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RE: GM Bail-Out? - 11/12/2008 11:39:24 AM
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GroupW
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quote:
ORIGINAL: deliveredarling
The bailouts just keep progressing, I guarantee that this spring the credit card companies will be going under....
Nobody seems to get that we are on the hook now for every bailout to come. Where is the money going to come from? Do we citizens have enough to pay for all these bailouts? Around here, our salaries aren't increasing. Eventually these companies are going to have to fol because there just won't be any money left.
What's most bothersome is the bank bailouts. They were bailed out so that they could begin lending money again. Instead they used that money to buy up other banks and still aren't lending money. Donald Trump said this morning on Fox, that even he can't get a loan!
The bailouts are very bad news for the people.
It's no wonder Donald Trump can't get a loan. As a person in the industry, my former firm wouldn't have lent money to Trump even in GOOD times. He's generally not been the best credit risk.
As far as the bailout funds being used to buy other banks - that's kind of the point. If you push capital into the stronger institutions, you can put them in a position to buy up the weaker one's before they have to be taken into conservatorship by the FDIC. In the long run, it can be a lot cheaper to do it this way.
It's one of those things that sounds bad on the surface, but really isn't as bad as it sounds in reality. In reality, this is exactly the sort of process the private sector would use to weed out the weaker players. In this case, though, the private sector is out of cash so that aspect of the market can't function like it's supposed to.
In reality, this is really all about trying to get the private sector back in a position so it can function correctly and take care of these issues on its own - just like we all want.
A side benefit - if you do it this way, bad management gets kicked out by the acquiror BEFORE they actually can drive an institution all the way under.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: GM Bail-Out? - 11/12/2008 11:42:23 AM
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GroupW
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quote:
ORIGINAL: Dubya
quote:
ORIGINAL: GroupW
quote:
ORIGINAL: Dubya
As I understand it, Ford and Chrysler are also looking for a bailout.
GroupW mentioned the ripple effect if GM went under. Imagine the ripple effect of all three go under.
Why are these three US auto-makers in such trouble but we don't hear anything from the US operations of Honda, Toyota, and other foreign auto-makers with assembly plants in the US?
A big reason is post-retirement benefits. The US firms have most of what could be profits eaten up by the cost of pension and medical plans. GM particularly operates at a $3k disadvantage in cost per car due to those items
So what is the solution? The US firms must have, at one time, had the profit margin to cover those retirement benefits. Even if we might consider the retirement benefits to be excessive they are part of a contract. Do the companies have any options for getting out from under those benefits?
Excellent question. I was talking to a colleague on Wall St yesterday. He and I both came to the opinion that a reorganization via bankruptcy may be the only way in the long run to put these companies on solid footing. Unfortunately, until banks can get recapitalized there isn't any debtor-in-possession financing that's available to do that.
It's a heck of a problem - kind of the nature of a crisis. In a crisis, all your good options start to disappear and you're left with two kinds of choices: Bad and Worse.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: GM Bail-Out? - 11/12/2008 11:45:53 AM
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GroupW
Posts: 2863
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quote:
ORIGINAL: deliveredarling
quote:
So what is the solution? The US firms must have, at one time, had the profit margin to cover those retirement benefits. Even if we might consider the retirement benefits to be excessive they are part of a contract. Do the companies have any options for getting out from under those benefits?
As you said, "part of a contract", so if they filed for bankruptcy, wouldn't the retirement benefits be included in that, assuming the filed a chapter 13? Whether a company fails or not, it still needs to honor the employees contracts that they worked hard for.
Actually, in bankruptcy all contracts come under review and can either be affirmed, modified, or canceled outright. In the case of employee benefits, the PBGC (Pension Benefit Guaranty Corp) can become the obligor of the pension liability. Medical benefits though could go away completely.
So, not every employee benefit or contract needs to be honored in either a 13 (reorganization) or a 7 (liquidation) bankruptcy.
