The Detroit News reports that presidential candidate John McCain "declined to support any of several proposals to provide loan guarantees to the domestic carmakers." (Whatever happened to Just Say No?) During a campaign swing through Michigan, McCain dismissed calls to help Detroit make the cars they should have been making in the first place, or should be able to make now on their own damn dime given all the profits they banked during the SUV and pickup boom, or something like that. Anyway, McCain's rationale: supporting bail-outs would unleash karma that would jinx Detroit's automakers. No, really. "Asked if he backed such proposals, McCain suggested that such support might create a sense of doom around the companies. 'I have heard many of these proposals, but I have also had meetings with the Big 3 automakers, and they are confident that with the new hybrids and flex-fuels and other technology advances … they can succeed. So in all due respect, I worry a little bit about us predicting failure on the part of the automakers when they're struggling mightily.'" "Barack Obama supports loans and tax credits to retool the nation's auto plants and build the next generation of American cars," Brent Colburn, Obama's economic adviser, advised soon thereafter.
Find Reviews by Make:
Read all comments
Kinda funny how the 50-50 split is becoming more defined as each day passes.
Do you bail out a large company to save blue-collar jobs (GM, Ford) or white-collar jobs (Bear-Stearns, Fannie Mae, etc.)
The battle (as always) is joined.
Not bailing out the Det2.8 would almost be enough reason, for me, to vote for McCain. Almost…
Doesn’t he just always get it wrong.
The Terminally Ill 2.8 don’t need the threat of loan guarantees to create a sense of doom. They’ve already got that in abundance.
And, in their case, “predicting failure” is a bit like “predicting tomorrow”. “Confirming” would be a better word choice.
Mac has the stones to go to detroit and tell them that he won’t bail them out. I respect that. It’s a message they must hear.
I just wish he’d send that same message to wall street, as shaker pointed out.
Great, don’t “bail out” or attempt to support in any way the US based manufacturers. Let’s move this country towards no domestic based manufacturing because information and service jobs are the way of the future (except, of course, for the ones we are already sending to India). Heck, our government apparently doesn’t care. Most Americans don’t care because they don’t work directly for an automaker. So let’s give as much money as possible to other countries.
Someone has got to explain to me how the Wal Mart economic model works, where we import manufactured goods or give our money to companies headquartered elsewhere. Our money is leaving this country at a much higher rate than money is coming in. I cannot understand how that can be sustained. And the more we allow our decent paying jobs to leave the country, the less economic power we have.
Pickens is right, although he’s talking about oil–the money that leaves the country without a roughly equivalent amount coming back in represents a huge redistribution of wealth.
Shaker, good point. Why is the collapse of the banking industry more problematic than the collapse of US auto companies, who account for something like one in twelve jobs in this country?
Whether you guys support a bailout or not, let’s realize that McSame is doing his best to hand Michigan over to Obama.
Just like the TV ad I saw last night that he was “tough on big tobacco” that ran in… North Carolina. What’s next John? An ad that attacks “Big Coffee” that runs in Seattle? How about a smear campaign against the Red Socks directed at Boston?
His campaign is in the weeds…
Honestly, politically speaking, there is virtually no point at all in McPain saying he’d bail the 2.801 out because all the unionized workers (and ex-unionized workers) are TOLD to vote Democrat or else by the union, and often vote that way out of their own beliefs anyway.
Since much of the rest of Michigan is much more conservative, but the population demographics tilt to the southeast in our state, the conservative west and northern parts of the state with lower population get ignored. Every election.
So much for having your vote count, eh?
Not that I’m a Repugnican – but then again I’m not a Demon-crat either.
Personally, I’d love to see the Metro Detroit area leave the US and join Ohio or Canada but they don’t want ’em (and I don’t blame them).
As for bailing out Wall Street, now that we’ve all done so, I’d like to see 1/2 of the profits from Wall Street going into the public coffers to pay down our debt over the next century, by way of pay-back.
Like that’s going to happen, eh?
In reality, it’s the same as always. The rich profit at the trough of socialism for the wealthy and cronyism, the average joe and jane get screwed. Meanwhile, for the lazy/poor as well as deserving poor (such as truly disabled), they also get to slop at the public trough.
It’s us folks in the middle who pay, and pay, and pay. It’ll end badly once the poor & the rich find they cannot get blood out of a stone / have killed the middle-class goose that continually laid the golden eggs.
The United States will end up much like Brazil or Argentina.
Wow, a real fiscal conservative? Sweet.
Let’s give him time. He’s flipped on so many things I expect it here too especially as we get to the wire if things are close.
As for why bail out the financials but not the manufacturers? A reasonable argument I’ve read has to do with where the foreign money is. Apparently there’s LOTS of foreign investment in the financials, including Fannie and Freddie, and we can’t afford to scare those people lest they lose faith (how can they have any) in us and withdraw more thus crashing our currency.
Why should US government save car manufacturers? Isn’t it a free market? Last time I checked, US was not a social(ist?) state. Would US government grant such a credit, lets say, to a dishwasher manufacturer against Chinese competition?
