The U.S. jobless rate just rose to 9.1 percent. Employers added the fewest workers in eight months during May. The housing market is double-dipping. Only 16 month to go until the next presidential election. It’s the economy, stupid. The President has to do something. What does he do?
“President Obama’s visit to a Chrysler plant in Toledo, Ohio, on Friday was the culmination of a campaign to portray the auto bailouts as a brilliant success with no unpleasant side effects. “The industry is back on its feet,” the president said, “repaying its debt, gaining ground.”
If the government hadn’t stepped in and dictated the terms of the restructuring, the story goes, General Motors and Chrysler would have collapsed, and at least a million jobs would have been lost. The bailouts averted disaster, and they did so at remarkably little cost.”
He’s wrong, writes David Skeel, a professor of law at the University of Pennsylvania, in his op-ed piece in the Wall Street Journal. Steele is the author of “The New Financial Deal: Understanding the Dodd-Frank Act and its (Unintended) Consequences” .
“The problem with this happy story is that neither of its parts is accurate. Commandeering the bankruptcy process was not, as apologists for the bailouts claim, the only hope for GM and Chrysler. And the long-term costs of the bailouts will be enormous.”
David Skeel doesn’t buy the story that the bailouts were done at little cost. According to Whitehouse estimates, the bailout will cost the tax payer nearly $14 billion. And that’s a lie, says Skeel.
“But the $14 billion figure omits the cost of the previously accumulated tax losses GM can apply against future profits, thanks to a special post-bailout government gift. The ordinary rule is that these losses can only be preserved after bankruptcy if the company is restructured—not if it’s sold. By waiving this rule, the government saved GM at least $12 billion to $13 billion in future taxes, a large chunk of which (not all, because taxpayers also own GM stock) came straight out of taxpayers’ pockets.”
If you or I would take that tax loss under these circumstances, we’d go to jail. GM received a tax holiday for many years. But that’s not the worst of the bailout, says Skeel:
“The indirect costs may be the worst problem here. The car bailouts have sent the message that, if a politically important industry is in trouble, the government may step in, rearrange the existing creditors’ normal priorities, and dictate the result it wants. Lenders will be very hesitant to extend credit under these conditions.
This will make it much harder, and much more costly, for a company in a politically sensitive industry to borrow money when it is in trouble. As a result, the government will face even more pressure to step in with a bailout in the future. In effect, the government is crowding out the ordinary credit markets.”
It may not just make it harder to borrow when a company is in trouble. It may make it much harder to borrow, period. When the rule of law is set on its head, when senior debt is thrown by the wayside for political expediency, then investing in Russia suddenly looks like a safe investment.
The coda appears….this is much what Farago was writing….back when Farago was writing…
When the GM and or Chrysler slide toward the abyss agian, AND THEY WILL….we just get to do. This. Over. Again!
The government was going to do the bailouts anyway and you were all gonna just have to deal with it.
They didn’t use lipstick…
They used KY JELLY.
“It may make it much harder to borrow, period. When the rule of law is set on its head, when senior debt is thrown by the wayside for political expediency, then investing in Russia suddenly looks like a safe investment.”
Good comparison.
“…then investing in Russia suddenly looks like a safe investment.”
Doesn’t seem to hurt investment in China, they *are* still communist after all…
“This will make it much harder, and much more costly, for a company in a politically sensitive industry to borrow money when it is in trouble”
Which is why Chrysler now has to pay *far* more interest on “shyster loans”, proof that what goes around, comes around.
and herein lies the rub when lookin at the ‘cost’ of the bailout. What about all the potential lost tax revenue, both income and property, from letting the automakers go under? what about the governemnt money out-of-pocket for all the unemployment that would come from it? Show me the whole picture before crying foul.
Sundowner –
The whole point is that in an orderly bankruptcy, of which there WOULD HAVE BEEN ONE (regardless the fearmongerers), everything is restructured and operations continue, albeit with all of the stakeholders taking haircuts per the judicial process.
I guarantee you that GM would have definitely come out of a normal bankruptcy very similar to how it is today. Chrysler is the sick man and likely would have been carved up. Oh wait, that’s essentially what happened already.
Very similar minus the protections to the union pension plans. I guess its just the poor luck of the people working for their suppliers that the government didn’t feel they had enough votes to be worth giving a “helping hand.”
“I guarantee you that GM would have definitely come out of a normal bankruptcy very similar to how it is today.”
GM was $90 billion in debt and would have NOT emerged from bankruptcy.
The takeaway for individual and institutional investors is that on 01/20/2009 the United States of America officially became a Banana Republic (until further notice), and so in the meantime to avoid investing in unionized companies, whether as an owner / stockholder or creditor / bondholder.
Yes, because the financial/auto bailouts only started after this date.
10:00 AM on Dec 19 2008 I watched George W on CNN tell the world he was cutting a check to GM. Four and half hours later I clocked into GM for the last time.
I took my buy out check, and a new car,and a nice little deposit hits my account every month.
Sorry if I don’t join you all in another TTAC bailout bash.
No, but the politicized bankruptcy started on that date.
The Obama administration protected the UAW from the treatment it would (and should) have received in a genuine Chapter 11 restructuring (made necessary in the first place in large part because of the UAW).
Now let’s just hang on a minute here! When company’s get into cash flow trouble Debtor in Possession (DIP) funding is usually quite easy to get. But the credit crisis made that impossible. GM and Chrysler didn’t cause the credit crisis (virtually every person in the US is repsonsible for that). So let’s not compare the bailouts to a “normal” situation!!!
PLEASE FEEL FREE TO NOW BEGIN BASHING ON ME.
Do you remember the Chrysler bailout in the 70s or 80s? The government guarenteed private loads which Chrysler then repaid. Why couldn’t have the government done the same in a DIP for GM? You’re not worthy of bashing.
“Do you remember the Chrysler bailout in the 70s or 80s? The government guarenteed private loads which Chrysler then repaid. Why couldn’t have the government done the same in a DIP for GM? You’re not worthy of bashing.”
I dunno, Mike, the fact that GM in 2009 was $90 BILLION in debt might explain why DIP financing wasn’t an option – not for the government or anyone else.
But I’m sure a guy like you who taunts others with cute little lines like “you’re not worthy of bashing” would have known that little tidbit, right?
Hey, don’t knock that ninety billion! The bondholders had a stake in that! It’s theirs!
FreedMike, do you know what a haircut is? Look up the definition concerning investing. The debt holders would taken haircuts and eventually gotten equity in the new GM. That’s the way it works, when politics doesn’t screw things up. Besides your statement makes no sense. The amount of debt would have mattered very little because of the haircuts. You’re grasping at straws.
The debt holders would taken haircuts and eventually gotten equity in the new GM.
They could have had equity. They didn’t want it. They wanted cash, even though GM (and Chrysler) had less than none. They were hoping the government would have caved and paid them off, and they cried foul when their bluff was called.
The only entity, other than the government, that would have accepted equity was the UAW (or, in the case of Chrysler, Fiat).
The bondholders, towards the end, were either deeply ignorant, or opportunistically speculative.
Once again, in bankruptcy court, bondholders know that they will take a haircut abd debt for equity is negotiated on the best terms both sides can get. It happens often in commercial bankruptcies not so much in sovereign bankruptcies (the EU now). I think you can understand the process, you jst won’t admit that the whole purpose was to bail out the UAW. The semi-legality actuall outright illegality was just a veneer to cover the rescue of the UAW.
To MikeAR,
Chrysler, in the 80’s, didn’t even try to get DIP financing. They argued that a bankruptcy wouldn’t work (same argument Rick Wagoner got fired for) and avoided bankruptcy with government loan guarantees (not loans, loan guarantees). The situation in the 80’s and in ’08 are completely different.
As for the bondholders, many of them bought the bonds for pennies on the dollar, when they were junk rated, and then held out for 100% return on the principal. They wouldn’t agree to anything else.
At least you aren’t let facts get in the way of your arguments.
So the same paper that thinks tax breaks for oil companies are OK is now considering the tax arrangement of GM and Ford a “bailout”? If so then we have been bailing out oil and agriculture for a long time.
Not just tax breaks for oil companies…that’s not the whole story. We’re talking tax breaks for oil companies like Exxon, which made $30 billion in profits last year. There’s a difference between using the tax code to help vital businesses succeed, and giving tax breaks to companies that are already unbelievably successful for absolutely no reason.
Why can’t you get off Exxon Mobile and start yapping about GM, GE and Google? They all get favorable treatment from the tax code, it’s not just oil companies. Until you criticize them you don’t have anything valid to contribute. Maybe you don’t because thye happen to be favored crony capitalist companies.
I’m suspicious of all tax breaks, regardless of which entity receives them, but let’s be realistic. If we give tax breaks to oil companies, we improve the likelihood that all of us will continue to enjoy a steady supply of reasonably priced oil.
If we bail out GM, we get…a steady supply of Impalas, Malibus and Cruzes.
I’ll take the oil, thank you very much…
“Why can’t you get off Exxon Mobile and start yapping about GM, GE and Google?”
Because GM, GE and Google aren’t crippling the economy with the prices they charge for their products.
Their profit margins are not out of line with any other industry. Their capital costs are high and they pay lots for their product. You are just trying to make partisan points without regard for trtuth. Besides, I haven’t looked it up but I bet Googles profit margin is much higher than any oil company. You won’t criticize them because they are on your side.
Because GM, GE and Google aren’t crippling the economy with the prices they charge for their products.
Have you ever taken a look at how much FOOD has increased in price? If you think oil is crippling the economy, then you ought to investigate first the huge price increases we have been having in FOOD.
Oil prices have been politicized for too long. This administration is hoping voters ignor real price hikes by flogging oil companies again. Stop falling for it.