That's a hard pill to swallow if you're an 80-year old retiree living on a pension.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: GM Bail-Out? - 11/12/2008 11:53:12 AM
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GroupW
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quote:
ORIGINAL: mavrick
Let's not also forget the skyrocketing employee benefit costs in general, ie healthcare costs, which no one foresaw. This will be impacting retirees everywhere.
Reason for high healthcare costs - government intervention.
Actually, government intervention is a very small component of the overall increase in cost. The biggest component of cost is the increase in technological prowess and increased quality of medical treatment.
For example - cancers that used to prove fatal are routinely caught and successfully treated for years. When I shattered my knee in a ski accident last year, we had an MRI machine available to take detailed pictures of my knee in advance of surgery and figure out exactly what was broken and torn and what wasn't. My wife has access to certain drugs now that will likely prevent her Cystic Ovarian Syndrome from eventually becoming Type II diabetes.
It's natural for us to find some one single person we can point to as the bogeyman for the problems we face, but it's usually not that simple.
Part of the issue is also the insurance plans that most of us have. We pay a low premium for ongoing care, and when we have a problem we'll pay (or more correctly - have our insurance company pay) nearly any cost to get it fixed.
When I had my accident, did I go to the local hospital to have my knee fixed? No way. I went to Vail Orthopedics - the cadillac of knee experts. It was allowed under my plan, so I did it.
To some degree, we all act in this way and so to some degree we're all responsible for the higher medical cost.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: GM Bail-Out? - 11/12/2008 11:55:40 AM
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GroupW
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quote:
ORIGINAL: P31W
quote:
Donald Trump said this morning on Fox, that even he can't get a loan!
If Donald Trump cannot get a loan it's his own fault. Banks loan money to people they believe can "repay the loan". Evidently The Donald wants the banks to take on a risk greater than they feel comfortable with. Great!!!! It's about time they told high risk borrowers NO>
We actually agree on something. Most people don't realize this, but Donald has been on most high-quality lenders' "bad boy" lists for some time know. Three of the major lenders that I've worked for won't lend to him.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: GM Bail-Out? - 11/12/2008 12:00:42 PM
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mavrick
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quote:
ORIGINAL: GroupW
As far as the bailout funds being used to buy other banks - that's kind of the point. If you push capital into the stronger institutions, you can put them in a position to buy up the weaker one's before they have to be taken into conservatorship by the FDIC. In the long run, it can be a lot cheaper to do it this way.
Source? My understanding is that bailout funds are being given not to stronger institutions, but big ones in trouble. The bailout funds are being used not to buy weaker institutions, but smaller, healthy ones. At least that's the fear of many stable community banks.
quote:
In reality, this is really all about trying to get the private sector back in a position so it can function correctly and take care of these issues on its own - just like we all want.
No, the reality is the Federal Reserve played fast and loose with the country's currency, the government taxed and spent, borrowed and spent, and tacitly encouraged mal-investment, and obligated the American taxpayer to foot the bill when the roulette wheel landed on red, not black.
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RE: GM Bail-Out? - 11/12/2008 12:01:41 PM
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P31W
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quote:
I'm not sure I agree with your "right and good" process as ordained by God. The last time I checked, we are to give to Ceasar what his Ceasar's and to God what is God's. Within that statement, a variety of moral solutions to today's dilemma are possible.
Don't know if you put that in context or not but the REASON we are to give to Ceasar is so that he can do what God ordained him to do. Punish evildoers. Not those who are living peaceful good lives.
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RE: GM Bail-Out? - 11/12/2008 12:05:19 PM
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P31W
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quote:
We actually agree on something. Most people don't realize this, but Donald has been on most high-quality lenders' "bad boy" lists for some time know. Three of the major lenders that I've worked for won't lend to him.
We do agree on something! 
American mistook debt for "prosperity".
This is one reason I harp on people reading the book the Millionaire Next Door. It is hands down by far the MOST HONEST book about Millionaires I have ever read in my life. It's about the people I know and work with all my life.
