Big Three bailout -- the devil is in the details

   WASHINGTON  -- So now, suddenly, the debate over the auto bailout seems to be all about details and options.

   At a six-hour hearing Thursday that often moved as slowly as a '74 Pinto, senators from both parties kept throwing out alternatives  to writing the $34 billion blank check Detroit is seeking.

   Options spelled out over the course of the hearing included a Treasury Department or Federal Reserve bailout using existing funds or a mandate that some of the recently rescued banks come to the aid of the auto companies.    Meanwhile, Sen. Charles E. Schumer, D-N.Y., suggested a two-tier approach in which auto companies would get immediate loans and federal oversight, and more money later if they meet preset conditions.

   So, which should it be?

   Or shall we take our chances and bet that Mark Zandi, of Moodyseconomy.com,  is wrong when he suggests that letting Detroit die would cost taxpayers several times more than any bailout?

   -- Jerry Zremski

Comments

[Mark]

I hope this is not how this plays out, but as of Friday morning there is an indication that Congress is trying to put pressure on the White House to carve a bailout out of the 700 trillion set aside a couple months ago. This is so Congress does not have to take a stand on it by voting on the record. Heaven forbid that a legislator from an auto state would have to vote against it. Bottom line is if that is the logic, it is wrong. My hope then is a new wind blows in starting Jan 20th with Barack Obama, maybe he can knock some sense into the system.

[Paul Lee Turner]

At the very least, automakers receiving bailout monies should be forced to deliver vehicles with these requirements: 50% all vehicles meet minimum 35mpg in 2010, 50% by 2012; Maximum café standards accelerated to reduce emissions by 2012, not 2020.

[Steve]

How 'bout this:

Take 3 billion and buy GM outright--every share of stock.

Take another 3 billion and give each former employee who earned less than 250,000/yr. a severance equal to two years' salary plus $30,000 in education vouchers.

Take a final 3 billion and retool the physical plant to produce electric cars.

We'd have a production facility run by the US Govt.--owned by the American people, we bought it after all.

Call it APEC--American Project for the Electric Car.

APEC not OPEC, how's that grab ya?

It has the potential for being the only Government Agency to earn a fiscal profit for the American people.

[robert james]

We'll all spout our frustration and solutions, but nothing will ever change.
The corporations run this country, and tell congress what to do.
This is all show for public consumption, while behind the scenes all in power are snickering and scheming.
They will get what they want, and continue colluding with big oil to line their pockets while emptying ours.

[Hank]

"The devil is in the details", yes...only you are looking at the wrong details.
Michael Moore announced what I have said, that Wall Street, banks, and corporations are being bailed out while Main Street is being allowed to wither more and more. As Moore said on Olbermann's show, "This is class warfare." I've said before that this economic civil war was underground now come out in the open. The UAW is pinned down by their own leaders and industry, but with unemployment at 533,000 this morning and growing, the Big Three will find they have lost the market for vehicles.
Senator Schumer is befuddled in looking for progress in stages. Congress can't handle all the problems on their docket. Even an Auto Czar will have a nearly impossible time. Bankruptcy is not an option. CNBC poll shows that 57 percent will not buy from a bankrupt company. The only way out is to pass the right significant stimulus package now, now it 2009. And aid mortage holders to re-finance terms immediately, something Sheila Baird is trying to do at the FDIC. The Big Three cannot be dealt with independently from Main Street. The way Congress is doing it, the devil wins.

[OP Mike]

Hank,

You must be joking, you think of Michael Moore as an expert in economics! Who else do you turn to for enlightenment? David Letterman? Jay Leno? Bill Maher? Jerry Springer?

You don't need to be a Harvard educated economist to see the economic devastation that would most certainly follow the collapse of the Big Three US auto-makers. But it would help if your education level exceeded passing through the halls of a Buffalo public high school and watching goofballs on TV.

Michael Moore! Really, Michael Moore?

