The (Auto) Bailout is Not in Our Best Interest

Snakeoil salesmen and gullible bumkins still exist.

You can't blame the auto execs for trying to grab a share of the money bleeding out of Washington these days. They see how easy it is to use the media to back Congress into a corner and they probably figured, why not. They may have made a public relations blunder when they hopped on their corporate jets three weeks ago. But believe me, they learned their lesson quickly. They probably figured that their corporate-jet excursion would soon be forgotten if they changed the headline. And they did. The new headline is: we want more money, and we need it quicker.

It seems to be a matter of sharp executives taking advantage of a Congress that does a poor job of showing any sense of discipline. Look at how easily Congress rolled over when President Bush wanted to start a war in Iraq. Every one voted for it. Until this election cycle when they all insisted that they really meant to vote against it. And of course, Congress jumped at the chance to fund the bank bailout. And only now are they figuring out that former Wall Street execs sold them a bill of goods.

I know it would be a shame to see iconic organizations like GM go out of business. But their best days are long behind them and even with a bailout, it's highly unlikely they're going to be a dominant player again any time soon.

And you know what? We've seen this before, right? Railroads have gone under, as have construction companies, universities, banks, insurers, retailers and, yes, automakers.

So would it be so bad if GM went bankrupt? It might actually be a good thing. It's possible to conceive of a US auto industry similar to the aviation industry in which one company seems to be alone building commercial jets (Boeing) but actually partners with lots of manufacturers to get the work done. It would be terrible, however, if we bailed out GM only to be left with the equivalent of Airbus.

Congress has to get out of the lending / bailout business. Government has demonstrated repeatedly that it makes knee-jerk, ill-informed judgements.

Too Big to Fail - $7,000,000,000,000

The bailout of Citi is the latest attempt to prevent the economy from collapsing. Citi will be loaned $20b, not because it has a great business plan, but because it's too-big-to-fail.

And now an analysis on Bloomberg.com makes the assertion that the Citi bailout is a tiny number in comparison with the total amount the US is throwing at the economy. It appears that the total government commitment exceeds $7 trillion. I actually don't know what that number looks like, but I think it's this: $7,000,000,000,000.

According to the Bureau of Economic Analysis, our GDP is $14,429.2 billion. So the equivalent of half our GDP has been pumped back into the economy in the form of loans, bad-debt buy-backs and loan guarantees. To a large extent, all this government action seems to be occurring because certain companies are too-big-to-fail.

Assuming that certain companies are truly too big to fail, are there other companies, possibly in other industries that are also too big to fail? Right now the bailout is focussed on financial companies and other companies - like GM, Ford and Chrysler - that rely on consumer purchasing to survive. But there must be companies elsewhere in the economy that are too big to fail. What happens if GE falters? Or Google? Or Microsoft? Have we discovered - at the point of an economic gun - that we should not allow companies to grow too large?

Bailouts for the Big 3

Detroit, GM, Ford, Chrysler

No Way!!

The only way I'd give you one dime is when you shut down every one of your unions...period. Have a nice winter.