Nov
19
When Wall Street wanted a bailout, it had the advantage of describing a financial system so complex that most member of Congress couldn’t understand it. They turned to Henry Paulson and Ben Bernanke, who said pass it, so they passed it.
CEOs of General Motors, Ford and Chrysler flew in corporate jets to Washington, D.C., saying they need their own bailout, at least $25 billion, blaming their woes on Wall Street for ruining the credit markets.
This argument, like a Plymouth Duster I used to have, is a non-starter.
It’s like someone who failed to patch his roof blaming the rain for his carpet getting wet. Senators who don’t agree on much, agree on that.
“They are seeking treatment for wounds that are to a large extent self-inflicted,” said Sen. Chris Dodd of Connecticut, the liberal chairman of the Senate Banking Committee.
“I don’t think they have immediate plans to change their model, which is a model of failure,” said Sen. Richard Shelby of Alabama, ranking Republican on the same committee.
U.S. auto sales were down 15% from year-before levels until October. Now they’re down twice that much. The United Auto Workers union inaccurately blames Wall Street.
“Because of the overall credit union, most families cannot get get credit on reasonable terms,” UAW President Ron Gettlefinger said.
This assessments omits two key points. One partially exculpates Wall Street and the other is an indictment of Detroit.
First, families that CAN get credit, aren’t buying cars, either, because there is a recession on, caused as much by the effects of soaring spring and summer oil prices. All durable goods manufacturers are affected, not just automakers. Soaring oil prices should have been foreseen by Detroit. Did these Einsteins really think oil would be cheap forever? Do you want to entrust tens of billions of taxpayer dollars to such morons?
Second, and more important because it says even more about Detroit’s problems that cannot be laid at Wall Street’s marble doorstep, most families that ARE buying cars, are buying Japanese cars. Japanese car sales are not down as much as American car sales.
No one living in the real world thinks $25 billion in lending to the Big Three automakers will lead to a surge in car sales, or a halt to Detroit’s ever-shrinking market share. \
But people who fly in corporate jets do not live in the real world.
People who seek re-election from time to time usually have at least a glancing acquaintance with the real world, like Rep. Spence Bachus, an Alabama Republican, who brought up a purely practical matter when faced by the CEOs.
“I’m sure I’m gonna be asked, ‘Congressman, I work at Honda…I get $40 an hour…why are you gonna take my tax dollars and pay it to a company that’s paying $75 an hour?”
Gettlefinger, the UAW head, replied that his members have already agreed to significant givebacks. But the wage cuts in UAW contracts apply to new hires. His members other than new hires sold out their younger brethren to maintain their own paychecks that the market will no longer support.
The Big Three and their union continue to be locked into a death dance of high wages and high costs that the market can no longer support, and no bailout can change that.
Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee, supports helping the Big Three. “We already have too much union busting,” he says.
Union busting is indeed bad. And we in Hawaii know how unions can play an important role in securing living wages for workers who then support local businesses with their spending. But this isn’t union busting. Opposition to a Detroit bailout isn’t even company busting. It’s merely a recognition of reality. The reality is that the only bailout that can save the mismanaged Big Three is the one we call Chapter 11 bankruptcy.
The Big Three chief executives have been described as astonished af the reaction of Congress. The same men who convinced themselves that America needed ram-tough gas guzzlers have apparently convinced themselves that what’s good for General Motors is good for the U.S.A.
That hasn’t been true since cars had fins.
General Motors CEO Rick Wagoner, telling Congress that failure to bail will kill the industry, says, “The societal costs would be catastrophic — three million jobs lost within the first year.”
This is economic terrorism. Wagoner, his brethren at rival U.S. automakers, and the union brothers and sisters who work for them, are holding their breath until Congress turns blue.
If only they had jet-pooled they could have consoled each other when they returned emptyhanded.
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