Friday, December 12, 2008
Keep Bailing?
So, with the collapse of the congressional bailout Thursday evening, the Bush White House now says that it will move to tap some of the Troubled Asset Relief Program (i.e. bank bailout) money to help keep the Big Three floating for another few months.
Amazing. For those keeping track, this is now the third use of the TARP money since Congress voted the $700 billion three months ago. First, it was going to be used to purchase so-called "toxic" assets; then it was going to be used for direct investment into banks to help thaw the credit markets. Now, it's going to be used as a de facto bridge loan to troubled U.S. car companies. Two weeks from now, boys and girls, it will be used to buy Christmas presents for everybody!!! Yaaayyyy!!!!
The abuse of this amount of money -- in hindsight, pretty predictable, of course -- forces those of us who were nominally supportive of the bank bailout to want to offer up some major mea culpas. Yes, it makes us feel just like we did with the whole Iraq invasion situation: There's a crisis; we need near unlimited support to deal with this crisis -- and then after the congressional authority has been given, various follow-up reasons are and strategies are adopted to "win the war." Can't wait for the financial "surge" that will manage to reduce the economic "violence" that continues to rage. Fool me twice -- shame on me.
But, I digress.
The big irony here is that a case can be made that the $15 billion to shore up the auto industry may not be the worst idea in the world. After all, the government has already spent more than half the $350 billion of the financial bailout -- and it's far from clear whether it has actually done anything to help the economy. Given the 1.2 million in job losses over the last three months, I'm not sure letting the Big 3 (or two of them anyway) go bankrupt over the next few weeks is the best thing for the US economy. Even stipulating that UAW contracts get the autoworkers into this mess, just letting the companies die now -- when the country is facing one of its most severe economic crises in decades -- is not a good option.
Yet, there is something really bad about an administration requesting funds for Purpose A -- and then turning around and using them for Purpose B. Talk about misappropriation of funds. And oversight? What oversight?
And so, once again Congress and the Bush administration (and yes, incoming Obama administration, I'm looking at you, too) have put the country into a position where there are no ideal options.
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Amazing. For those keeping track, this is now the third use of the TARP money since Congress voted the $700 billion three months ago. First, it was going to be used to purchase so-called "toxic" assets; then it was going to be used for direct investment into banks to help thaw the credit markets. Now, it's going to be used as a de facto bridge loan to troubled U.S. car companies. Two weeks from now, boys and girls, it will be used to buy Christmas presents for everybody!!! Yaaayyyy!!!!
The abuse of this amount of money -- in hindsight, pretty predictable, of course -- forces those of us who were nominally supportive of the bank bailout to want to offer up some major mea culpas. Yes, it makes us feel just like we did with the whole Iraq invasion situation: There's a crisis; we need near unlimited support to deal with this crisis -- and then after the congressional authority has been given, various follow-up reasons are and strategies are adopted to "win the war." Can't wait for the financial "surge" that will manage to reduce the economic "violence" that continues to rage. Fool me twice -- shame on me.
But, I digress.
The big irony here is that a case can be made that the $15 billion to shore up the auto industry may not be the worst idea in the world. After all, the government has already spent more than half the $350 billion of the financial bailout -- and it's far from clear whether it has actually done anything to help the economy. Given the 1.2 million in job losses over the last three months, I'm not sure letting the Big 3 (or two of them anyway) go bankrupt over the next few weeks is the best thing for the US economy. Even stipulating that UAW contracts get the autoworkers into this mess, just letting the companies die now -- when the country is facing one of its most severe economic crises in decades -- is not a good option.
Yet, there is something really bad about an administration requesting funds for Purpose A -- and then turning around and using them for Purpose B. Talk about misappropriation of funds. And oversight? What oversight?
And so, once again Congress and the Bush administration (and yes, incoming Obama administration, I'm looking at you, too) have put the country into a position where there are no ideal options.
Labels: automakers, Congress, financial meltdown
Wednesday, November 12, 2008
Auto-Erotic Suicide
So, it looks like the last partisan battle of the Bush era will be over the automobile industry. Democrats want a lame-duck session to provide GM, Ford and Chrysler with relief. Obama supports the idea. Bush doesn't want to go along with it.