I grew up around millionaires. Know tons of them. They don't live like Trump. People in my circle who see folks who "live like Trump" pretty much STAY AWAY from them.
My CEO husband drives a 2K truck and takes his lunch to work every day. ROFL He has NEVER purchased coffee at a Star Bucks and would be more likely to lease them a building then pay them that much money for stupid coffee that cost him pennies at home.
It's "evil" for Ceaser to expect my CEO husband to give up anything to help support people who live lifestyles higher than his own.
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RE: GM Bail-Out? - 11/12/2008 12:07:20 PM
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mavrick
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quote:
ORIGINAL: GroupW
quote:
ORIGINAL: deliveredarling
quote:
So what is the solution? The US firms must have, at one time, had the profit margin to cover those retirement benefits. Even if we might consider the retirement benefits to be excessive they are part of a contract. Do the companies have any options for getting out from under those benefits?
As you said, "part of a contract", so if they filed for bankruptcy, wouldn't the retirement benefits be included in that, assuming the filed a chapter 13? Whether a company fails or not, it still needs to honor the employees contracts that they worked hard for.
Actually, in bankruptcy all contracts come under review and can either be affirmed, modified, or canceled outright. In the case of employee benefits, the PBGC (Pension Benefit Guaranty Corp) can become the obligor of the pension liability. Medical benefits though could go away completely.
So, not every employee benefit or contract needs to be honored in either a 13 (reorganization) or a 7 (liquidation) bankruptcy.
That's a hard pill to swallow if you're an 80-year old retiree living on a pension.
Yes. As a scary sidenote, the director of the PBGC testified in the last few weeks, and his answers were shaky at best about their ability to back pensions if enough corporations went belly-up.
My view is bearish. (as you might guess) :-)
_____________________________
"Never Leave Your Wingman"
"In this world you will have trouble. But fear not; I have overcome the world."
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RE: GM Bail-Out? - 11/12/2008 1:04:03 PM
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deliveredarling
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I agree with rendering unto Caeser what is Caesar's, however the bailout is not Caesar's money!
The initial bailout was not for banks to buyt other banks, it what so that banks would continue lending. We were deceived from the beginning.
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RE: GM Bail-Out? - 11/12/2008 6:15:30 PM
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Dubya
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quote:
ORIGINAL: GroupW
Actually, government intervention is a very small component of the overall increase in cost. The biggest component of cost is the increase in technological prowess and increased quality of medical treatment.
How about litigation? It certainly must be a very large component in US medical care.
Every time tort reform is even mentioned in Washington (or even Austin) all the John Edwards type cringe as if Dr. Van Helsing was brandishing his cross.
I agree that technology is a very high part of the expense but there are other countries in which health are is a fraction of the cost as it is here but the major difference is litigation.
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RE: GM Bail-Out? - 11/12/2008 6:20:11 PM
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GroupW
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quote:
ORIGINAL: Dubya
quote:
ORIGINAL: GroupW
Actually, government intervention is a very small component of the overall increase in cost. The biggest component of cost is the increase in technological prowess and increased quality of medical treatment.
How about litigation? It certainly must be a very large component in US medical care.
Every time tort reform is even mentioned in Washington (or even Austin) all the John Edwards type cringe as if Dr. Van Helsing was brandishing his cross.
I agree that technology is a very high part of the expense but there are other countries in which health are is a fraction of the cost as it is here but the major difference is litigation.
Not sure on that one - could be. It's a good idea for some personal research for me, but I have my doubts that I'm going to be able to get my hands on the numbers.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: GM Bail-Out? - 11/12/2008 6:26:25 PM
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garsyt
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Well if GM goes under and a few thousand people are out of work - many of them will end up on unemployment and foodstamps - something that is funded via tax payer dollars. Not to mention the few thousand employees of GM suppliers whose companies will not longer have work for them to do and thus have to lay off those workers which add to the problem.