[lanres]

Robots don't buy cars. You can give employees(line workers) all the education(feel good) money you want - where will there new jobs come from? --- Congress is providing a Golden parachute for the industry leaders, while using tax dollars to finally destroy the UAW. - - - Every election year we hear "Democrats are for the working Man." ------

[Frances]

It doesn't matter that we bail out the auto industry. No one is buying cars; no one will be able to afford to buy a car;who is going to purchase the hundreds of thousands of autos already made that are sitiing in lots all around the country? If you can't sell them, why make more? Instead, why not give the money to every American who then can buy a vehicle, and that money will go to the auto companies, and that will stimulate the economy by allowing them to dig themselves out of the hole they're in. And it'll be cheaper,too!

[Buffalo Libertarian]

Don't give them so much as a dime. They made their bad business decisions, they let the UAW extort insane wages and benefits out of them for unskilled factory workers, let them bear the consequences.

It's interesting that Toyota, Honda, Nissan, and Hyundai aren't running to Congress demanding that the taxpayers bail out their American plants.

[Buffalo Libertarian]

OP Mike wrote: "You don't need to be a Harvard educated economist to see the economic devastation that would most certainly follow the collapse of the Big Three US auto-makers." Yeah, so what? Life happens: get over it. The fact of the matter is that the Big 3 made bad business decisions and are rightly suffering the consequences. Bailing them out just gives them the green light to keep on making bad decisions.

But that is so typical of American society today: let's just remove the consequences for our mistakes. Let's not actually be responsible for our actions but instead let's blame it on something or someone else. There is no difference between the whole "It's not my fault" mentality prevalent in society today and what the Big 3 are doing in running to Congress for a bail out.

[Barton Keyes]

There are any number of reasons why Congress will not be able to hammer together a federal package for the three American Auto Makers this year, and maybe not even after Obama is innaugurated:
1) Curreent popular wisdom says the blame for the poor shape of the auto industry is near sighted management and self-centered unions. The collapse of the economy and the prior rise in oil prices are uncomfortable details. And Americans are
not in a mood to spend billions to help the bad guys.
2) The idea of involving the government in failing Main- Street businesses is anethema to a significant
minority in Congress. And this is depsite the fact the government has already involved itself in Wall Street to the tune of $700 billion.
3) Some Congressman are reluctant to help businesses that compete with car companies in their own states, i.e. foreign owned car companies.
4) Other Congressman see the federal treasury in danger of spending itself out of the will to spend more, and they desperately want billions for their own states who are or will shortly be facing huge budget deficits.
Saying no to the car companies allows the Federal government to say yes to state Governors who already have come begging to Washington. Profligate states are more deserving than profligate car companies apparently.
And 5) any prudent plan about helping the autor companiues would require a lot of time and work to insure the auto companies spend the billions wisely. After all, look at some of the banks that have received federal money. They have used the cash to acquire other banks rather than lend money to businesses as originally hoped.

[Hank]

Let's see, OP MIke. As I remember, you were wrong about the election, wrong on your economics, and Michael Moore predicted all this from way back in "Roger and Me". Now, who are we going to believe? Certainly not you.

[Robert]

I would like to point out that Charles Shumer has NEVER, EVER held a private sector job in his entire life. So, according to the Buffalo "News", we should look to him for guidance and "leadership" on solving the problems of the auto companies.

[scam artists]

If I has a wish it would be to slap there smug faces.They new for years as did so many other big corp. what there fat appetites for greed were doing. They should be held accountable for stealing of funds. Lets see them open there bank accounts for the world to see. Yes, the importing of foreign cars is an issue that must be handled. These people have no shame it sickens everyone that we have to pay for for such gross negligence. They should all be fired and replaced with government appointed personal. These people can not ever be trusted.

[sots]

Ever consider this?
What if this whole economic Katrina has been known and preplanned?
If you had this kind of inside information, please tell me, what exactly would you do? Get your hands on as much wealth as you can, in any way shape or form you can. Right?
Is that not EXACTLY what these elite highly trained and educated, top financial leaders have done and continue to do?