It is so hypocritical to advocate free-trade, no trade barriers etc, and then support domestic companies. It was OK when Detroit was number one, but now US tax payers should give their money to them to compensate their bad management.
“Loans”? Is it really a loan when you know that they have zero intention of paying it back? If you loan someone $1000 to buy lottery tickets do you still call it a loan? No… it is called “enabling”.
Khutuck, you might want to check here before you claim the US isn’t socialist.
No, the US isn’t and hasn’t been a capitalist, free market paradise. If it were, we’d all be under the thumb of the decaying Standard Oil trust. And you’d be renting your Western Electric telephone for $40 a month, and the internet might still be a university science project. Et cetra. Point is, the US is not now and hasn’t been purely capitalist, and not all controls on the market have negative results.
The argument for bailout in extreme situations is that this money goes to save the jobs/lives of the rank-and-file employees, not the executives who screwed the pooch. Chrysler made a huge point of this talking to Congress in the early eighties to secure their federal loan guarantees. It wasn’t Iaccoca’s fault, he wasn’t in charge at the time, he’s replaced all of the management, etc.
The argument for R&D funds is that Europeans and Japanese also frequently receive government money for new, ambitious development schemes. The perception is that this benefits society as a whole: more jobs (and less crime), better products, healthy economy, money stays in the country.
He might stand by and let one of the big three go under just to prove a point, but if a second was about to collapse he’d be under a lot more pressure to do something. If it got down to just one man standing and they were coughing up blood, I’m sure he’d immediately sign a big bail-out check because his (and GOP politicians in general) re-election chances would be severely hampered with the stigma of “the man who killed US auto manufacturing”.
yankinwaoz, if it’s written up on a paper as a loan, then, yes, it’s a loan. There are consequences for failing to pay back a loan. You could argue that they’re likely to default on the loan and therefore the feds won’t see the money back, at which point they probably get seized and parted out to the highest bidder.
The federal government actually profited from the Chrysler loans in the early eighties. Chrysler paid them back, with interest. The idea isn’t to give your tax money away. For the government, it’s actually an investment. Maybe Obama should sell it as such.
sitt@home: I think it depends on which one (a GM bailout may be more likely to be successful than a Chrysler one), but I wonder if McCain would actually have a choice either way. Congress will be stocked with even more Democrats regardless of who takes the presidency and Michigan is important to Democrats, and the legislation doesn’t need the president’s approval if they can override his veto.
I’m betting that if Michigan ever looks remotely competitive, McCain will flip (or move to a more ambiguous position) on this.
It is incorrect to say that the Federal Reserve “bailed out” Bear Stearns. Bear Stearns no longer exists. It was bought for peanuts by one of its competitors. Some of the former employees were absorbed by the buyer. The rest lost their jobs. Bear Stearns’ owners lost their asses.
The Federal Reserve’s role was limited to guaranteeing the loans that the buyer took out to finance the purchase. Unless the buyer collapses, itself, and it is a much stronger company than Bear Stearns, it will repay the loans and the Fed will not lose anything. By comparison, the federal government’s rescue of Chrysler, back in the 1980s, was much more generous in that it enabled Chrysler to survive.
The Federal Reserve’s justification for acting was to avoid the financial mess that would have resulted after Bear Stearns collapsed. Where I live, a couple of large home builders have gone bankrupt. Work on partially built houses stops. Anyone owed money by the builder is paid little, if anything, and that only after a long time. The loss of income sometimes drives subcontractors into bankruptcy. The Bear Stearns situation was different in detail, but similar in general. Cleaning up their mess in an orderly fashion protected many third parties whose only mistake was doing business with Bear Stearns.
Suppose the mortgage company forecloses on your neighbor’s $400k house because he can’t make the payments on his $300k mortgage. You buy the house for $100k with an insured mortgage. Your neighbor loses his house and the mortgage company loses the unpaid balance on the mortgage. You’re responsible for paying back your loan unless you go bankrupt yourself. That would be “bailing out” your neighbor the way Bear Stearns was “bailed out”.
I haven’t decided yet who to vote for (and it doesn’t matter anyway since I’m in illinois, an 80% democratic state).
Bailing out the Detroit 2.8 would cause me to vote against someone, but so would staying in Iraq, bailing out homeowners, or bailing out anyone.
I think once again I’ll vote “3rd party”
faster_than_rabbit, I know about corporate welfare practices, and I’m strogly opposing them. Considering the whole economy, saving companies creates more damage than not saving. If you save one, the others will want the same; and take too many risks.
Dont save Detroit, just let the better managed companies such as Toyota to buy them. It would be better for US economy, in my (outsider) opinion.
@f_t_r:
What makes you think Michigan will be remotely competitive?
And the big difference between the Big Three and Bear Stearns is that the words “imminent financial system collapse” have never been used to describe the fallout of the Big 3’s death. There’s really no comparison. A run on the banks kills everyone. A run on GM kills only Michigan and just reverberates everywhere. I hate the term “too big to fail”, but that’s where we’re at. We’re a society that refuses to take short-term pain, so we hurt even more long-term.