If GM gets this bail out and stays in business the costs of the bailout get passed on to tax payers. Suppliers keep their employees working, at least for now.
I just heard tonight on the news that out of every 50 applications for seasonal employment it is very likely that only ONE person will be hired on.
As I see it - either way the tax payers are then ones that are going to end up dealing with the fallout from this.
Blessings,
Garsy
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RE: GM Bail-Out? - 11/12/2008 6:28:00 PM
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GroupW
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quote:
ORIGINAL: deliveredarling
I agree with rendering unto Caeser what is Caesar's, however the bailout is not Caesar's money!
The initial bailout was not for banks to buyt other banks, it what so that banks would continue lending. We were deceived from the beginning.
Why isn't the bailout Ceasar's money? (Just playing devils advocate here. Can you do that on a Christian forum?)
The initial bailout proposal included language that allowed for the possibility of equity stakes in banks. Nothing really that new here. The issue with the original concept of buying illiquid mortgage assets is that the markets fell apart in October to a degree that most of us in the industry are astonished by. It made the original idea of just buying illiquid assets appear no longer feasible.
Buying equity stakes in banks accomplishes the same goal, but in a different way. Instead of building bank capital indirectly by putting a floor on asset prices, you can also build bank capital directly by buying preferred equity stakes in banks.
If you go that route, you have two possible paths you can go down - 1) buy equity stakes in troubled banks, or 2) buy equity stakes in healthy banks. If you choose to invest in weak banks, you may or may not get your money back and you may or may not actually increase the ability of those banks to lend.
If you buy equity stakes in healthy banks, those banks can go buy up the weaker banks. You have a better and safer investment for the taxpayer, the weak banks and their ineffective managements go away, and the remaining healthy institutions can be put back into a position where they can lend again.
There's no deception there - just two different ways to skin the same cat.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: GM Bail-Out? - 11/12/2008 6:32:06 PM
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GroupW
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quote:
ORIGINAL: garsyt
Well if GM goes under and a few thousand people are out of work - many of them will end up on unemployment and foodstamps - something that is funded via tax payer dollars. Not to mention the few thousand employees of GM suppliers whose companies will not longer have work for them to do and thus have to lay off those workers which add to the problem.
If GM gets this bail out and stays in business the costs of the bailout get passed on to tax payers. Suppliers keep their employees working, at least for now.
I just heard tonight on the news that out of every 50 applications for seasonal employment it is very likely that only ONE person will be hired on.
As I see it - either way the tax payers are then ones that are going to end up dealing with the fallout from this.
Blessings,
Garsy
Pretty much right. To put some numbers on it, the Anderson economic consulting group that deals with this sort of problem estimates that for every 1 GM job lost, there's another 1 to 1.25 jobs lost at GM suppliers and another job lost due to multiplier effects.
That's 2.25 jobs lost for every 1 GM job lost.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: GM Bail-Out? - 11/12/2008 7:10:33 PM
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deliveredarling
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quote:
Why isn't the bailout Ceasar's money? (Just playing devils advocate here. Can you do that on a Christian forum?)
The initial bailout proposal included language that allowed for the possibility of equity stakes in banks. Nothing really that new here. The issue with the original concept of buying illiquid mortgage assets is that the markets fell apart in October to a degree that most of us in the industry are astonished by. It made the original idea of just buying illiquid assets appear no longer feasible.
Buying equity stakes in banks accomplishes the same goal, but in a different way. Instead of building bank capital indirectly by putting a floor on asset prices, you can also build bank capital directly by buying preferred equity stakes in banks.
If you go that route, you have two possible paths you can go down - 1) buy equity stakes in troubled banks, or 2) buy equity stakes in healthy banks. If you choose to invest in weak banks, you may or may not get your money back and you may or may not actually increase the ability of those banks to lend.
If you buy equity stakes in healthy banks, those banks can go buy up the weaker banks. You have a better and safer investment for the taxpayer, the weak banks and their ineffective managements go away, and the remaining healthy institutions can be put back into a position where they can lend again.