The well off bankers took gigantic bailout payments, despite being "billionaires". The same can be said for the "billionaires" in insurance and Wall Street. How many more billionaires do we have to bailout before it sinks in?

They took away our jobs, homes, retirements, health coverage, and made for us, a pure daily "hell" of nothing but constant fear and constant worrying about how to continue to just live, day to day. They made their no bid corporations untouchable, unaccountable. They repeatedly threatened us to give them HUGE tax breaks or "ELSE", they will eliminate many, many jobs. Well, we gave them those tax breaks repeatedly, and they STILL eliminated millions of jobs, blatently supported illegals by hiring them, and outsourced the rest.

Now, no matter how many of the majority, in a so called "democracy", oppose the bailouts, they will STILL get them, regardless of the will and wants of the people. Just like their bs war in Iraq. That's democracy?

When does it finally sink in?
We have been TAKEN, and they want even MORE! Follow the m-o-n-e-y.
It is still going right to the top, only now, the spigots, and their pockets are opened wide, and the money is spontainiously flowing in "free fall", not unlike the three buildings in the World Trade Center.

Career politicians "abound", from the bottom to the very top. And the few families that are in it from day one through their entire lives, get elected over and over and over again, and always move right on up the ladder, despite the ultra complicated "system" they run being repeatedly reported as seriously defective. Those facts are being very seriously ignored and burried. Just like our hopes and careers. My daily funds have dwindled down to almost nothing, let alone my extra bailout money for "billionaires".

[I Love Broken Gold]

OP Mike -yes, Michael Moore. No really, Michael Moore. Our fellow poster Hank merely mentions Michael Moore commenting on the situation. I'm not interpreting any of Hank's comments as you mistakenly did. Maybe you should go back and read Hank's post again, slower this time. You've obviously never seen Roger and Me. Lackawanna, as a result of Bethlehem Steel leaving the area, looks like Flint Michigan. I think I've finally figured out why the right wing despises Michael Moore - there is no right wing version of Michael Moore. You chide Hank for quoting Michael Moore. My guess is you own Sean Hannity's books and listen to the hate filled champion of class warfare - Oxy Limbaugh.

[OP Mike]

Buffalo Libertarian,

You recommend some tough-love for GM, Ford and Chrysler. Well, how about some tough-love for the City of Buffalo, your home town?

Bad decisions made by City Hall over the years, including, but not limited to, kowtowing, bowing down and genuflecting to the union goons who run the police and fire departments, control the city school teachers and herd the other city sheep, have created a city of perpetual beggars. Year after year, decade after decade, the so called city leaders trek off to Albany and Washington, tin cups in hand, begging for more, more and increasingly more bail out money.

Shouldn't the City of Buffalo finally and rightly suffer the consequences of its own bad decisions? Constantly bailing out Buffalo just gives the Mayor, the City Council and the Union Goons the green light to keep on making the same old bad decisions, over and over again. Right?
There are millions of workers that will benefit from maintaining a viable auto industry in the US. By contrast, however, there are only a few thousand city employees that would suffer if Buffalo were allowed to bite the bankruptcy bullet. For every city employee now feeding at the government trough there are at least a hundred well qualified workers ready, willing and able to take his place. And for a lot less slop, too. If Buffalo is forced into bankruptcy, so what? Life happens, you will all just have to get over it.

[lanres]

As long as PAC Funds over flow with workers dues money - Buffalo will remain status quo. - - There may well be hundreds of better educated , overly skilled workers available but - they don't belong to the "Controling Political Majority Party" - so this is what you get. Patronage and Politicaly influenced job creations , with tax funded pensions and benefits. - - -

[Hank]

The News editorial board should read carefully what Paul Krugman says today about the liklihood of the U.S. auto industry disappearing.
http://www.cnbc.com/id/28097151
Krugman is wise to say it now, because Congress is paralyzed by the thought that the financial system has failed, and the economy is failing. "Planes, trains, and automobiles" are not where an economic resurgence can begin. Senator Dodd is more to the point: get rid of GM's Rick Wagoner, the CEO epitomizing arrogance in the board room. Unfortunately, it's too late.

