Everyone lines up for a bailout
The day the $750 billion dollar federal bailout figure was mentioned, every single Fortune 100 company, state and city chief financial officer started planning. Not only would this level of federal involvement in these institutions be unprecedented, it would actually dramatically change the way everyone did business.
Let’s say you owned a small ice cream stand in a city with three other ice cream stands. The owners of those stands paid their employees too much, offered crappy service and featured ice cream that tasted terrible; they were going bankrupt. But since those stands employed a total of 100 people, the government came in and offered grants and subsidized loans to these owners so they could continue to keep the doors open. How would this government action change your business plan?
If you say you would not change the way you do business, you’re going to be in shock in short order. These businesses – due to management failures – are being rewarded with time. You offered superior service, your ice cream tasted better, you paid your employees a reasonable salary. Your business plan – which we assume includes becoming successful within a specific period of time – has now been altered by outside forces.
The government is messing with the free market and you’re getting screwed. To make matters worse, there seems to be zero accountability or performance guarantees.
So as a business owner, why not see if you can get some of that government bailout cash to help level the playing field?
That’s what companies, cities and states are now doing. $750 billion dollars (at a minimum) is a huge chunk of cash and everyone wants their cut of the pie.
- AIG came back for more cash last week.
- The Hartford (my former employer) bought a bank for $10 million just so the could get in line for cash.
- Not only are we providing $25 billion in loans so automakers can build more fuel efficient cars, GM, Ford and Chrysler are in line for another $25 billion in bailout cash. The companies value – all three combined – is only $7 billion. If Reid and Pelosi are offering, why not?
- American Express changed their business model so they could qualify.
- Philadelphia, Phoenix and Atlanta mayors think they should be part of the plan too.
- Plenty of other cities think the time is right to have hands out.
- Even though Nancy Pelosi is not sure about the idea (will wonders ever cease), California Gov. Arnold Schwarzenegger’s emergency request for $7 billion is in the mail.
Malkin is asking everyone to get behind Senator Jim Inhofe’s accountability plan to force Congress and the Treasury into rethinking this entire bailout nonsense.
Unlike most, the governor of South Carolina, Mark Sanford, is not standing in line for cash. He’s standing on principal, but his stand may be for naught. If you don’t bring home the bacon these days from the federal trough, you’re no good to the 40-plus percent of voters who are receiving some sort of federal entitlement cash.
Another bank, UMB Financial, is also opting out. Kudos to Mariner Kemper, chairman and chief executive officer of the institution who said no thanks. His institution deserves to be on a fair and even playing field.
Looking for your own bailout? Ask by wearing a T-shirt.
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