There's no deception there - just two different ways to skin the same cat.
Take is not a voluntary process. Paulson revamped the TARP, the proposal is no longer the same. CONGRESS voted yes to the bailout, the people did not. It's not money owed to Caesar.
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Luke 8:16
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RE: GM Bail-Out? - 11/13/2008 11:06:45 AM
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GroupW
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quote:
ORIGINAL: deliveredarling
Take is not a voluntary process. Paulson revamped the TARP, the proposal is no longer the same. CONGRESS voted yes to the bailout, the people did not. It's not money owed to Caesar.
Two comments:
1) I'm not sure that paying taxes has ever been a voluntary process. Still, we are admonished to pay to Ceasar what he asks.
2) Congress voted yes to the proposal, we voted for Congress. You get a chance next year to correct what you didn't like this year.
3) Paulson didn't change or revamp TARP. He's still operating within the guidelines of the legislation. The original TARP allowed for a significant degree of flexibility in how the Treasury spent the $700 billion. That was smart. In a very rapidly situation, it's not always wise to tie someone's hands too tightly. To some degree, it's wise to allow a manager to adapt to new circumstances and shift tactics.
Here's why Paulson's shift isn't as bad as it looks on the surface:
Let's imagine a bank that has $100 in assets, $90 in liabilities, and $10 in capital. Let's further assume that the 10% ratio of liabilities to capital has to remain constant. At no time is the bank allowed to let it's capital ratio dip below 10%.
Now let's introduce a financial crisis - the value of those $100 in assets suddenly drops to $95. The $5 loss is a reduction in capital.
Now the bank looks like this:
$95 in assets, $90 in liabilities, and $5 in capital. The capital ratio has dropped to roughly 5%.
Enter the US Treasury. It has two choices - buy assets from the bank and allow it to shrink to restore the 10% capital ratio, or invest directly in the bank.
If it buys assets, how much does it need to buy? The bank has $5 in capital, and it needs to maintain a 10% capital ratio. That means it can only support about $50 in total assets. It needs to sell $45 in assets to the U.S. Treasury. That would give it a $50 asset. It would then take the cash and pay down liabilities to $45, and still have $5 in capital.
If it invests directly in the bank, how much does the Treasury need to invest? Not nearly as much. The bank after it takes the $5 loss has $95 in assets. At that level, it needs $9.5 in capital, but it only has $5. The Treasury only needs to spend $4.5 billion to stabilize the bank.
So it's not really a change in the TARP, really just a more cash efficient way to implement the original TARP. The original legislation allowed for this kind of transaction.
Why the change? The market prices of the illiquid assets deteriorated so dramatically in October that Paulson was worried about blowing through $700 billion in relatively short order without making a dent in the problem. We saw close to a 20% decline in price on even some of the most bullet-proof securities out there. Worse yet on some assets that carry credit risk
Even more importantly, the direct investment could put the money to work much, much faster than asset purchases. Asset purchases can take months to document and close (been there, done that. It's not fun.) Direct investments can be documented and closed within a week or two.
Why didn't they propose this method initially then? It's fairly unpalatable to the average American as well as the average American politician. We simply don't like taking equity stakes in private companies.
At some point in a crisis, though, you just don't really have much of a choice.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: GM Bail-Out? - 11/13/2008 5:41:43 PM
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deliveredarling
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It does not say to render what is asked.
Mat 22:21 They *said to Him, "Caesar's." Then He *said to them, "Then render to Caesar the things that are Caesar's; and to God the things that are God's.
Rom 13:7 Render to all what is due them: tax to whom tax {is due;} custom to whom custom; fear to whom fear; honor to whom honor.
It's being reported that he changed the terms. But then again, why wouldn't we expect it when we KNEW that he has power the Secretary should never have...