The indirect costs may be the worst problem here. The car bailouts have sent the message that, if a politically important industry is in trouble, the government may step in, rearrange the existing creditors’ normal priorities, and dictate the result it wants. Lenders will be very hesitant to extend credit under these conditions.
You know, when Ed says he doesn’t want to re-fight the bailout and doesn’t want to mired in political trench warfare and then stuff like this gets posted, it really gives me cognitive dissonance. We had all these discussions back in 2008 on this very forum and we more or less sorted out that the bailout was strategically unsound and definitely legal,** and that the bankruptcy proceedings certainly were. And yet, nearly three years later, this kind of silliness still crops up.
“Lenders will be hesitant to extend credit” because priorities will be rearranged? Never mind that, in 2008, there weren’t any lenders willing to extend GM enough credit to renovate a bathroom, Professor Skeel seems to be forgetting who the largest lenders were at the time (the US Government, followed by the Canadian government, followed by banks and so forth, and eventually we get to the bondholders). How were things rearranged? Was the government supposed to just keel over and socialize the bondholders’ investment mistakes, forsaking their position as primary creditor? Really? Is this what the “my poor beleagured tax dollars!” crowd wants?
If Professor Skeel believes normal priorities were rearranged, then he should be able to take the matter to court. You’d think that, with all those poor wronged bondholders and the masses of ideologues out for Obama’s blood that someone would have mounted a successful court case. Someone? Anyone? Bueller?
That the debate on this matter hasn’t entered the courts of law tells you everything about how “illegal” the bankruptcy really was. Put up or shut up, guys.
Let’s be honest: lenders aren’t lending because the economy sucks, not because of a prior suppositions about interventionism.*** The economy sucks because the middle class’ earning and spending power has been hollowed out and they’re unsure of their employment. You want to fix this? Stop worrying about flushing money into bank coffers, deficit ceilings, medical care vouchers and politicians’ weiners and get more people working.
** I really, really miss Pch101.
*** The US Chamber of Commerce recently kicked out a report saying as much. People aren’t investing not because of tax breaks, regulation or such, but because of demand or nervousness about demand.
psarhjinian: Never mind that, in 2008, there weren’t any lenders willing to extend GM enough credit to renovate a bathroom, Professor Skeel seems to be forgetting who the largest lenders were at the time (the US Government, followed by the Canadian government, followed by banks and so forth, and eventually we get to the bondholders).
When GM first hit trouble, its largest creditors were financial institutions and bondholders, not the U.S. or Canadian governments. The U.S. government initially bailed out GM in late 2008, after it was apparent that the UAW would not accept contract modifications (proposed by Senator Corker) that would bring wages and benefits in line with those of the transplant operations.
That, however, was AFTER the entire bailout debate had started. You are making it sound as though the U.S. and Canadian governments have always been creditors of GM, which is not accurate. If GM had been allowed to go into bankrutpcy proceedings in late 2008, the U.S. and Canadian governments would not have been major creditors.
The fact that these respective national governments WERE major creditors is because the UAW balked at the proposal put forth by Senator Corker. The union knew it was going to fare much better under a government-engineered bankruptcy than a “standard” bankruptcy, with the Obama Administration to set to take over within two months. Which, of course, is exactly what happened.
Were the bankruptcies legal? Yes. But where they handled in the way normal bankruptcies are handled? No – the UAW made out much better than it would have with a “regular” bankruptcy (it wouldn’t have received any equity in the new company, and the contract would have been more drastically revised), and “new” company cannot normally use the tax credits that were available to the “old” entity.
Those financial institutions you mention had just themselves gotten bailed out six months prior. Why did they need to double-dip? I mean, I know why a Wall Street Journal pundit thinks that the major investment banks needed two cracks, not one, at the public pinata, but for everyone else it seems excessive.
geeber,
Your assume that GM would have been restructured and not sold off into pieces cutting thousands of jobs in the process. You also assume that the UAW would have accepted some other contract that they didn’t before the bailouts happened.
So, if it is chapter 11, who does the DIP? I seriously mean that, go back a few years where people couldn’t get cars loans, and who is going to provide DIP financing to GM to restructure? People seem to forget what is was like in 2008. I understand it has been 3 years, but people need to remember carmageddon to understand why it was done. Chapter 11 with out gov’t DIP, would have been extremely unlikely.
My guess, GM goes on the auction block, different companies by different parts at pennies to resell what they bought later. The UAW won’t accept the concessions before the bailout, why would someone buy up GM and expect to be able to make cars without the negotiating with the UAW? The UAW wouldn’t go away during the bankruptcy and the people who are members aren’t going to give up membership because of the bankruptcy.
During this time, the suppliers are going bankrupt. Chrysler is gone. GM isn’t building anything. Ford now can’t get parts, it likely goes bankrupt as well. Just saying, that is my guess on how it happens without a bailout.
Steven02: Your assume that GM would have been restructured and not sold off into pieces cutting thousands of jobs in the process.
If the jobs aren’t needed, then using taxpayer money to “save” them is a waste of money. GM is not a social welfare agency designed to ensure that no one ever loses his or her job. It is supposed to be a private company that generates a profit, and returns for shareholders, by building products that people want and selling them at a profit.
Steven02: You also assume that the UAW would have accepted some other contract that they didn’t before the bailouts happened.
If the union chooses not to accept it, that is the union’s problem. It really has no choice in the process. Let it strike – no one will care.
Steven02: So, if it is chapter 11, who does the DIP? I seriously mean that, go back a few years where people couldn’t get cars loans, and who is going to provide DIP financing to GM to restructure? People seem to forget what is was like in 2008. I understand it has been 3 years, but people need to remember carmageddon to understand why it was done. Chapter 11 with out gov’t DIP, would have been extremely unlikely.
If you have to get the federal government involved, this is when – it will provide the DIP financing.
Steven02: Your assume that GM would have been restructured and not sold off into pieces cutting thousands of jobs in the process.
And this is bad in exactly what way….?
Steven02: The UAW won’t accept the concessions before the bailout, why would someone buy up GM and expect to be able to make cars without the negotiating with the UAW? The UAW wouldn’t go away during the bankruptcy and the people who are members aren’t going to give up membership because of the bankruptcy.
So, you are basically saying that, because the union wouldn’t accept the normal procedures of a regular bankrupty, it’s the federal government’s responsibility to step in and make sure that the union is kept whole in the process?
The union can do what it wants, and bear the consequences of its actions. It can go on strike, and then listen carefully for the sound of America not caring. That should be a rather brutal reality check.
Steven02: During this time, the suppliers are going bankrupt. Chrysler is gone. GM isn’t building anything. Ford now can’t get parts, it likely goes bankrupt as well. Just saying, that is my guess on how it happens without a bailout.
The other car makers would not have sat around while the suppliers went bankrupt. This scenarios simply would not have happened.
geeber,
I agree that GM is a private company and should be kept that way. If the rest of the economy wasn’t in such a terrible position, gov’t intervention wouldn’t have been needed.
You also miss the point about the strike. I am talking about the union not wanting to accept terms to another deal, which makes buyers and bidders few and far between. I don’t see a company using GM or Chrysler’s facilities to make new vehicles. If anyone buys pieces of it, it would likely be the Chinese gov’t. And I am guessing they would only be buying the intellectual property.
You are also missing the point I am saying about GM being restructured (which it was). You are saying that the UAW would have been handled differently it went through chapter 11 and the gov’t wasn’t involved. You say it wouldn’t have received equity, which isn’t true. The UAW through VEBA was owed much more money than most other creditors. The UAW was fine with getting equity. When you are a creditor, you can either take reduced cash or some sort of debt equity swap. They chose equity while most people wanted cash. The contract negotiations would have happened again with the UAW, but there is no proof that the contract would have been any less for them. If a different company comes in buying pieces, they pieces that they buy are useless without labor. The UAW is likely to get a similar contract. It might be less or more, but it also depends on who buys it and how deep the pockets are.
You are also putting words in my mouth about the UAW not accepting the bankruptcy. I am saying that they didn’t accept terms to the deal before bankruptcy, why do you think they are going to accept such smaller terms after bankruptcy. No where did I state that it is the govt’s job to move in because of this. I stated that the UAW isn’t going away because of bankruptcy. They are still going to negotiate the best deal they can. Are you trying to say that normal bankruptcy procedures would have dissolved the UAW? Because you are flat wrong about that.
If you go back to 2008, who would have been able to provide the funding to keep the supplier network alive. There was over production everywhere, and people could have used production from overseas. My guess, the gov’t would have to jump into to save the supplier network because the auto makers wouldn’t have the stomach to do so.
If Professor Skeel believes normal priorities were rearranged, then he should be able to take the matter to court. You’d think that, with all those poor wronged bondholders and the masses of ideologues out for Obama’s blood that someone would have mounted a successful court case. Someone? Anyone? Bueller?
Wrong.
You assume courts are not above politicized decision making. They are not, especially when it comes to challenging precedent (no matter how poorly reasoned).
In this case…
Normal priorities WERE rearranged by stretching the law.
Was it legal? Yes.
Was it unusual? Yes.
Can unusual legal tactics create economic uncertainty? YES. That was the point of the article.
That the debate on this matter hasn’t entered the courts of law tells you everything about how “illegal” the bankruptcy really was. Put up or shut up, guys.
What’s your intention with quotes around “illegal”?
Neither Professor Steel nor Bertel Schmitt uses that word. Their point (and many economists agree) was that the bailout was a bad idea from a market perspective and that it reeked of crony capitalism.
** I really, really miss Pch101.
I do also. But, IIRC, you both had a hard time accepting sound arguments (admittedly from the academic libertarian right, both legal and economic) about the unusual nature of the GM and Chrysler bankruptcies.
You assume courts are not above politicized decision making. They are not, especially when it comes to challenging precedent (no matter how poorly reasoned).