[Buffalo Libertarian]

OP Mike wrote: "Bad decisions made by City Hall over the years...have created a city of perpetual beggars...Shouldn't the City of Buffalo finally and rightly suffer the consequences of its own bad decisions?...If Buffalo is forced into bankruptcy, so what? Life happens, you will all just have to get over it."

The short answer to your question(s) is "Yes." The longer answer is that bankruptcy just might give Buffalo the opportunity to restructure itself (especially its employee contracts; it's interesting to note that federal employee unions don't get to negotiate salary and benefits).

[What A Joke]

Since this bailout is bound to occur, rather than creating more government oversight and therefore more government spending that garners little to no return to the taxpayer, why not consider an alternative:

Use the $34 Billion to purchase inventory from each of the dealers, and then set up a daily national auto lottery to 'give away' those vehicles the government has purchased.

If you say the average price of the Big 3 fleet of autos is say $40,000, the government could purchase 850,000 vehicles.

Use a lottery system to 'give away' those vehicles. Essentially, all you'd have to do is have 40,000 people buy a $1 tickets for each car. Likelihood is that you'll get more than that on the whole. I mean who wouldn't pay a buck or two for a chance to own a Corvette, Escalade, Volvo, etc. And essentially, you'll have to give away more than one car a day, so you offer the chance to win one of the higher end vehicles, but end up giving away only one of those but many other lower end vehicles.

And as a taxpayer buying tickets for this, what is my incentive??? If I win, I basically have pruchased a vehicle for $1, or even a dollar every day of the year, $365. You have instant equity at your disposal...Even if you sell off the car you won for $1000, you would make money. Furthermore, since this system is bound to work, the government should make money on this, which should be returned to the taxpayers whose money they used to fund this in the first place.

Only downsides to this:
1. Devaluation of vehicles, although it can be said that they are already declining in value.
2. Gas prices. By creating more vehicles potentially on the road, you could potentially cause a greater demand for gasoline again, thereby increasing prices.

Just a crazy idea from a guy who does not want to see my money go to waste with little chance for a return on investment. I am sure this will be met with much criticism.

[Hank]

Look. Here are the facts, News. The bailouts, now heading for the Big Three, are an acid. The bigger the dose, the worse the kill zone. Like acid rain.
Read CNNMOney.com's special report today: "Auto bailout: $15 Billion is just the beginning."
http://money.cnn.com/2008/12/09/news/companies/auto_bailout_pricetag/index.htm
Drinking this acid-laced Kool-Aid dooms the nation to growing liabilities that will never be paid back. Is this what you really want?
Reform is what is called for and national sacrifice by the wealthy. Even impresario Donald Trump wants to stiff his banks and make his condo contracts pay. Governors are going corrupt. Attorneys are being arrested for impersonation. New York State schools will not merge and resist. Paul Krugman told everyone, the U.S. auto industry likely will not survive. The first rule of capital is to not throw good money after bad, just what the News is advocating. A depression may result, but there is an antidote. Truth.
or are you like Madonna, willing to Dare?

[Hank]

The UAW and workers and communites that depend on their earnings should understand that the temporary funding bailout is just a super-unemployment benefit extension. They need to use the time to train and prepare for new careers, whatever and wherever they may be. Capital providing people are organizing to provide severe resistance to all taxpayer funded bailouts in the future. If there is a hope, the independent General Accounting Office needs an immediate mission to track, account, responsibly itemize probable outcomes, from auto sales and revenues to pension liabilities. I don't see that happening because Barack Obama will defer to an auto "czar" who will be no more than a Washington propaganda outlet. Workers...change course now.

[Keith]

The UAW should have said they would take the pay cut if the big three management took one too. As it is right now the UAW is killing the auto industry with out dated thinking. Coupled with poor management at the big three, this industry needs to be completely decimated and rebuilt from scratch!