Treasury Secretary Henry Paulson's announced changes to the $700 financial bailout plan -- to focus on shoring up financial institutions that offer consumer credit rather than purchasing troubled assets -- led all three network newscasts last night, and are featured on the front pages of today's major newspapers. The story is being reported in stark terms: ABC World News referred to "a dramatic change in course"; NBC Nightly News called it "a $700 billion switcheroo"; a "bombshell announcement," said Fox News Special Report. Bloomberg News, meanwhile, reports the Secretary "may encounter resistance from Congress for the remaining $350 billion after using most of the first half to buy bank stakes."
The rest here
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Luke 8:16
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RE: GM Bail-Out? - 11/13/2008 5:43:47 PM
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mavrick
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quote:
ORIGINAL: garsyt
Well if GM goes under and a few thousand people are out of work - many of them will end up on unemployment and foodstamps - something that is funded via tax payer dollars. Not to mention the few thousand employees of GM suppliers whose companies will not longer have work for them to do and thus have to lay off those workers which add to the problem.
If GM gets this bail out and stays in business the costs of the bailout get passed on to tax payers. Suppliers keep their employees working, at least for now.
I just heard tonight on the news that out of every 50 applications for seasonal employment it is very likely that only ONE person will be hired on.
As I see it - either way the tax payers are then ones that are going to end up dealing with the fallout from this.
Blessings,
Garsy
Yes, but the former (no bailout) will be overall much less damaging and shorter in length on taxpayers and the economy than the latter (bailout).
If there's no bailout, sure, some will use government programs, but many will not. Many will get jobs with stable companies, immediately adding productivity and capital to the overall economy.
If there's a bailout, not only are we ensuring that we'll be paying for the bailout, we have no guarantee that the bailed out company will survive (in fact odds are it won't), and then we'll have the double whammy of a bailout and unemployment/welfare cases.
Additionally, all these bailouts are inflationary in nature, hurting everyone - including the poor among us most severely, and will eventually cause the dollar to weaken, possibly to failure.
And, just as we're beginning to see - bailouts beget bailouts. Snowball effect.
Is your palm getting itchy yet? 
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"Never Leave Your Wingman"
"In this world you will have trouble. But fear not; I have overcome the world."
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RE: GM Bail-Out? - 11/13/2008 5:45:38 PM
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mavrick
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Yep, DD, you're right on the money (p.i.).
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"In this world you will have trouble. But fear not; I have overcome the world."
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RE: GM Bail-Out? - 11/13/2008 6:06:53 PM
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GroupW
Posts: 2863
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
Status: offline
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quote:
ORIGINAL: deliveredarling
It does not say to render what is asked.
Mat 22:21 They *said to Him, "Caesar's." Then He *said to them, "Then render to Caesar the things that are Caesar's; and to God the things that are God's.
Rom 13:7 Render to all what is due them: tax to whom tax {is due;} custom to whom custom; fear to whom fear; honor to whom honor.
Exactly. Pay the taxes. It's not a "taking".
quote:
It's being reported that he changed the terms.
He's the Treasury Secretary, not Congress. He cannot legally "change the terms."
He's actually working within the bounds of the original legislation. The original legislation was fairly broad ON PURPOSE in order to allow the Treasury adequate latitude to switch tactics as needed.
I'm a bit baffled by the way the press is reporting this, honestly. One would have thought the press would have read the legislation before accusing the Treasury of a "switcheroo". The fact is that in late September and throughout October, a number of very safe types of mortgage backed securities lost value at a very alarming pace.
The treasury needed to put a lot of money to work very quickly. This was the fastest and most cash efficient way to do that and perfectly within the bounds of the EESA legislation (aka "TARP".)
BT
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“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
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RE: GM Bail-Out? - 11/13/2008 6:26:23 PM
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deliveredarling
Posts: 2191
Joined: 8/30/2007
Status: offline
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quote:
He's the Treasury Secretary, not Congress. He cannot legally "change the terms."
YES, he can. And he did.
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
That alone should have scared the begeezers out of everyone!