I would accept that, except that the courts, at the level this could have played out at, aren’t particularly biased, and were certainly much more conservative at and around 2008.
But, IIRC, you both had a hard time accepting sound arguments (admittedly from the academic libertarian right, both legal and economic) about the unusual nature of the GM and Chrysler bankruptcies.
There is a world of difference between unusual (which describes just about everything socioeconomic in 2008) and illegal (which does not describe the GM and Chrysler bankruptcies). We had a fuel price spike, a credit crisis, a banking failure, and a recession. That pretty much made the traditional bankruptcy model impossible, and intervention by the only entities with free cash (governments) and the only entities who would take equity (unions) a requirement.
People keep using the word “stolen” to describe what happened, and imply (or outright state) that what happened was illegal. It wasn’t, and one would think with the amount of money and influence that’s in play here that someone would have tried to push the legality angle.
This article makes two fairly tenuous claims:
* It implies that the bankruptcy was improper.
* It implies that a major cause of concern among the business class is interventionism, when recent surveys point the concerns about consumer demand as the defining worry.
You have to go pretty far out on an ideological limb to state that, for the bulk of the economy, the reason we aren’t growing is because of fears of regulation/intervention. That’s “axe to grind” territory.
The Bailout would not be an issue if the economy bounced back as it normally did after other previous fiscal crisis. The Bailout is being politicized by a politicized administration. The Administration is claiming success where there had been no success. If your view was to simply accept these phony claims at face value, then you would not like hearing other points of view.
If the Administration simply shut the hell up only one side would be trying to beat this issue, and we could all just ignore them. Instead, the Administration has been flailing repeatedly on the economy and has been forced to spin this disaster as something else altogether in an attempt to have some kind of PR story highlighting the Administration’s work on the economy. This issue is alive due to a failing administration’s need to political spin it.
Lies are news. If any president decides to make a fake claim on practially anything, that thing, becomes news. The news isn’t the thing lied about – it is the lies that are the news.
The Bailout is about as successful as any previous war. In both cases the initial feelings to do something are overwhelmed by the realities of actually doing something, resulting in mistakes made, lies exposed and criticisms. It is perfectly reasonable to question how an administration administrates. During times of war, lives are actually on the line. For this bailout, lives are not. However, it seems rather stupid for the Party so quick to jump on how an administration handles a war, seems to quick to insult those who do the exact same thing on a much less serious issue like this bailout.
If it was OK to criticize a war, it should be just as fine to criticize a bailout. However partisans wish to pretend otherwise.
So the Bailout is an issue that will not go away until the economy improves enough for us to forget the billions upon billions wasted by the Bailout.
RE: Psar…
There is a world of difference between unusual (which describes just about everything socioeconomic in 2008) and illegal (which does not describe the GM and Chrysler bankruptcies).
For the 2nd time, neither Bertel nor Prof Skeel use the word ‘illegal’.
We had a fuel price spike, a credit crisis, a banking failure, and a recession. That pretty much made the traditional
bankruptcy model impossible,
Liquidation.
Wasn’t.
Even.
Considered.
Admittedly, it’s a hard choice – but markets are hard. And markets are what the WSJ and many academic economists (and a few libertarian law professors) respect.
Would it really matter if Americans drove Tundras instead of Silverados? Or if Nissan owned Jeep?
and intervention by the only entities with free cash (governments) and the only entities who would take equity (unions) a requirement.
Lower the price enough, someone buys. Sell lots of 1000 Silverados for $10 million and someone would by. They then resell with no warranty for about $12K. People would be lining up to buy.
Or $6K for new Cobalts? They’d sell. And benefit those who bought them.
People keep using the word “stolen” to describe what happened, and imply (or outright state) that what happened was illegal.
People use lots of words. This article and Bertel’s commentary only used certain words.
For the record (again), neither Bertel nor Prof Skeel use the word illegal. And they don’t use “stolen” either, even though you have it in quotes.
They also don’t use the words/phrases “sodomize”, “napalm”, “terminate” or “plunger rape”. I figured they were next on your list.
This article makes two fairly tenuous claims:
* It implies that the bankruptcy was improper.
* It implies that a major cause of concern among the business class is interventionism, when recent surveys point the concerns about consumer demand as the defining worry.
Finally, a reasonable paragraph.
Quibbles:
I disagree with “tenuous claims” take.
I strongly disagree with your take (and the survey you cite) regarding business concern. Uncertainty harms markets; the bailout increased uncertainty; that’s the article’s main point.
ihatetrees,
The author uses the word sham to describe the bailouts/bankruptcies. Sham can mean fraud, which would imply illegal.
How do you know that liquidation wasn’t considered? I am pretty sure that was the option if it wasn’t restructured. How do you know the gov’t never considered letting Chrysler, GM or both go into liquidation?
It wouldn’t matter if people drove Tundras, except for that isn’t what was trying to be prevented. They were trying to minimize the effect of an uncontrolled bankruptcy and the jobs that were associated with it. Toyota wouldn’t have been able to make the Tundras it need due to supply constraints. Supply constraints would have made it very difficult for all manufactures who make cars in the US. Jobs were trying to be saved.
Words like stolen have been used several times when the bailout topic has come up. Not everything in psar’s post is about this particular article, but all of the articles and comments that claimed that the bankruptcy was illegal, or that people had something stolen from them during this process.
I would also disagree with you that the bailouts increased uncertainty. Crashes in the financial sector and auto industry would have sky rocketed uncertainty.
There is a successful court case being mounted against Obama’s Automotive Task Force, The Treasury Department and the PBGC by the salaried folks of Delphi Corp who lost their healthcare, life insurance and 70% of their pensions in these proceedings. You can read the court docket here http://www.delphisalariedretirees.org/delphi/index.php?option=com_content&view=article&id=424&Itemid=94&dir=%2Fhome%2Fdelphi%2Fpublic_html%2Fdelphi%2Fjsmallfib_top%2FGovLetters&sort_by=name&sort_as=asc&Itemid=94&Itemid=94
Put up or shut up? Do you know how expensive it is for a group or ordinary people to take on the federal government? Millions. The salaried at Delphi are fighting this with month donations from their own now empty pockets. Perhaps the similarly fleeced bondholders don’t have the money or willpower for such an ugly uphill battle. Do your research.
The two biggest points lost on those that believe the bailouts were wrong:
1) the cost (economic & social) of letting GM & Chryco fail.
2) the fact that the credit markets were frozen (and to a large extent still are for small businesses) at the time of the bailouts.
Two concepts lost on the layman:
1) Darwinian selection
2) Creative destruction
This has absolutely nothing to do with the Darwinian idea of natural selection. Pretending to justify various economic, social and political policies by appealing to natural selection is the worst kinds of ‘social Darwinism’ and is in reality a process of social or cultural selection, not natural selection.
Forget natural selection. How about survival of the superior?
It depends on the metric. Superior in what sense? Is Walmart superior? How about Monsanto, it is superior? What exactly does ‘superior’ mean here? Superior at maximizing profits? Superior at producing goods by taking advantage of cheap, foreign labor? Superior at taking advantage of other countries minimalist environmental laws? Superior at producing well-paying jobs? Superior at making sure its workers and consumers are treated well? Until I know the metric that you’re using, I have no clear idea what you mean by ‘superior’ (or what you mean by Darwinian selection for that matter, now that you express it this way).
Superior at providing the products people want at a price they can afford, while still turning a profit.
Achieving that goal will generally require a company to take other beneficial steps. For example, to ensure top quality, a company will not mistreat its workers, as unhappy workers generally don’t turn out superior products.
Note, however, that “treating workers well” is not the same as “paying them as much as the local union rep thinks they should make” or “making sure they are members of a union.”
@ geeber
That’s helpful. Thanks.
(Though I must confess I still don’t see what this has to do with Darwinian selection, as if reference to Darwin is supposed to authorize the selection process or something?)
I haven’t heard Walmart and Monsanto resort to pan handling so I guess that makes them superior?
Superior in that you don’t have to declare an embarrassing bankruptcy?
That, unfortunately, is begging the question.
Semantics much? You must be from New York. :)
No, I’m afraid it’s worse than that. I’m from Atlantic Canada…
Let me know where senior debt was thrown by the wayside. It didn’t happen. How many times does that have to be brought up?
From his article, I don’t know where he thinks the lending for GM or Chrysler was going to come from. I have heard this argument before, and it goes no where.
Auctions take time to happen. The suppliers probably go bankrupt during this time and the auction is meaningless because there are no parts to build cars. Also, who is going to get into the car business during carmageddon? Lots of assumptions made in this article. They weren’t very good assumptions either.
Also, bankruptcy law wasn’t circumvented as this article would lead you to believe. Again, there was no problem with bankruptcy law.
I feel like the same stories are getting told again by people who aren’t experts in law, but they read it somewhere else so it had to be true.
I feel like the same stories are getting told again by people who aren’t experts in law, but they read it somewhere else so it had to be true.
It’s “The Big Lie” in action. Repeat the same thing, over and over again, in denial of facts and logic, and eventually you’ll get enough people to believe it.
If the facts are on your side…pound the facts into the table. If the law is on your side, pound the law into the table. If neither the facts nor the law are on your side, pound the table.
Amen psar, Amen.
“It’s “The Big Lie” in action. Repeat the same thing, over and over again, in denial of facts and logic, and eventually you’ll get enough people to believe it.”
You can thank Edward Barnays for a lot of this. He’s the one who basically invented the modern PR game as a way of selling an idea (in fact, I think he also actually first coined the phrase “public relations”). There’s actually a great film series by Adam Curtis called “The Century of the Self” where he documents the influence Barnays has had on politics and public life. Interesting stuff (just do a quick search if you’re intrigued, it’s easy to find).
Yeah, socialists and their dupes know all about the big lie, you use it often enough. The thing is no matter how many times you are proven wrong, you stick to the same story until it becomes accepted as the truth. Way to follow Goebbels.
