One morning, I shot a Chevrolet in my pajamas…

Government does not solve problems; it subsidizes them. – Ronald Reagan

The White House said today that "The legislation crafted in recent days aimed at helping the ailing U.S. automakers is an effective and responsible approach". 

I strongly disagree. It was hard enough to get policymakers to finally utter the word "recession." The Treasury just issued 4 week T-Bills at ZERO percent interest, for the first time in history. In the secondary markets, T-Bills were trading at a premium (meaning negative yields). You want to talk about deflation? People are so fearful that they’re willing to let the US Treasury hold their money and earn no interest at all.  The next challenge may be to get them to say "nationalization"  -- because that’s exactly what’s happening, baby!

That's pretty much what the government takeover of big chunks of the economy amounts to, in my opinion. Welcome to the USSRofA, Comrade!

Actions taken by the Democratic-led Congress and the outgoing administration — moves generally supported by President-elect Barack Obama — already have reversed decades of deregulation and privatization that Presidents Ronald Reagan, George W. Bush and George H.W. Bush all championed. It seems that when times get tough, the U.S. Government needs to step in and be the "lender of last resort". I say, “bullshit!”

Washington has taken a direct stake in  or orchestrated the takeover of banks, seized control of mortgage finance giants Fannie Mae and Freddie Mac, taken a controlling stake in insurer American International Group and now is poised in the final weeks of Bush's term to throw a multi-billion dollar lifeline to the troubled Big Three automakers. We can print money until our faces turn blue. But where is the solution to the problem? Do you see a solution? NOT! Credit markets are still frozen, Pal. And people are out on the fyookin’ street because they cannot pay their mortgages. And that’s after our Government has literally pissed away billions of your and my hard-earned tax dollars in an insanely misguided effort to “fix it”.

Congressional Democratic leaders and the White House just negotiated a bill to provide $14 billion in emergency short-term loans for Detroit and create a "car czar" to be named by Bush to dole out the loans and oversee restructuring.  Republicans may very well  ditch it, and I really hope they're successful. The Government simply does not have a very good track record of intervention in the business sector during hard times.

The problem is, this is simply throwing money at a sinking ship in an effort to "rearrange the deck chairs on the Titanic" without addressing the real baggage of bad decisions on long-term union contract agreements and other financial obligations that will still completely prevent US automakers from ever being competitive in global markets. 

The unions crippled the car industry because they were greedy and  didn’t think ahead. It’s not just the fault of the unions – the carmakers made reallyreallydumb decisions about what to produce and sell too.

I bet you that with the current deal, within just three months, GM will be back in D.C. asking for an additional 15 Billion of your and my hard earned money! Six months later, an additional 15 billion! What am I talking, GREEK? Come on, can we  THINK for a change?

"The government has no business managing car companies, even if temporarily", says Sen. Richard Shelby, R-Ala. "It's very un-Republican". And boy, is he right.

Nearly two years after Bush suggested that Detroit produce "a product that's relevant" -- rather than looking for a possible Washington bailout, the President now supports the emergency loans — after getting a concession from Democrats that the money would come from an existing program to help the industry retool its plants to make greener cars.

Longer-term proposals being developed by Obama and congressional leaders call for an equity stake for the government and a chance to dictate business decisions for years to come. This is totally wrong! The only way to fix the mess is to enable the automakers to restructure under Chapter 11 Bankruptcy, which will give them a chance to ask the Judge to nullify all the bad contracts and utterly stupid decisions they agreed to over the last 30+ years, and have a chance to really come out with a fresh start and have a viable industry.

I repeat: the pouring of taxpayer dollars into this Black Hole WILL NOT FIX THE UNDERLYING PROBLEM!

During World War II, the government seized railroads, coal mines, Midwest trucking operators and, briefly, retailer Montgomery Ward.

The federal government partially nationalized the nation's troubled railroads in the 1970s. Today, it still owns and runs Amtrak. What a DISASTER! You want more of this?

The government nationalized more than a thousand failed savings and loan institutions in the late 1980s and the early 1990s, modeling the effort on a government-run corporation that made loans and bought stock in distressed banks during the 1930s.

The Government has a very bad track record of intervening in failing industries. Don’t we get it? Can’t we THINK? It's time to stop the bullshit and let the automakers take bankruptcy. That’s what they need. It won’t be painless, to be sure. But it could work. It could be a lot less expensive to retrain and re-employ the displaced workers than to throw hard-earned taxpayer money down the sewer.  My two cents.

Comments

  1. As someone who lives near Detroit and has numerous family inlaws working for the big three I somewhat agree with you. Unions suck and the management of the big three sucks. But the auto industry faces a lot of competitive challenges that foreign automakers don't. Take Japan for example. They can export to and assemble in America pretty much an unlimited amount of cars, not so the reverse side. Last I heard there were limits to the amount of cars the U.S. could export to Japan. Little trade barriers like this get brushed under the table but they are signifigant hinderances to our auto industry. I would agree with you that the government bailing out the auto industry probably isn't the answer, but I'd rather have the government bail out an industry that provides hundreds of thousands and jobs and tangible products over a bunch of bunch of rich @ssholes who lost billions (maybe trillions) of investors money. So I say no to the bank bailouts, and maybe some very small loans with big strings attached to the auto industry as well as some heavy trade pressure on foreign governments to open up their markets.

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  2. And another comment, just to bring the argument from the abstract to the real. My office is next to a automotive parts supplier. They just laid off 40% of there workfore this morning. Our government pisses away so much money, 700 billion to bankers to protect the rich while giving themselves pay raises, I think 15 billion, at least by government standards, is a small price to pay for keeping hundreds of thousands of jobs going. True, if the bailout doesn't happen it doesn't mean that the automotive industry will just vanish, parts of it will survive, but thousands will loose their jobs.

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  3. Anonymous4:50 AM

    Fortunately the Government sold Conrail back to NS & CSX. Even though they did this they ran the railroad so horribly (speaks volumes for the efficiency and business of freight rail, poorly of the Guv'ment) that it took NS & CSX a large effort to bring it into the fold.

    Once Conrail got into the hands of NS & CSX the efficiencies increased multiple times over what they where.

    Amtrak on the other hand is poorly run, poorly funded, doesn't work under a similar model as airlines or anything else, has the largest regulatory guideline list (FRA) to follow, can't purchase MODERN passenger rail vehicles used in Japan or Europe, has very outdated equipment, and on top of that...

    ...I honestly don't think the Government wants Amtrak to succeed.

    If Amtrak worked at the same efficiency of Virgin Rail (in BRitian) the railroad would easily turn $200-$500 Million a year in profits. That's with only 25-28 million a year in ridership. If it turned profitable and started dumping that money into expanding, they'd have every corridor lined up and start running airline short hops out of business...

    but as I said, the Government, I think, likes to just control the railroad - and don't even get me started on the stupid bastard Union of Amtrak. Someone gets laid off from Amtrak, they get paid full for 5 years while looking for another job. Pure insanity...

    blagh.

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