dollars…”
No ‘potential’ about it, Jon. We’re in it for about 2 trillion already. It’s not just the $700 billion in guarantees from the Treasury. The Fed has ballooned its balance sheet for the other $1.3 trillion.
No need to worry about bankruptcy though. They can just print the repayments.
I have to say that I’m persuaded by Michael Moore about how to bail out the auto industry. His main point is that these companies have been on the decline for decades, long before this financial crisis. They don’t need big, novelty-sized checks, but radical intervention.
Paraphrasing Moore:
– The Big 3 are not currently worth what they’re asking from us.
– We should kick out upper management, take the companies over, and force them to build hybrids, electric cars, and mass transit.
– Just handing over cash to the auto companies will sustain the current downward spiral instead of doing anything to reverse it.
No ‘potential’ about it, Jon. We’re in it for about 2 trillion already.
——————–
See: http://www.voltagecreative.com.....ut-pie.png
based on this data:
http://www.boingboing.net/2008.....ore-t.html
Also see:
http://www.portfolio.com/views.....-the-world
for a comparison of (estimated and highly fluid) worldwide bailout costs.
@10 ps It’s worth noting the Iraq war costs in the pie chart are conservative. When long-term medical care and related costs are factored in they go considerably higher.
I still don’t know why there was no large outcry to restructure the finance industry that created the phony paper MBS etc crisis and yet there is for the auto industry–not that the management of the US auto industry should have their salaries cut so that they are the same ratio as Euro/Japan companies say 50 times the average worker’s and not 500 as they are now.
But with more and more people out of work and credit drying up, folks are not going to be able to buy 30k+ worth of electric cars anytime soon.
re 9: The only thing stopping this country from following Moore’s suggestion seems to be a philosophical commitment in this country to have the mass of us support a tiny, monied elite to lord it over us.
Time for another round of inflation? Before we all go screaming for the hills, perhaps we should look at some of the problems facing us and ask if that’s such a bad idea.
Some folks would be seriously hurt. Anyone on a fixed income would be in deep kimchee.
But how many folks are actually on a fixed income, anyway? Pensions are normally indexed to inflation, and as the dollar value of the investments goes up (because of the inflation) the net change ends up being almost a wash.
Folks that actually work for their money and own things do reasonably well, provided that we don’t try to emulate Zimbabwe.
Things that are overpriced will tend to grow at a slower rate, so all those folks over their heads in mortgages could find themselves helped out. Even with moderate inflation, that house could become more affordable, in terms of hours worked.
Who would be hurt? Well, those few folks that are actually on fixed incomes. That is a real danger. Also, people who primarily trade in money, companies whose real assets are significantly less than their paper “worth”, and anyone squirreling away their money under the mattress. Oh, and foriegn governments holding piles of dollars might not be too happy, either.
Of course, all of this is just my looking at the situation and trying to make lemonade out of the lemons we’ve got. With the Fed and the government pumping billions of dollars into pretty much everything, ramped-up inflation within the next few years is almost a foregone conclusion, unless my high-school economics teacher was dead wrong about how the economy works.
So, we might as well look for some kind of benefit from the situation.
The trick will be avoiding not double-digit inflation (we’ll almost certainly see that) but triple-digit inflation. If President Obama and the Congress can keep things down in the low double-digit range and limit that to a few years, that’s probably the best that can be done with the mess they’re being handed.
I’m stealing this idea from a free market capitalist that I like t pick on, but hey, gotta give credit where credit is due:
Take the money you’d use for the bailout, and instead give it as an incentive to groupings of employees to break off and create their own companies. With about a quarter of a million employees, you could create multiple small companies that would actually have enough to for start up costs, that would keep jobs here in the US, while creating innovative and competitive cars for us to buy at lower costs.
We need to stop rewarding bad companies and greedy management by giving them money every time they f*ck up.
Long ago Puddy posted links regarding the intricate relationship the Auto industry had with Donkey politicians. All that money wasted on Donkey when Donkey owned the state. HorsesASSes pooh-poohed what Puddy wrote. Finally Dan Rather News wrote about it. And the Michigan guvnur is crying da blues her donkey friends ain’t cummin to her aid.
Now Donkey gunver Jennifer Granholm had another job too. She played Sarah Palin for the Joe Biden debates
Long ago Puddy posted
Right wing bullshit and he’s still at it…
What a freaking clown!
16 That was remarkably incoherent.
The oil execs must be shitting their pants. The real crisis, from their point of view, is that people have stopped buying more and more SUV’s and muscle cars to slurp up their product. Without the “big three” and all their biger/faster/plusher propagandizing, we may see consumption actually stay down after the economy pulls out of the abyss. It’s kind of suprising Paulson and Bernanke aren’t just stepping in and arbitrarily shovelling some cash in Detroit’s direction before the new administration takes over. Of course, they have a while to go yet.
So yelling loser boy@18, the CBS article is right-wing bullshit? Dan Rather is a right-winger? That’s the problem with you and your ilk, truth is null and void to you.
What a loser in mind, body and spirit! I’m glad you chose not to read the link. You are still one of the most stupid libtards here.
FartyArt: Are you upset Obama cancelled the windfall profits tax?
Weren’t you one of the brainless here who claimed big oil set the price? Yes you were.
Puddy, all companies set their price. Even big oil. Particularly big oil.
Supply and demand, plus overhead (which includes the price of oil per barrel) factor in, and then they “set” the price above and beyond according to their projected profit goals.
Duh.
i don’t buy that these companies are losing money….none of em…..they cooked the books for more than a decade to juice the market and overvalue theie shares by using the 401K buys.
and now almost overnight are singing a very different tune…..where are the audits of these losses???
pro sports for years have cooked the books to claim losses and every time a CBA comes up the numbers are WRONG by underreporting….these are the same corporations that own many of these sports teams.
the US is in trouble. i do believe that but it is the individuals and their spending….not the corporations.