Look go ahead and believe that it was done in accordance too normal bankruptcy law, it wasn’t and you know what the guy who wrote the piece in the WSJ knows a lot more about it than you do or any pro-bailout bitter-ender here.
Psar, you are a fairly bright guy, but you do the same thing every time when the bailout comes up. It’s always the same mantra, “it was legal, nothing out of the ordinary happened and even if it did the situation entailed doing it that way”, you can do better. It won’t kill you to admit that the whole thing stunk to high heaven and the only entity who made out well during the process was the UAW. And the UAW was protected because they gave money to the right party.
I know that you think socialism is the answer to the world’s problems because of your grandfather, but it isn’t and its twin crony capitalism is just as bad.
Goebbels actually borrowed many of his ideas about propaganda techniques from Barnays ‘irrationalist,’ desire-constructing marketing strategies.
MikeAR,
He makes the same argument every time because the same argument against he bailouts is made every time. Why should his argument change? It shouldn’t because he is right.
Yeah, socialists and their dupes know all about the big lie, you use it often enough. The thing is no matter how many times you are proven wrong, you stick to the same story until it becomes accepted as the truth. Way to follow Goebbels.
If you think Goebbels was socialist (Godwin!) you really do need to pick up a PoliSci textbook. Do you think the Democratic Republic of Korea is Democratic, too?
Psar, you are a fairly bright guy, but you do the same thing every time when the bailout comes up. It’s always the same mantra,
That’s because the same arguments keep coming back. I don’t mind debating “Was it worth it?” because that’s fair game and we really can’t be sure, but “Was is legal?” is just partisan posturing at this point. It was legal. Get over it. Move on.
I know that you think socialism is the answer to the world’s problems because of your grandfather
Actually, I’m socialist for all sorts of reasons, starting with being Canadian (which, even if you’re a conservative, starts you left of the Democrats). But yes, we’ll say I had a very liberal upbringing.
However, since I’ve actually worked for both unions, governments and a big four accounting firm I’d like to think I’m more than just your garden variety clove-cigarette-smoking, Saab-driving, tweed-and-birkenstock-wearing ivory-tower Pinko.
For one, I don’t own anything tweed.
Psar, an easy equation:
Goebbels=Nazi
Nazi Party=National Socialist Party
Josef Goebbels was a Nazi therefore he was a socialist. Don’t say that the Nazis weren’t socialists, they were. They believed in a central, planned economy with state control. They formed a profitable for both relationship with big business but it was clear to everyone that the state was in charge.
You justify the bailouts by saying they were legal. If legality is the standard then maybe so. But legal does not mean right. Right and wrong are still the final standards that everything is judged by. I’m dodging Godwin here by pointing out that a lot of things in the Soviet Union were legal but they surely weren’t right or moral. You are in the same position here. The bailout was not right, that is the final word.
They formed a profitable for both relationship with big business but it was clear to everyone that the state was in charge.
That’s not how socialism actually works. Much as you might like to redefine terms to mean what you want them to mean, words have definitions and limits and you cannot just arbitrarily decide to make them mean “something I like/dislike” and expect to be taken seriously. Again, I cite the example of the Democratic People’s Republic of Korea. About the only accurate word in that label is “Korea”, and even then it would be more accurate to say “half-Korea”.
Socialism, in the Marxist** sense, assumes that the people are all members in the state, and the state owns all means of production. Fascism doesn’t mean that, not even close: classical Italian fascism certainly sees corporate power as in a close relationship with the state, and certainly beholden to it, but the “workers own the means of production” flat out doesn’t exist.
This is why, eg, Cuba is socialist and China is (mostly) fascist, despite what they call themselves. It’s also why neither George Bush nor Barack Obama’s America is either, despite the raving on both sides think.
Really, pick up a textbook sometime and read up on “socialism” and “fascism”. Language really is important in debate.
You justify the bailouts by saying they were legal.
No, I reject the criticism of the bankruptcy as illegal, and that the bondholders were robbed.
The bail-out falls into the “probably legal” category. I tend to think it’s more legal than not since I haven’t seen a lawsuit to the contrary.
If legality is the standard then maybe so.
No, definitely so. As some of your ideological brethren on this thread have hammered on, this is a nation of laws. You might not like them, and you can vote to change them, you can sue to have them re-interpreted, and you can certainly complain about them, but you can’t deny them.
But legal does not mean right. Right and wrong are still the final standards that everything is judged by.
I’m dodging Godwin here by pointing out that a lot of things in the Soviet Union were legal but they surely weren’t right or moral. You are in the same position here. The bailout was not right, that is the final word.
Ok, so now you’re re-trenching from “it’s illegal” to “It seems immoral, from my point of view”? Moral absolutism is a pretty tenuous position to take. What’s “right” and “wrong” in economic theory?
I think it’s wrong that people lose their homes because they get sick. I think it’s wrong that a single person can be paid a quarter-billion dollars for failure. I think it’s wrong to invade a country based on lies. I think it’s seriously wrong that the state has the power to order people’s execution.**
Doesn’t mean squat, though. Wishes, fishes, etc.
Again, we’re discussing three things:
* Whether or not the bailout was effective
* Whether or not the bailout was legal
* Whether or not the bankruptcy was legal
What you’re arguing is that you don’t think it was moral. You’re free to think that, but morality of economic theory is theoretical at best. You’re in demagogue territory, there.
Now, you’ll probably decry me as a moral relativist, which is probably correct. I’d counter that you’re trying to ascribe morality to where you should be applying ethics and completely missing the difference between the two, and between subjective and objective truths.
@MikeAR:
“Goebbels=Nazi
Nazi Party=National Socialist Party”
By the same logic, the German Democratic Republic (better known as East Germany) was a democratic republic, the People’s “Republic” of China is a republic, and the United Kingdom is ruled by a king.
If you can’t see the difference between Nazism and modern liberalism (hell, even NON-MODERN liberalism), then you need to crack a few books, Bubba.
@ MikeAR “Goebbels=Nazi
Nazi Party=National Socialist Party
Josef Goebbels was a Nazi therefore he was a socialist.”
Even if true, it doesn’t prove much because while all Nazis might be socialists (in your sense of the term), not all socialists are Nazis (just as while all humans are animals, not all animals are humans).
Socialism is a broad notion. You can have National Socialism (Fascism) and you can have Democratic Socialism (Canada, Sweden, Roosevelt’s “New Deal”).
The socialism being defended here is Democratic Socialism, not National Socialism (or any other of its non-democratic variations).
You wrongly equate socialism with Communism and Fascism, and you do it all the time. Using the term in this deliberate, misleading sense not only undermines everything you have to say on the topic, it also calls into question the overall credibility of anything else you might have to say (even when it might be worth saying). You do everyone here an injustice, including yourself, by continuing to use the term in this deliberately misleading, caricatured sense.
Boy everyone piled on, I must have struck a nerve. I am very aware of the differences between socialism, fascism and communism. There are differnces but there are a lot more similarities. Remember both communists and fascists called themselves socialists. Both corrupted the original meaning of the word but both are logical outcomes of socialism. It amazes me that anyone can look through the history of socialism and still call themselves socialists. Socialism manifested in its totalitarian offshoots has caused untold mysery and death throughout the world.
You can split hairs about who is what but when its all said and done they are all totalitarian societies. Socialism assumes man can be perfected and can me made to act rationaly for the common good. There are always different versions of the common good, that’s why we are arguiing the bailout now. Your side imposed its version of the common good in that case. We fortunately have the chance to vote on that next year. You all need to undrestand that people are different and that no one has the right to impose his particular idea of common good on us all.In other words, all of you guys do not know best, you aren’t that smart. I know I don’t know best for everyone, I’ve matured past adolescence.
@ MikeAR “You all need to undrestand that people are different and that no one has the right to impose his particular idea of common good on us all.”
I actually agree with that, completely. That’s why the notion of what counts as the common good has to be subjected to continuous democratic debate. It has to be constructed and reconstructed again and again without end and tested constantly and rigorously against different kinds of realities and different, newly emerging economic, social, technological and other constantly developing conditions. In a sense, our notion of the common good should be regarded as analogous to scientific truths in general–you try them out and then refine, revise, and if necessary reject them if they don’t stand up to rigorous testing and application or experimentation over time.
I don’t know what the common good is, but I’m willing to risk certain notions such as acknowledging, preserving and advancing the freedom, dignity and moral equality of all, because these have so far stood the test of time and seem like very good candidates for understanding what the common good might mean, at least until we can discover something better. But for now these seem to be the best that we have, and that’s as good a place to start as any.
Nice post, thanks.
Steven 02: The suppliers probably go bankrupt during this time and the auction is meaningless because there are no parts to build cars. Also, who is going to get into the car business during carmageddon? Lots of assumptions made in this article. They weren’t very good assumptions either.
Speaking of assumptions, you are making a very big one yourself.
Under your scenario, when suppliers hit trouble because GM and Chrysler declare bankruptcy, Ford, Toyota, Honda and Hyundai all would have just sat around, twiddling their thumbs, saying, “Whatever will we do?! We can’t build another car, now that they suppliers are bankrupt. We’ll just close all of our factories until the courts sort out this mess.”
No, they work together to shore up the supplier base. Of course, if the federal government is poised to use taxpayer money to do this, it makes sense to take this route. Spend taxpayer money instead of your own. And all of those buy-American fanboys who used to foam at the mouth because people were buying Camrys instead of Impalas now can point to Toyota as their (indirect) savior – “The bailouts must be justified – even TOYOTA supported them.”
Toyota, of course, just played them like a violin, but they aren’t smart enough to realize it.
Those companies you mention were bleeding cash at the time. Ford was mortgaged to the hilt, what would they have been able to do?
Toyota was scraping by on non automotive profits.