Henry Blodgett weighs in on why letting the American companies formerly known as the "Big Three" just die. Megan McArdle at The Atlantic agrees.
The best argument is that, the US auto industry was already dying a prolonged death -- the credit crunch just boosted ann already ongoing process.
American consumers have already "voted" with their pocket books and have decided that the American cars don't quite measure up. What is amazing is that US car companies already went through this thirty years ago. They didn't anticipate the end of the gas-guzzling station wagons during the '70s oil crunch -- and they didn't anticipate the end of the SUV culture (even though that was eminently more predictable). So, why should the taxpayer be forced bail out an industry that has been stunningly irresponsible.
The major mitigating factor is immediate impact increased unemployment in Michigan, Indiana, Illinois, etc. if GM and Ford go under. Not to put too fine a point on it, but somehow I can't see the new president want to take office just as the US industry goes belly up. Yeah, it wouldn't be his fault, but it's kind of an ominous way to launch a term (consider the US hostages being released from Iran s Ronald Reagan was being sworn in as the exact opposite omen).
So, were I in Congress I would vote against further aid to Detroit. However, with all the other bailouts floating around, I don't see how the momentum for this political train is haulted. Once Fannie, Freddie, AIG, etc. have already been helped out by Uncle Sam, it becomes difficult to say no to the next person in line -- Hey there, Amex!! So, because of the American love affair with the car, Detroit is likely to get what it wants.
This, by the way, further convinces me that this election really is 1980 in reverse: Jimmy Carter, Democrat, helped kill off the best tenets of the liberal "brand" by governing incompetently. Ironically, though, Carter also was responsible for serious deregulation -- most significantly in the airline industry. That step helped usher in the broader deregulatory and conservative Reagan era.
George W. Bush, Republican, helped kill off the best tenets of the conservative "brand" by governing incompetently. Ironically, Bush is responsible for serious government expansion into the private sector -- quasi nationalizing the banks. That step apparently will usher in a broader regulatory and corporate welfare environment in a liberal Obama era.
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Henry Blodgett weighs in on why letting the American companies formerly known as the "Big Three" just die. Megan McArdle at The Atlantic agrees.
The best argument is that, the US auto industry was already dying a prolonged death -- the credit crunch just boosted ann already ongoing process.
American consumers have already "voted" with their pocket books and have decided that the American cars don't quite measure up. What is amazing is that US car companies already went through this thirty years ago. They didn't anticipate the end of the gas-guzzling station wagons during the '70s oil crunch -- and they didn't anticipate the end of the SUV culture (even though that was eminently more predictable). So, why should the taxpayer be forced bail out an industry that has been stunningly irresponsible.
The major mitigating factor is immediate impact increased unemployment in Michigan, Indiana, Illinois, etc. if GM and Ford go under. Not to put too fine a point on it, but somehow I can't see the new president want to take office just as the US industry goes belly up. Yeah, it wouldn't be his fault, but it's kind of an ominous way to launch a term (consider the US hostages being released from Iran s Ronald Reagan was being sworn in as the exact opposite omen).
So, were I in Congress I would vote against further aid to Detroit. However, with all the other bailouts floating around, I don't see how the momentum for this political train is haulted. Once Fannie, Freddie, AIG, etc. have already been helped out by Uncle Sam, it becomes difficult to say no to the next person in line -- Hey there, Amex!! So, because of the American love affair with the car, Detroit is likely to get what it wants.
This, by the way, further convinces me that this election really is 1980 in reverse: Jimmy Carter, Democrat, helped kill off the best tenets of the liberal "brand" by governing incompetently. Ironically, though, Carter also was responsible for serious deregulation -- most significantly in the airline industry. That step helped usher in the broader deregulatory and conservative Reagan era.
George W. Bush, Republican, helped kill off the best tenets of the conservative "brand" by governing incompetently. Ironically, Bush is responsible for serious government expansion into the private sector -- quasi nationalizing the banks. That step apparently will usher in a broader regulatory and corporate welfare environment in a liberal Obama era.
Labels: automakers, bailout, Big Three, Ford, General Motors