The problem comes in when he screamed save the troubled assests now or we will be in a depression. He hasn't yet helped. He purchased banks to create super banks and the people are still wondering when the money is going to benefit them like he said.
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RE: GM Bail-Out? - 11/13/2008 6:44:20 PM
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tony.nz
Posts: 226
Joined: 7/6/2005
Status: offline
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Somebody said to me last night that they bailed out Chrysler some years ago - why not GM. My reply is that it is a different set of circumstances. The problem with Chrysler was the product range. They got the bailout, sorted out management and the product range, and paid the loan back. The problems here are caused by a different set of circumstances, namely the economic situation in general, and the company cost structure. The company does not have a problem with the product range or market share, and they are not going to improve either with a bail out. It also seems that they are unable to renegotiate contracts to address their cost structure. So, I really fail to see what a bailout is going to achieve. Except to prop up a little longer those that have chosen to make a bad investment, against those who have made not-so-bad. With taxpayer help.
The option is to let them crash. Somebody said this would cost 2.5 million jobs, including "downstream" losses. I do not think it would be this bad, because what they have not counted is that the "slack" will be picked up by other manufacturers. The same number of cars will be sold, they will just not be GM products. GM assets will be sold off, the industry will still see spare parts manufactured for existing vehicles. In fact, it is even probable that some product lines will continue under different ownership. Letting GM go, may in fact secure the survival of Ford and Chrysler.
This is difficult to say, because I am a GM man, not Ford. But, this goes on all the time on a smaller scale. I have had to close a business down, because keeping it going would prolong losses, without large capital injections which I could neither afford nor felt inclined to put at risk. There were various causes for this problem, but competition from larger businesses was one. Closing was just the best business option. This was difficult at the time, but I had made the decision to buy the business, no good crying over spilt milk. I am sure there are thousands of small businesses closing down now in the US, which of them is going to get a bailout so that they can continue to make losses for a little longer? Why should the size of the business decide who gets the taxpayer to keep them going?
This of course, is not very comforting for those that lose their jobs now. Unfortunately, it is the drawback of capitalism. Capitalism does involve survival of the fittest, and the labor market must follow it. The option is something called communism. The US government could buy GM, Ford, and Chrysler. Merge them into one entity, but guarantee everybody their jobs of course. The President could apoint a committee to decide what will be manufactured. Probably millions of little electric cars. Pass a law that says you need a special permit to by an SUV, or a high performance car. Permits would only be obtainable by paying a large "fee" to some local official. Sounds good?
As somebody has said, in a crisis you sometimes need to make a decision between a bad choice, and a worse choice.
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RE: GM Bail-Out? - 11/13/2008 7:11:20 PM
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jbow
Posts: 629
Joined: 2/16/2007
From: Dixie
Status: offline
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GRRRRRRRRR..... I am totally against a bailout for the Detroit auto industry. The unions have ruined the industry there and they need to go. I do not want any of my money going to union pensions. There are plenty of unemployed workers who would love to have those jobs for half the wage... give me a break... please...
I live in Georgia and if I get a chance I am going to go to a Chambliss meeting and do my best to ask him a question...
"If you are re-elected to the senat will you actually use the filabuster??? Will you use it to stop bailouts?"... if not, I don't see the need to re-elect him. I man, if he is just going to compromise with democrats... what's the use. I'd rather just give the liberals all the rope they need to hang themselves.
That's the way I feel about it.
Oh, one more thing. Do you know that union wages are tied to the 'minimum wage'? Do you wonder why the democrats are always wanting to reise the minimum wage? Do you think it;s because they care about the 'poor'? No.. it is because they are doing what the unions want.
Julien
< Message edited by jbow -- 11/13/2008 7:20:57 PM >
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"These things I have spoken to you, so that in Me you may have peace In the world you have tribulation, but take courage; I have overcome the world."
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RE: GM Bail-Out? - 11/13/2008 7:38:07 PM
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GroupW
Posts: 2863
Joined: 11/16/2007 | | |
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