Hyundai would be the least effected. Most of its models are built in Korea.
Honda would have the most to lose from this outside of Ford. But, Honda is also a much smaller player. I don’t think its influence alone would have made it possible to keep the suppliers going.
If you really look at it, it would be Toyota and Honda trying to save the suppliers. I think that they would of course save the ones that they need, which might leave Ford dead, depending on if they can still make what they need.
But, such facts of the supplier network never make it into the article. In fact, the don’t make it into any anti bailout arguments. Only “it wasn’t legal” and “someone would have bought GM.” The same argument every time.
If Honda and Toyota work to save the suppliers, that is their money being used, not taxpayer money. Even more importantly, it will further the restructuring of the entire industry, which is sorely needed, and which the bailouts of GM and Chrysler only delayed.
As I said, I don’t think that Toyota and Honda would have done it. They had the most to lose, but I still don’t think they would have done it because each was losing so much money at that time. I am guessing that would have went to DC with Ford saying that the supplier network was crashing and they needed help.
There was a reason that Toyota supported help for GM. They knew what would happen. They didn’t want to upfront the money.
@Geeber
“Under your scenario, when suppliers hit trouble because GM and Chrysler declare bankruptcy, Ford, Toyota, Honda and Hyundai all would have just sat around, twiddling their thumbs, saying, “Whatever will we do?! We can’t build another car, now that they suppliers are bankrupt. We’ll just close all of our factories until the courts sort out this mess.”
Actually, they’d closed their factories because new cars are a ridiculously tough sell in a country with a devastated economy and no banking system…and without the bailouts, that’s exactly what we would have had. How well did automakers fare during the Great Depression? Not so well, as I recall.
So the Wall Street Journal found a right-wing ideologue – I mean, principled conservative – to trot out to trash an Obama policy? I’m shocked…shocked, I tell you.
This reminds me of watching Fonzie admit he was wrong.
Again, the big lie. The WSJ is a right wing paper. It isn’t, not even close. The news sections are more leftie than the NYT. The editorial section is getting more left every day. It was already that way before Murdoch bought it and has gotten worse under him. I cancelled my subscription in 09 because I got sick of the Obama worship in the news section and the left wing hacks like Thomas Franks.
For a “conservative” of your ilk, MikeAR, anything less than pure, unadulterated, far right swill – we’re talking inspired wingnut lunacy like Beck, NewsMax, Soldier of Fortune or Jerome Corsi – might as well be Pravda.
Of course, not all conservatives are of your ilk.
But I digress. The WSJ is famously right-wing biased, particularly when it comes to the op-ed pages. Which, of course, is their right to be.
Actually, it’s not. The regular news section is notable for NOT being biased, and the editorial page is no more biased than that of The New York Times or The Washington Post.
The WSJ’s editorial page has always been hilariously right-wing, and their news pages have trended that way ever since Murdoch bought it. They’ve got about as much “Obama worship” as Conservapedia. What’s next, are you going to say that Fox News is part of the “liberal media”? What the hell qualifies as a right-wing editorial page by your standards?
FreedMike, who are these people and institutions you name? I know who Beck is but I have never been able to watch him because he is pretty weird. Soldire of Fortune I do know but the others I have no idea. This may suprise you the the paper (online version)I read most is the New York Times. But unlike some, I can think, you should try it sometimes.
One more thing, compared to the pure, unadulterated filth on some left wing sites like Daily Kos and DU, you have no right to critcize any conservative at all. The conspiracy theorists, the nihilists, the crazies are 99% on your side.
Today’s Washington Post also calls the President a liar based on what he said in Toledo.
So you are wrong.
David Skeel (the author of the WSJ article) is a professor of law at the University of Pennsylvania. A lawyer for about 20 years. One of his areas of expertise is Corporate Bankruptcy. He appears to be very qualified for his opinion.
Yes, but by the standards expressed by many**, that makes him an academic elitist and thusly instantly discountable.
Come on, now, which is it? Are academics credible or not?
** including on this blog
Yeah, it’s funny how academics are often classified as ‘elitist’ and ‘out of touch’ (unless, of course, their views happen to coincide with those doing the classifying).
Psar, even if he is and idealogue, which I doubt considering he is at Penn, he still knows more about the subject than you. He blew your several years worth of pontifications about the bailout out of the water in that piece.
And people who don’t have law degrees are more qualified?
It depends on the topic. While people with law degrees should be highly qualified to speak about issues relating to the law, I don’t think that makes them more qualified in addressing economic, political, moral, policy and other non-legal considerations than people with other, related areas of expertise.
I’m sure Professor Skeel is highly qualified to speak on legal matters relating to corporate bankruptcy, but as to the other non-legal economic, political, moral and policy considerations, I don’t see why his background in corporate law should make him more of an expert in these areas than other people with different academic and experiential backgrounds.
I should add that I personally don’t have a firm position on the merits of the ‘bailout.’ I’ve read many arguments from both sides, but nothing that would make me conclude that it is necessarily a good or a bad thing. I actually think many of the arguments for and against the bailout are strong on both sides, and personally lean towards viewing this as one of those antinomous cases where there is no clear, easy answer on one side or the other.
In other words only someone who agrees with you is qualified to comment on anything.
I neither said nor implied any such thing. I just acknowledged that Professor Skeel is probably highly qualified to speak on legal matters relating to corporate bankruptcy, and I never contested his claims.
You need to stop putting words in people’s mouths.
@Philosophil:
“I should add that I personally don’t have a firm position on the merits of the ‘bailout.’ I’ve read many arguments from both sides, but nothing that would make me conclude that it is necessarily a good or a bad thing. I actually think many of the arguments for and against the bailout are strong on both sides, and personally lean towards viewing this as one of those antinomous cases where there is no clear, easy answer on one side or the other.”
An answer can become more clear if you have a definitive idea on what government’s job is. Is it to bail out failed companies? Provide food stamps for poor people who can’t afford to eat? Take tax money to fix roads, pay police and firemen? Should the government be funding Planned Parenthood, NPR, give tax deductions to churches, make abortion illegal, etc.? What moral or financial obligation does the government have to it’s citizens? Does it have an obligation? We know it’s responsible for providing “a common defense”, but these other things are where people differ.
To my knowledge, there is no well run government program. By definition, a government run program is large, expensive, with lots of layers of waste and very little accountability. Was C4C well run? How about the Volt rebate, that dealers are taking and cutting the end customer out of the equation? And these are some of the smaller government programs!
And no, the military is not a well run program. Want proof? Explain why we have 50k troops in Germany and thousands more all throughout Europe, Japan and South Korea.
I have a general idea of what government’s role is, but not a definite one. I say this in large part because I think the proper role of government is not something fixed and static, as if a single clearly defined role could be applied universally across all places and all times. Instead, I think the proper role of government differs depending on such things as the size and density of the populations concerned, the extent of various resources that might be available, the kinds of infrastructure and technologies available for the production and distribution of goods, and so on. Thus, a relatively small population might allow for a high degree of participatory democracy with government having the relatively small, hands-off responsibilities associated with judiciary and other related concerns, while a large, widely distributed population with pockets of extreme density and low technology might require a more representative form of democracy with government playing more of a managerial role on top of its judiciary functions, and so on with various other kinds of historical, technological, demographic and other relevant conditions.
Whatever the varying roles of government, I think a democratic government that recognizes the moral worth and dignity of all individual persons is always preferable, no matter how ‘efficient’ or such the alternative forms may appear to be.
He has credentials, but reading this article, I don’t think he is qualified. Here is why.
First, a single line quote from his article.
“General Motors was a perfectly viable company that could have been restructured under the ordinary reorganization process.”
Excuse me? GM was a perfectly viable company? Did he read any of the reports on how much money and market share they were losing? He is trying to paint a picture of how bad it wasn’t. GM was only running the light bulbs it needed to at the time.
Second, his description of the bankruptcy process.
The process that was used was a 363 sale. It is used when speed is important for the bankruptcy process. Other people were allowed to bid. No one else bid. If it wasn’t going to be a 363 sale, it would have taken much longer and the supplier network could have crashed. That was one of the principle reasons that the 363 sale was used. But, he calls it a sham.
Third, his description of the costs of the bailout.
He isn’t counting or even mentioning that savings at least some of the jobs has a positive impact on the economy and through that, taxes. He doesn’t have any accounting for what could have happened if their were no bailouts. He is trying to paint the picture of how much this is going to cost with forgetting the other side of the argument.
Forth, this is an editorial piece.
He is not pro-bailout. That is fine. He can have that opinion, but it makes is credentials less relevant. He is trying to make his point and only his point. Facts that support the other side of the coin aren’t mentioned. It is the same article I have seen many times before, only with the addition that this sets a bad precedent to creditors who may not want to lend money to companies that are in trouble if the gov’t cares about that industry. Funny, it was creditors not wanting to lend more money to GM (which was the right decision for those creditors) that caused the bailout in the first place.
GM was looking for more financing before the bailout happened. It wasn’t coming from anywhere. So how exactly did the gov’t start that? It didn’t. People weren’t lending money to GM b/c at that time, it would be a very dumb move. GM was a very sick (not viable as he would have you believe), company. The DOE wouldn’t approve loans to them because of this.
I am telling you, this is the same article that has been written and rewritten again and again. Same argument with the same fallacies.
Prof. Skeel has a blog where he has been writing since early 2008, at http://www.law.upenn.edu/blogs/dskeel/. It’s interesting to go back there and read his thinking on the financial crisis generally and the auto cases as they were happening. His politics are right of center, but not too far out there, and also he’s an evangelical Christian — but he wrote about not supporting Huckabee in ’08 because he campaigned too much on his faith.
Yeah, Murdoch’s WSJ and Fox News are ready to lead the revival of American Manufacturing … not.
Call me when the Chinese government stops being a direct participant in industry and finance in China.
