Nov
13
Bailing, wailing and assailing
Filed Under Sunrise on KGMB9
Now that the bailout plan has changed into something completely different from what Congress thought it was voting for, we’re seeing a blame game, and lobbyists descending on the Treasury Department to explain why the bailout should be expanded to include their clients.
Treasury Secretary Paulson, who originally was going to use a third of a trillion dollars to buy the securities that financial giants couldn’t sell to anybody else, changed his mind and decided instead to simply let those financial institutions have the money in return for stock.
Assuming lenders begin making loans again, Version 2.0 is better for taxpayers, giving their a piece of everything instead of a piece of toxic securities, improving the chances for the Treasury to resell what it bought in better times and perhaps even return a profit.
Those assailing the Paulson plan complain that the money is going to lenders (and AIG) with no strings attached. That’s not exactly true. Federal regulators have made it clear what lenders are supposed to do, or face more specific orders.
Nevertheless, the problem, so far anyway, is the bit about “assuming lenders make loans again.” They aren’t. They’re mostly sitting on the cash so far. The objective of this whole exercise is to get lending unstuck. If that doesn’t happen, the bail fails.
And those lobbyists? The New York Times says everybody from plumbers who want to be paid to fix foreclosure homes to auto dealers who want a handout because times are tough for them. Well, duh. When did auto dealers suddenly become socialists?
Then there is President-Elect Obama’s call for a bailout for the Big Three automakers, which President Bush says he does not support. Mr. Bush is not universally lauded for his brains, but in this instance I think he is right and the Punahou grad is wrong.
The U.S. automakers have allowed their Japanese competitors to excel them for decades on fuel efficiency, and have done very little to control the massive cost structure that they and their labor unions built back when they did not have that competition. Any idiot could have foreseen that they would be in big trouble the next time oil prices soared, focusing so much on gas guzzling SUVs, pickups and vans. Any employee of Ford, General Motors or Chrysler should have known that when this happened, jobs would be lost, and the next job they got would not pay so much. Didn’t they ever rent “Roger & Me” from Blockbuster? Do they think the rest of the American people, including people who make less money and enjoy fewer benefits, will sit still for a bailout?
U.S. automakers aren’t too big to fail. They’re too big to bail. What they need is the old-fashioned kind of rescue, in which a federal judge with broad powers helps them line up financing, compels supplies from vendors, and supervises a sensible renegotiation of labor contracts, putting these dinosaurs back on a sound business footing so they can more nimbly compete with the automakers of other nations.
It’s called bankruptcy.
I know this sounds — mean. But how kind would it be to impoverish the nation pouring tens of billions of dollars into these three companies so they can keep building the wrong vehicles and paying wages that the industry can no longer support? The result would be a reprieve until the next crisis, and the migration of more domestic automaking jobs to other countries.
With bankruptcy and renegotiated contracts, it might be possible to actually save the bulk of these jobs and keep them in America.
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Love ya Howard, but isn’t that Hawaii functions today. Bailouts in one form of another? Welfare rolls, section 8 housing, and military contracts. Hawaii is always being bailed out Howard and those on the government handout list have little incentive to change. Without the federal governemnt the state could not function. So bailing out the auto dealers etc is no different. Come on Howard, fess up already that tourism doesn’t pay and the younger educated leave because there are not enough real jobs for these people to build a future. I LOVE YOU MAN!