Serious QOD
Over the past two days, the executives of the Big 3 automakers spent alot of face time in front of House and Senate Committees making their case for government financial help. They faced alot of questions about how they would use the funds and how they will get organized to emerge healthier and able to pay the money back.
So my question is — how come the banks did not have to face this kind of music?
You can argue that the questions were largely theater and I’d be inclined to agree, but the banks have gotten (and apparently will get) way more money than the $38B that the Big 3 are asking for. And these banks are not using their new-found liquidity the way that was expected, and apparently neither the Treasury or Congress has implemented a robust oversight of the banks and how they use your money. Back when the bailout of the banks was urgent, I argued that the Congress ought to figure out the minimum effort to stabilize the banks and do that, then take a little time to do some research (including talking to the banks) to formulate a smarter, longer-term solution.
So how come the banks were allowed to be represented by Paulson and his hair on fire, but the Big 3 needed to show up to justify their request?
Tags: Bush's Fubar Economy
Looks like a question of “priorities,” and our country’s are screwed up.
Also, the auto industry has Unions. And we know how evil conservatives think they are.
wall street doesn’t have pensions or unions
$38 billion is more than twice the value of the Big Three and combined, their loses equal about $15 billion a quarter. Those facts would make me pause and ask what are you going to do to turn this ship around.
Not only did the bankers not get grilled – but IO heard last night that the money went out so fast that there is no real accounting of who got what.
Sick.
Great going Mike Castle!!
There seems to be a revolving door between investment banks and government. Obama seemed to be the favorite candidate of the high rollers on Wall Street who take their skim on the ‘pass the trash’ game regardless of profit or loss.
We are in an economy that is becoming increasingly paper oriented. Few politicians seem to be concerned about the de-industrialization of America. Some may see protectionism as the answer but that certainly worked well under the Hoover Administration.
Look at our own state. We lured in a lot of bloodsuckers by abandoning limits on usury. But where are the industries that produce products that people want to buy and hire skilled craftsmen?
The answer is neither protectionism nor pork but a new approach to economic development that would encourage a growth in the private sector. Who seems to be taking steps to make the state more small business friendly?
The answer is very simple. Market wide liquidity, solvency and access to credit is much more important than the auto industry.
In 1970 the domestic auto makers had 90% of the car market, now they have 44%, one half. America should not and does not have to live without a domestic car manufacturer presence but it could.
The most effective plan for taxpayers, workers and the auto companies would be a pre packaged bankruptcy (restructuring) with DIP financing by the government.
I think it’s a combination of things:
1. The banks serve a different function, and it was a crisis at the time. The credit markets were truly frozen and I think Paulson and Bernanke were running around with their hair on fire.
2. Time has passed since the bank bailout and it’s unclear whether it’s actually helped. Also, evidence of waste and abuse has occurred.
3. Union-busting by the Republicans. Why are they so hung up on the mythical $70/hr autoworker and not the actual existing $11,ooo/hr CEO?
4. Arrogance & incompetence of the car companies. We’ve all seen Toyota and Honda make better cars and a better mix of car types (although their sales have also fallen off the cliff).
Good points, Mike and Arthur.
On the original question: I think most people don’t really understand banks and finance well enough to form opinions.
On the other hand, anybody can see that the US automakers have fucked up and gone against the public interest. Anybody can see that the UAW has consistently lined up with management against fuel and safety standards.
I first noticed in 1968 that Detroit was losing it. If an 18 year old could see it forty years ago……
A bailout without fundamental reforms of the industry is at best a short-term, band-aid sort of thing.