American manufacturing is fine in market friendly states. Unionized American manufacturing is distressed.
Ding-ding-ding. Nice piece there, Bertel, this hammers most of my complaints about the bailout nicely.
The socialists and marxists are at it again. Trying to justify the government handing billions to the UAW which was in return for UAW donations to the Democrats. For years, I put up with inferior GM and Ford products in order to support Detroit. Then, GM, Ford, and Chrysler, and the UAW decide to take tens of billions of government money when a normal bankruptcy would have fixed the industry. Ford fanboys, Ford tooks lots of money too. They just took it from different programs. Like the FED CP program, and the energy department program. Even today, many billions are being handed out to suppliers via the Small Business program.
Time to get even with the UAW which destroyed the Detroit industry, then decided to pocket massive amounts of taxpayer money. Time to get even. Toyota and Honda forever.
“The socialists and marxists are at it again.”
…so are the barely coherent ideologues who think anyone who disagrees with them is a Marxist.
Mike, are you saying that the people whoo don’t agree with you are stpid and incoherent? Sure sounds like it. The actual thinking posts here are coming from one side only. The others are just regurgitations of the same old talking points.
“Mike, are you saying that the people whoo don’t agree with you are stpid and incoherent?”
Well, considering that you failed to spell the words “who” and “stupid” correctly, I’d say that the incoherent tag applies in your case.
And, yes, considering that REAL Marxism would have seen the government simply nationalize the bailed out companies (most likely at gunpoint), saying that bailing them out to save them as stockholder-owned concerns was even remotely Marxist is indeed stupid.
FreedMike, do not ever make a spelling or grammar mistake again here. You do know that no one is perfect and I can’t wait to catch you. I can spell I just can’t type. Be careful.
Mike AR can spell just fine – but he makes typing errors while furiously paging through his Ayn Rand library to help him frame his posts.
Shaker that’s funny. I also should wear glasses but I don’t most of the time too. Haven’t read Rand for almost 20 years either. She makes very good points but is a horrible writer of fiction. Plus I never could get past her hatred of religion. I’ve got Atlas Shrugged and The Fountainhead in my library somewhere but I haven’t touched them since I moved into this house 4 years ago.
You do have to admit though that Rand knew crony capitalists and government very well. It’s almost scary how Atlas Shrugged has become the playbook for the current administration.
Fair enough. I actually think that some of Rand’s ideas are sensible, but I’m actually a centrist, which means that (as it is now) I try to take the side of the “underdog” when it comes to the corporate/government tug-of-war. It’s a shame, really, as corruption on both sides makes it a false choice, a distasteful exercise. Let it be said that I’m behind the middle class, and right now, it seems that the Democrats are, too. The UAW is a calcified organization, indeed, but it represents a lot of middle-class workers, and (though the bailout was unorthodox) they now have a stake in GM’s success, so it might actually work differently this time. And yes, I’m sure that Obama was taking care of constituents at our expense, but after all, that was S.O.P. at his last job.
(And yes, Ayn Rand wrote speeches, connected by loose narrative and used stilted characters that only resembled human beings, but she made her point well.)
+1
I get it, the bailouts weren’t legal because you got a bad product from Detroit in the 70’s and 80’s. Makes perfect sense.
Maybe to assist BIG corporations is why the IRS is playing “paperwork games” to perhaps force me to re-pay the 10 percent freebie I received for buying the shanty.
$4,200 I can not spare that went to building repair materials etc. to fix the shanty spent locally but since the paperwork that convinced every other bureaucrat ’round these parts I own the shanty and have lived here (And I HAVE met every single requirement from DAY ONE to legally obtain that 10 percent freebie.. it’s a created-later issue… a paperwork-style-only issue not available when the buying/applying for the rebate event was going on).
“There’s class warfare, all right, Mr. (Warren) Buffett said, but it’s my class, the rich class, that’s making war, and we’re winning.”
Excuse me while I despise the USA federal government, BIG business and every bureaucracy that spits upon the lowly commoner class of the USA.
Conxidering yhe subsidies and tarriff walls US industries have hidden behind for years the auto bailout is pocket change Wall street who crashed the world economy with their stupidity and greed got bailed out without a mumur of complaint these bastards should have been hauled out and shot.
Bertel, it’s not a very persuasive form of journalism when you attempt to make a point and use one quote from one law professor as some form of validation. If I found another law professor to make the opposite arguement, would I have then negated Professor Skeel’s? See how this kind of thing leads absolutely nowhere? Why not just make your point as compellingly as you can and allow others to judge its merits.
Jeff, don’t try that. You know that if Bertel just wrote his thoughts about the bailout, you would just say that it’s just an opinion with no facts or experts to back it up. You can’t be satisfied because you have to keep on defending the indefensible. Your side is like the holdout Japanese soldiers on Pacific islands after the war. You just can’t give up because of your ideology.
MikeAR,
Is that the pot calling the kettle black? If there was an expert who said that the bailout was a good idea and legal, you wouldn’t agree with him either because of your ideology.
It’s always appeared that the anti-bailout group was like the kid from HCA’s story saying the emperor has no clothes, while the pro-bailout group just sat there and nodded.
It’s fine to opine that the bailout was a good thing. There are cogent arguments in support of the bailouts, but I have not heard one of them that didn’t lie or misrepresent substantive facts while doing so.
There was not much normal about the GM and Chrysler bankruptcy proceedings, so lighting your hair on fire and saying it was normal just undermines your credibility.
WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH
‘1984’ turned out to be a How To book.
It’s pretty obvious here that there is an ideological divide about the bailout. Other than some guys like Mikey who aren’t afraid to defend it based on self-interest, all the other defenders are uniformly liberal, Democrat, socialists or some combination who (if citizens) voted for Obama. You have the right to vote however you want. I won’t say anything about that unless I meet you inperson.
But I challenge anyone of that second group to come forward and admit that maybe, just maybe that the bailout was mostly about saving the UAW, their votes and their money. Admit that it was a pure political calculus from the administration. It shouldn’t be hard to admit, after all winning is what counts and you won. Be proud of what happened, you shouldn’t have to grasp at straws to justify it. It’s yours now. You won, take ownership of what you did. If the end is worthy, then the means are justified.
Edit, feel free to do an end zone celebration and rub our noses it, I’d love to see it, if you’re honest and admit it’s all about politics.
There is that little matter of us no longer resembling a nation of laws. I wonder what they think about the prospects of the obamunists being replaced by people they disagree with who continue to yield unlimited power.
Oh please.
And when will one of you right wing ideologues admit that Obama and his supporters are not “socialists”, and that the bailout had everything to do with the damage that an uncontrolled collapse of GM and Chrysler might do to the economy and the physiology of Americans when the country was already in a near economic freefall?
Any political calculus beyond that was at best secondary, and much of it exists only in right wing imaginations.
You can’t do it can you? You have to pretend that it was all legal and not political.
One more thing, what about Obama gives you the idea he isn’t a complete socialist and crony capitalist? You sound like a proud, if somewhat angry socialist, why won’t you claim him?
You can’t do it can you? You have to pretend that it was all legal and not political.
I don’t doubt that politics was involved, but I don’t think it was illegal.
One more thing, what about Obama gives you the idea he isn’t a complete socialist and crony capitalist? You sound like a proud, if somewhat angry socialist, why won’t you claim him?
Because I know what actual socialism entails, and I know Barack Obama’s presidency is nothing like it. Examples modern socialists: Fidel Castro, Hugo Chavez. There’s a big, fat, gap between guys like that and even the pinkest of western democratic socialists like, oh, just about anyone in Europe, let alone Obama, whose actual policies are generally to the right of such auspicious Reds as Stephen Harper or Angela Merkel.
Recall that a real socialist policy would have been something along the lines of what happened with Renault: that the government would have bought the company or companies in question and nationalized them wholly. That didn’t happen here: the government didn’t even interfere particularly much with product planning (the Volt, for all the calls of “Pelosi-mobile” was in the pipe when Bush was president) and spun them off as soon as it was feasible.
Ralph Nader was actually pushing for Obama to do the kinds of things the American Right was hysterically claiming he was going to do, only to have him not do it.
Why won’t I claim him? Because he’s yet another Third-Way Clinton/Blair neo-liberal and representative of the kind of thinking that’s co-opted liberalism. Nader’s “Uncle Tom” comment was pretty accurate, if also tasteless.
Nader called him an Uncle Tom? I didn’t see that, suprising that Nader wasn’t thrown out of the left for that.
Psar, you said that it was illegal, do you have any shred of a doubt that it wasn’t completely legal though? A big part of our justice system is precedent, can you admit that things were done that did not have any precedence in over 200 years of our lefgal system? I’m not talking about doing things as a response to the crisis either.
Actually, I will kind of backtrack on Obama’s socialism. He might think he is a socialist but he is really more of a fascist. Funny thing is your grandfather would be taking to the hills to fight his regime.
MikeAR,
You offer no proof of anything in your posts. You want people to admit that it was political, which it wasn’t. It was about preventing a free fall for the economy. Can you admit that? That it was first and foremost about the economy?
Also, when you are talking about precedence, it does and doesn’t always apply. Precedence comes from what happened before. But at some point, it will be the first time, and it can still be legal.
Precedence can also be wrong. “Separate But Equal” was legal at one point in time, even approved at the Supreme Court level. It isn’t today.
But, there are 2 parts of the bailout. First, was the initial TARP funds that were used. This is probably the easiest argument to say that the bailout wasn’t legal. Depends on what you read, but it is still a complicated argument either way.
On the bankruptcy side, no. That was legal. That would be a much harder argument to make.
Anyway, if you are so concerned with legal precedent, why not show were legal precedent was violated in the case of the bankruptcy.
If it was about the UAW, being a liberal, Democrat or socialist, then why did Bush start it?
