Give Me Too!

OK … The Bush administration jumped in to help the financial services industry and now the auto industry. Non banks like Goldman and AmEx are now banks so they can tap tthe Treasury’s $250 billion bank rescue program, and on and on and on … is there anyone left? Oh You bet. Video below the fold.

 

By the way if you are looking for a reason not to bailout the auto industry, this at Motley Fool should do the trick.

Comparing a Detroit bailout to a financial-system bailout is, quite frankly, stupid. When auto manufacturers go out of business, we lose jobs. When the financial system goes out of business, we lose the economy. If GM fails, Chevy trucks won’t simultaneously explode. If AIG(NYSE: AIG) fails, financial markets will simultaneously explode.

But that isn’t the point. To justify a bailout, you’d have to make the case that doing so would get the industry back on a sustainable track. There’s no logic in bailing out companies if they’re simply going to blow through the cash and come back begging for more.

4 replies
  1. Erik
    Erik says:

    Well the motley fool is wrong. If the auto industry fails so will the banks and our economy. These industries do not live in vacuums.

    There are hundreds of billions in credit default swaps on the auto company bonds. Credit default swaps are insurance that bond holders buy to protect their investment. One issue, is that CDSs are purchased by people that do not own the bonds. This is like 10,000 people buying insurance on your home betting that it will not burn down. Then a fire starts!

    So the insurer buys a swap from another company and then that company buys a swap from another company. Some people are saying let it burn because you are the one that built a bon fire in your living room. But the insurance company can't pay all of the claims to the insurance holders so they are saying CALL THE FIRE DEPARTMENT QUICKLY!!

    To complete the analogy when the bonds fail the swaps have to be paid, the counter parties have to be paid.

    This is only a part of the reasons that you can't let them fail. I was of the same opinion that you should let them go BK but I have since come to realize that it is not just the auto industry that suffers it is all of us.

    However to give them the loans they should be forced to come to the table with a solid plan to become viable again. The unions also have to be practical and give up a lot.

    One change that they can make it to change their sales process and go to just in time manufacturing. The tax that they pay on inventory and on lot space must be tremendous. So you go to there showroom where they have 3 of each model, you drive it and they order it and a week later you get your car. This solves a lot of issues, sure it creates a few but the net would be positive.

    -Erik

  2. Dan
    Dan says:

    Why are you blaming unions for the big 3 auto industry disaster? The fact is that union members don't design the vechicles nor do they make decisions on how to run the company. The auto industry has been unionized for decades and has succeeded. Now the industry is in trouble and it is all the unions fault? I think not! I am amazed at the ignorance of the American people when it comes to unions.Nobody want to state the fact that only approx. 10% of this countrys workforce is unionized. Ask yourself this question: how can 10% of the workforce be responsible for 100% of the problems? The real problem is these so called educated coperate executives are collecting excessive compensation packages and making bad business decisions (such as vehicle design).Ww have heard about union wages,now lets be fair and state the top 25 auto industry executives salaries,benefits and stock options.

  3. Gary the socialist
    Gary the socialist says:

    Thank you Dan. You said it perfectally and I listen on and off to Jim's show a lot and he tries to balance the line here more so then the rest of his views. I hear him defend them in one breath and then off handledly bash there pay and benifits as if it's suddenly a crime in America to make a good living and have benifits in this day and age of your your own man dieatribe that comes from the right.
    I declare I am in construction and before I got in the union I lived by working 60 hours a week at job sites and after I got in the union stilll the same but now I have money in my pocket am abe to drive a nicer car ,start my own little business and put other union memeber to work,( I failed Health issues also incompentance)Good and honest Union members who after I layed them off they still had their pensions and decent health care to take with them.I also have to wonder if those that put the union down so bad are simply Jealous of us.. Yes your all Jealous jealous. As goes the union so goes the middleclass down and down a race to the bottom. I say stand up for yourselves and ask for what your worth and join a union to live better and to have better benifits.Do not be affaird and always remember every radio host you listen to and echo is a proud union member so why are you not.Be advised we only except the best and if you are a lazy bum who does not work hard and are affaird to stand up for your self stay right where you are bashing us and becoming future goverment dependents of the programs you spent your life trashing that we faught for you.

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