I don’t have confidence in anti-trust laws, either, because I believe if you’re good enough, you could very well end up being the only game in town. If a monopoly is engaged in something illegal, by all means, break it up. But otherwise, you’re punishing a company for beating their competitors, and that’s not fair or right. That’s not capitalism.
The argument for R&D funds is that Europeans and Japanese also frequently receive government money for new, ambitious development schemes.
You mean like the oft-mentioned Partnership for a New Generation of Vehicles that netted…absolutely nothing once the SUV profits rolled in? Why throw more good money after bad?
robert. thank you for making ‘political discussion’ a salient part of ttac. it adds tremendously to my enjoyment of – and appreciation for – this site.
As Ronald Reagan said, “The most terrifying words in the English language are: I’m from the government and I’m here to help.“
66Nova: Let’s move this country towards no domestic based manufacturing because information and service jobs are the way of the future (except, of course, for the ones we are already sending to India).
So the manufacturing facilities in the U.S. owned and operated by Honda, Toyota, Nissan and Hyundai don’t really exist?
The Big Three don’t represent all new-vehicle manufacturing in this country anymore, let alone all manufacturing.
faster_than_rabbit: And you’d be renting your Western Electric telephone for $40 a month, and the internet might still be a university science project.
The telecommunications industry prior to deregulation was hardly an example of unfettered, free-market capitalism.
At the state level, telephone companies were government-sanctioned monopolies, heavily regulated by the appropriate state utility commission. They were required to provide service to all customers within a geographic area, and those customers were required to receive their phone service from that particular company. Companies were even regulated as to when they could disconnect service for nonpayment of bills.
At the national level, AT&T agreed to allow other companies to connect to its network, under the Kingsbury Commitment imposed by the federal government, in part because the government didn’t want the other companies building rival networks. These networks would have cluttered the countryside with lines.
Loan guarantees for Detroit would be a disaster: they can’t even pay back the loans they have now. If not for the constant new issues of bonds and stock, the Big Three would have folded a long time ago.
McCain is right to oppose loan guarantees to Detroit. It’d be like giving a cheater a second, third, fourth, fifth, etc. chance.
I’ll admit a fair amount of ignorance regarding the Bear-Stearns “bailout”, as I don’t read any financial papers or journals (cantcha tell); but it really comes down to the perception of the “Average Joe” who gets his news beamed into his eyeballs while munching on a microwave pizza pocket — it’s the “perception thing”.
GM execs screw up, Blue Collar takes a hit. Big banks screw up, Uncle Sam to the rescue!
I know that the turmoil caused by letting banks fail would crash the economy faster than Capt. Hazelwood would an oil tanker, but it just appears to be slanted towards the filthy rich, no matter how much they screw up.
Apart from the fact that I’m against bail-outs…
As some above have pointed out it is easy to say for McCain no bail-outs for Detroit. He’s going to loose Michigan anyway if I’m not mistaken and it might only gain him a couple of votes from voters in other states thinking ‘I don’t want my tax money to go to some incompetent exec’s 100+ Ft yacht’, or just ‘why should they get money and not me’.
In the last case they may actually have a good argument.
Either way, for McCain saying no to bail-outs is just good politics that happens to be the right thing to do.
On another note, as a European I can’t believe McCain might actually have a shot at winning the elections, 20 years ago sure…now not so much. I know the US media says the rest of the world supports Obama (and I think that’s accurate) but it’s as much about having none whatsoever connection with McCain as it is about enthousiasm for Obama.
re: “…I can’t believe McCain might actually have a shot at winning the elections…I know the US media says the rest of the world supports Obama…”
JJ / August 14th, 2008 at 2:55 pm
the mainstream media pump up mccain because: [1] they need a ‘competitive’ race to cover and [2] ‘compelling’ content/programming to sell advertising around, plus [3] media’s corporate ownership prefers to have politicians in their pocket, especially considering that they are regulated by and regularly have ‘business’ before the government.
in the united states, no group of politicians has been more favorable to big business and it’s slash-and-burn, profit-at-any-cost agenda than the republicans. and to make matters worse, recently, even many democrats have finally figured out where the money is and have joined the gop in some sort of pathetic ‘good cop/bad cop’ routine that benefits no one but themselves, each other and others at the very highest echelons of society.
the con is on. the fix is in. and the ‘marks’ are us.
Kendahl :
“It is incorrect to say that the Federal Reserve “bailed out” Bear Stearns.”
Whatever you want to call it, it cost the taxpayers $32 billion.
The best thing a government can do during a recession is to spend money to stimulate the economy. That has worked in the past in the U.S. and in Europe. When countries have cut back, the recession gets worse, the currency collapses, and foreign interests come in and buy assets.
Loan guarantees should not be provided without strings. One string would be a limit on executive pay during the period of the intervention. Another could help to produce particular vehicles, such as plug-in vehicles. One way the government could help would be to provide incentives to provide charging stations at interstate rest stops, for example.
I have not read Obama’s plan in detail, but I think it is short-sighted of McCain to dismiss any kind of incentives to the domestic auto industry. If he wants to do something different from Bush, why not just promise no more no bid contracts to cronies? Payments on no bid contracts in Iraq have reached $100 billion.