I don’t doubt that anything Washington does doesn’t have something political reasoning attached. But I am not sure that saving Detroit wasn’t more about helping the economy then “saving the UAW.”
For the record, I am conservative, Republican, and didn’t vote for Obama. I do how ever care about truths and am a fan of GM. To me, what I have read about on comments about this particular issue are not ideological on politics, but ideological on favorite car companies. If you are a GM, Ford, or Chrysler fan, you are for them. If you hate all that Detroit stands for, this was a complete sham. I don’t know how many times I have read about how the bailout was illegal followed up by how the UAW builds a crappy product. Yep, law is built upon where a good product was made 30 years ago or not.
Steven, Bush’s reasoning behind the auto bailout wasn’t particularly political. It was about saving jobs and not dumping a mess on president-elect Obama. I don’t agree with too big to fail, but Bush has always been somewhat squishy on economic principles.
http://www.cardealexpert.com/news-information/auto-news/decision-points-auto-bailout/
Independent of Bush’s decision to spend $17.4 billion from TARP on keeping GM and Chrysler running, the Obama administration structured the bankruptcy process in a way that appears to have treated the UAW better than if the companies went through chapter 11 restructuring.
George B,
I understand what you are saying, but what I was trying to say is that bailouts started before Obama took office. If the auto bailout wasn’t needed, was the Wall Street one? If Bush says no to helping GM and Chrysler, they likely go chapter 7. And Obama doesn’t get a chance to help them. I am just pointing out that it was Republican led to save GM and Chrysler initially. In fact, democrats voted against using TARP funds to save GM and Chrysler.
Now, I also disagree that the UAW was treated much better. The UAW was one of the biggest creditors to GM and Chrysler through VEBA. Instead of taking reduced cash, they took equity, which was an option available to the people who took cash.
“But I challenge anyone of that second group to come forward and admit that maybe, just maybe that the bailout was mostly about saving the UAW, their votes and their money. Admit that it was a pure political calculus from the administration.”
You see UAW jobs saved, when in fact the fact of the matter was that JOBS were saved. The auto bailouts were a drop in the bucket compared to the bank bailouts, which happened in an industry that’s famously non-unionized. You’re making a political distinction driven by ideology, ignoring that in the final analysis, a job is a job is a job. Bush got that, and so did Obama, but it seems the contemporary right wing just can’t get its arms around that basic concept. Your problem, not mine.
The REAL “payoff” here is the result of doing what needed to be done, and if that means that Obama gets a pat on the back from the American people from doing it, and your side can’t handle that, then that’s just too bad, isn’t it? Democrats had no problem patting Bush on the back for the bailouts, and for the things that he did right (his handling of the immediate aftermath of 9/11 comes to mind), but now that it’s Republicans’ turn to pat Obama for saving the auto industry, they’re acting like a bunch of grade schoolers.
Bush and Obama made moves to save the auto and banking sectors of our economy, and now that they’re saved, they both deserve some credit. That you can’t handle that fact, and continue to make the morally bankrupt and economically stupid distinction between union jobs and jobs, tells me the person blinded by ideology is you…and I’d say that’s something that infects the whole right wing as well.
FreedMike: You see UAW jobs saved, when in fact the fact of the matter was that JOBS were saved.
What if those jobs involve making products that people don’t want, or can’t be sold in sufficient volumes or at sufficient prices to turn a profit (which was the real problem)?
Saving jobs for the sake of saving jobs is counterproductive at best.
FreeeMike: The auto bailouts were a drop in the bucket compared to the bank bailouts, which happened in an industry that’s famously non-unionized. You’re making a political distinction driven by ideology, ignoring that in the final analysis, a job is a job is a job.
So, why didn’t the government bail out Linens ‘n Things and Borders, or all of those local restaurants that went belly up during recession? Lots of people lost jobs when those businesses went under.
If a job is a job, then, based on your logic, we should charge the federal government with making sure that no one loses any job, and we can enjoy 0 percent unemployment.
FreedMike: Democrats had no problem patting Bush on the back for the bailouts, and for the things that he did right (his handling of the immediate aftermath of 9/11 comes to mind), but now that it’s Republicans’ turn to pat Obama for saving the auto industry, they’re acting like a bunch of grade schoolers.
The auto industry isn’t just GM, Ford and Chrysler anymore. The domestic auto industry now consists of those three, plus the transplant operations of Honda, Hyundai, Nissan and Toyota. Busha and Obama saved the substandard parts of the domestic auto industry.
Newsflash – it’s not 1965 anymore. The Big Three no longer control 90+ of the domestic market.
If GM and Chrysler had gone under, we all still would have been able to buy lots of vehicles made right here in the good old U.S. of A.
Geeber,
Linens ‘n Things and Borders and local restaurants aren’t manufacturing jobs. Something that the US market has been losing for a long time. You are talking about apples and oranges here.
You are correct, Detroit isn’t 90% of the market, but it is definitely close to if not over 50%. Hyundai makes very few cars in the US, the Sonata and Elantra. Toyota makes about 1/2 of its cars in the North America as does Honda.
And there is no guarantee that the supplier network would have been there to support many cars being built in the US.
@ Geeber:
1) People DO want the products GM and Chrysler are selling. That’s why their sales are up.
2) The failure of Linens and Things didn’t threaten the economy. The simultaneous failure of several of our largest banks, along with GM and Chrysler, would have.
3) If GM and Chrysler would have gone under, then other companies would have been able to pick up the slack…right after the economy recovered from the double-tap of the simultaneous failures of the auto and finance sectors. God only knows how long that would have taken. If I’m Toyota in 2008, the LAST thing I want to see is GM and Chrysler outright fail – their failure would be a head-shot to the national economy as a whole, and that would immediately and fundamentally threaten MY business.
re: mikear / 06/06/11 @ 9:09 pm; “Admit that it was a pure political calculus from the administration.”
you gotta problem with that? political calculus plays an important role in the processes and practices of every administration – even the creeps on ‘your’ side. remember that bastard bush?
quoting james k galbraith’s third paragraph in the washington monthly back in september 2004: “Bush’s top economic priority has always been to cut taxes on the wealthy; as he famously said, the “have-mores” are his political base. The marginal income-tax rate, the estate tax, the tax on dividends, and the proceeds of the profits tax all fell sharply in his first term. His second term could finish the job, shifting the tax base to consumption, perhaps even abolishing the income tax for a value-added tax (as Republican Speaker Dennis Hastert now suggests). Virtually the whole tax burden [would] then fall on the middle class, on working Americans, and on the poor.” end quote.
http://www.washingtonmonthly.com/features/2004/0409.galbraith.html
Wow – the wingnut paper of record runs a slanted opinion piece making lots of BIG assumptions (that normal bailout financing could be found, and job losses, supplier failure and damage to a US economy already in freefall would have been minimal – nothing to worry about here) – and you post it without even a hint of skepticism?
I would have expected that from “Obama is under my bed!” Edward Niedermeyer, but Bertel, I expect better judgment from you.
The wingnut paper of record. You people can’t stand any independent thought at all can you? Are you afraid that if you read something that you don’t agree with that you will be converted into an evil conservative? Or do you realize that your beliefs can’t stand up to critical thinking?
That was a disgusting cheap shot at Edward Niedermeyer. He has admitted that he voted for Obama. Are you so Khmer Rouge-like that any ideological heresy must be punished? Do you not accept that people can change their minds for good reasons?
I would have expected that from “Obama is under my bed!” Edward Niedermeyer, but Bertel, I expect better judgment from you.
You know this site does good work when the masthead gets accused of bias by both sides of the spectrum in the same post.
Did I accuse Edward of bias? Where? I never said he or anyone was biased. Come on Psar, don’t misrepresent to defend a rabid teammate. That reflects poorly on you.
Nope. In this post alone we’ve got people claiming TTAC is part of the both the Communist conspiracy, and is also terrified of Seekrit Kenyan Muslim Hawaiians.
It’s not all about you. :)
Living in the parents’ basement off dad’s UAW pension produces a strangely hostile streak in a number of people here. The juxtaposition of 24/7 Fox News and living off mom and dad is quite disorienting.
In the last few years the WSJ has lost all credibility and its opinion page never had any. Today it mostly seems to exist to give right wing commentators and bloggers an intellectual sounding “reference” for whatever their echo chamber is currently pushing. Obama is promoting the automaker bailout: they publish a lengthy attack. Pick any topic and you will see the same pattern.
I was perhaps a bit hard on Edward Niedermeyer, but it has seemed to me that his posts over the last few years have been more about justifying criticism of Obama or the Obama administration than in giving a broad analysis of whatever the actual topic may be.
Speaking of independent thought MikeAR, why do you think everyone who disagrees with you is a socialist akin to Stalin? I am a business owner who wants what is best for my business and my country, and I don’t think risking 25% employment in the Midwest would have helped accomplish that goal. I am a pragmatic who believes we need to do what works best to promote prosperity and freedom for everyone, using markets when they work and social programs where markets fail. I also believe that health care is area where the overwhelming evidence says markets will fail. GM was destroyed by poor management and the current and legacy costs created by our insanely complex employer based health care system – the unions were a secondary factor at best.
Actually, the opinion page of The Wall Street Journal has been very respected, and it has just as much credibility as the left-of-center editorial page (probably even more) of The New York Times.
And I have yet to read of any scandals involving The Wall Street Journal that reached the magnitude of the faked memos on CBS News, or the entirely fabricated stories that appeared in The New York Times or The New Republic. It reminds me of the whining about alleged bias on Fox News – turns out independent research from that well-known bastion of conservatism, Harvard University, found that it was LESS biased than CNN.
shiney2: I am a pragmatic who believes we need to do what works best to promote prosperity and freedom for everyone, using markets when they work and social programs where markets fail.
I’m not seeing here markets failed here. The companies that made inferior products – GM and Chrysler – were on the verge of going out of business. Other companies that provided superior products were not in this danger.
That sounds as though the market worked exactly as it was supposed to have worked. Like many pro-bailout folks, you make the mistake of believing that “free market failure” is synonomous with “bringing about an outcome that I don’t like.”
shiney2: I also believe that health care is area where the overwhelming evidence says markets will fail.
You do realize that health care is one of the most heavily regulated and subsidized sectors of the economy, and that most of the distortion comes as a result of government regulation and interference, no matter how well intentioned?
shiney2: GM was destroyed by poor management and the current and legacy costs created by our insanely complex employer based health care system – the unions were a secondary factor at best.
And, yet, the transplant operations have been able to provide health care coverage for their employees and still turn a reasonable profit. If I recall correctly, from a profit standpoint, the North American market is more important to Honda than the Japanese market.
The simple fact is that if GM had been able to renegotiate its health care package for employees, it would have been a big help. The UAW would not hear of it, and GM would not push the issue, for fear of igniting another nasty strike on the order of the 1998 walkout. The UAW also refused to allow retirees to be solely covered by Medicare – a government health care program for senior citizens. (This is how the transplant operations of Toyota, Honda, Nissan and Hyundai handle retiree health care.)
Why? Because Medicare coverage wasn’t nearly as generous as that provided by the UAW negotiated plan.
Of course, any true national health care plan will more likely resemble Medicare in its co-payment structure and coverage than the UAW plan. This is why the union has sought exemptions for its members when any national health care plan is discussed. Which makes the union’s call for national health care more than a little disingenuous, and also shows that a nationalized plan would not have helped GM or Chrysler in the long run. The union would have simply demanded that GM, Ford and Chrysler make up any difference between a national plan and the plan its members have long enjoyed. This, of course, would still leave these three companies at a disadvantage with their transplant competitors.
That’s not a failure of the employer-based health care system. It’s a union desperately holding on to a very generous package (one can hardly blame union leadership for taking this position), even though that package was strangling its employer
Shiney, you’re a business owner right? You don’t have to go into detail, but what sort of wages do you pay and what is your health care like? What about othe benefits like retirement? Do you offer a UAW like benefits package? If not then you aren’t being fair. You want fairness, so give everyone a UAW or Federal employee wage and benefits package or else you aren’t being fair. Also, if you are truly fair then you pay yourself no more than your lowest paid employee. Again you have got to be fair.
Don’t say you can’tt afford it, GM couldn’t afford it either and you want to hold them to the UAW contract. Again, it all comes down to fairness, you can’t hold anyone to a standard that you don’t meet yourself.
The Washington Post is also making similar claims today, so you are wrong. It has nothing to do with the messenger, but the truth within the message.
Say what you will, I think there are millions of us who will never buy a GM or Chrysler product.
I would say most of them wouldn’t have bought another GM or Chrysler product anyway, with or without the bailout.
I wouldn’t be so sure. I’ve met quite a few people who traded their full sized GM SUVs for Toyotas or Lexuses. A friend of mine who now drives a GMC SUV and is fresh back from his Xth tour of Afghanistan said he’d sooner buy his next car from Al Qaeda then from the UAW. My next door neighbor currently has a Dodge Magnum that will be replaced by something other than a GM or Chrysler product. Another friend has a Chrysler that won’t be replaced by another UAW product when the time comes, and that time is coming pretty soon. There are plenty of people who bought Detroit cars because they thought it was the patriotic thing to do who now know that their greatest enemy is domestic. GM better hope they buy Nissans or VWs, because there will be no return once they’ve experienced Honda or Toyota ownership.
Since GM is increasing retail share right now, I don’t think the few examples that you have matter that much. And many people are trading in SUVs for gas prices. Oh, and people are leaving Honda and Toyota. In case you haven’t noticed, Honda and Toyota are making GM level or below interiors now.
That’s your call, ‘Stang.
Golly, I must be getting old. I can remember when TTAC had a no-flaming policy. But since we’re bashing away, I’ll nominate my favorite bashees: GM management, which for decades not only failed to realistically deal with structural problems, but pretended they didn’t exist as money-making operations were sold off to support unprofitable lines. Financial institutions, which facilitated the masquerade by continuing to treat GM as a healthy corporation. Credit rating agencies, which failed to warn unsophisticated bondholders that GM would not be able to meet its obligations. The independent (?) auditors, who continued to issue clean opinions on GM’s statements even when the “going concern” assumption was very much open to debate. The SEC and stock exchanges, which should have acted against GM earlier. Media, which failed its duty to inform the public. Contrary to the old adage, Failure is not an orphan.
All the above deserve contempt for all those things.
Credit rating agencies, which failed to warn unsophisticated bondholders that GM would not be able to meet its obligations.
It’s barely credible that, if you were in the bond market and you were still holding bonds in GM in 2007, that you were unaware of the serious problems it had.
I’m sure there were a a few little old ladies, but most of those guys were speculators.
About 100k individuals lost money on GM bonds holding about 20% of GM’s unsecured debt. Think about that, you just wrote off 100,000 people as nothing, not mattering, inconsequential. Nothing more than a speedbump on the road to a socialist utopia. How many UAW jobs were saved because of the maybe legal bailout? Not that many more. Do UAW members count for more than little old ladies? Are you ok with me calling the little old ladies the modern day Kulaks? Maybe we can dig up Walter Duranty to cover the story.
He said that they were speculators, meaning that they weren’t unsophisticated as the original post assumed. He didn’t write them off. He said that they knew what they were getting into.
There is some truth to that. They bought the bonds because they knew the provisions of the laws we used to observe.
actually, you would have known of GM’s problems if you paid attention to credit default swaps. GM’s CDS were trading at levels indicating severe default risk in 2005.
There is some truth to that. They bought the bonds because they knew the provisions of the laws we used to observe.
No. They knew that bonds are not legal tender, and not redeemable at face value for cash. What they were hoping was that the government would be a pushover; that in the face of a a PR campaign they would see the bonds they bought for pennies on the dollar bought for near face-value.
That didn’t happen.
Bondholders aren’t entitled to anything when the company they hold bonds in has negative cash, worthless assets, secured creditors in line before them and no white knight ready to buy their structurally broken butts in the middle of a recession.
That is the law, and given that, the bondholders actually did better than they had any reason to expect.
“About 100k individuals lost money on GM bonds holding about 20% of GM’s unsecured debt. Think about that, you just wrote off 100,000 people as nothing, not mattering…”
You’re being rhetorical and silly. Of course this matters. But the survival of the companies in question mattered more – their economic impact is far greater than the “footprint” of the people who lost money with these bonds. The bondholders survived. Our economy wouldn’t have.
as someone who was working in credit markets in 2008 and 2009, let me tell you that GM and Chrysler would never have received the necessary DIP financing.
banks had stopped lending to General Electric (Federal Reserve was buying GE’s commmercial paper at this time). What hope would the automakers have?
a good case in point was Lyondell Chemical. Lyondell went into bankruptcy with more assets than liabilities (liabilities were 70% of assets), and it cost Lyondell Chemical 20% (13% interest plus 7% fee) to obtain $3.25 billion of DIP financing.
GM had twice as many liabilities compared to assets, and it needed over $30 billion in DIP financing.
+1
“GM had twice as many liabilities compared to assets, and it needed over $30 billion in DIP financing.”
Exactly. And in the midst of this, GM was supposed to get tens of billions in loans…at a time when GM was a steaming disaster, and the entire market for new cars was cratering? Oh, and yeah…all the financial institutions that could have even conceivably lost their collective minds and lent to GM were so damaged by the credit crisis that they couldn’t have done so anyway.
The problem with the ideologues here is that they don’t get these central facts…which is kind of troubling for people who trot themselves out as the keepers of the “we know business” flame.
So, in other words, the goal of the federal government is now to prop up companies that no one with an ounce of financial sense would think worth saving? That is not exactly a strong argument for the bailouts.
hey geeber, were you against the federal bailout of the banking system as well?
@Geeber
“So, in other words, the goal of the federal government is now to prop up companies that no one with an ounce of financial sense would think worth saving?”
The goal of the federal government is to safeguard the well being of our country. If the auto and banking sectors of our economy would have failed, particularly if they’d failed simultaneously, then our well being would surely have been threatened. The government acted properly.
FreedMike,
If the goal of the government is to safeguard the well being of the country (i.e. promote the general welfare), then it is safe to say that companies deemed too big to fail and were in need of a taxpayer rescue should broken up so as not to risk the well being of the country again.
Agreed?
@jkross:
What’s the point of breaking the companies up? In 2008, amidst a massive credit crisis, and in a radically down market, there’s no business case – or capital – to buy up the pieces. If the companies were “broken up,” that’s how they’d have gone down the drain – in pieces. And a large part of our GDP would have gone down with them.
The government did what it’s supposed to do – it averted disaster by keeping these companies afloat, and by engineering a deal whereby the retiree costs were offloaded, it removed the single biggest obstacle to long term profitability that faced these companies.
Whatever you folks end up deciding, just remember to stay away from MY dumpsters.
If the IRS screws me for PAPERWORK reasons I am going to be an EXTREMELY disgruntled old coot.
The last three paragraphs sum it all up. One word: POLITICS.
There is another aspect that I can’t quite identify with any factual information at the moment is that it appears or appeared that the people responsible for the entire economic mess, whether in the financial world or in the automotive world in this country are somehow regarded as “golden eggs” that represent the fundamental cornerstones of stability, real or imagined, that must be protected at all costs.
Hope that this makes sense in someone’s universe, because I can’t put my finger on any other reason that I’ve come across. If not this, then I give up trying to figure this whole thing out and just watch from the sidelines, too far away to render any assistance and just watch the whole thing go down the drain.
What’s done is done. <em"Tomorrow is another day!"