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This Is What Democracy Looks Like
www.NationalView.org's Note From a Madman
November 25, 2008
Did you ever go in to purchase a new or used car and buy it on the spot? Well, I have and more often than not have thought better about the deal after signing the papers. That intoxicating new car smell; those smiling faces of the salesperson, manager and the finance guy; and the easy sign-and-drive which allows me - a new car owner, again - the instant satisfaction of taking my new car home and showing it off to my neighbors, friends and alike.
We are now experiencing that same buyer's remorse regarding the $700 billion financial industry bailout, sans the new car smell.
Treasury Secretary Hank Paulson played the new car salesman when he put out his two-and-a-half page financial industry recovery package which explicitly removed any kind of judicial or Congressional oversight in how he and President Bush were to distribute the now-approved $700 billion supplied by the US taxpayer. President Bush, with his warnings of dire consequences and similar predictions played Paulson's sales manager.
We almost bought the car at the sticker its price, plus paid for the pin-striping and didn't even get the new car warranty. And even though we ended up negotiating a better deal (in the bill which eventually passed through Congress, the Senate and was signed by President Bush), it's still a car which we now find out is indeed a lemon.
Why, it's almost as if we signed the finance agreement for one price and didn't read the fine print which allowed them to change the deal at their pleasure.
We now see that Bush and Paulson want to make sure this money - all of it - goes to those who were big contributors to the cause. And the cause is big business, Trickle-Down and huge breaks for those who put us in this position in the first place. With what appears to be one phone call, Paulson and Bush are "lending" Citigroup $20 billion of the initial $350 billion allocated in stage one of the economic bailout. But with promises of backing up $306 billion worth of bad subprime loans, the lion's share of the next $250 billion could be gone in the blink of an eye.
Of course, that's the worst case scenario but this is the season of Murphy's Law: Anything that can go wrong will go wrong, especially when "going wrong" ends with $326 billion going to poor, poor Citigroup.
And if anyone still believes that Bush and Paulson aren't going to try and give away the whole $700 billion before they end their tenure at 1600 Pennsylvania Avenue, well then, they don't know Bush. I wouldn't even put it past them to ask for another $700 billion after the first installment is spent before the end of the year.
Yes, they do have that much chutzpah.
By comparison, the US auto industry will have to jump through hoops to get the $25 billion they say they need to keep their heads above water, and keep anywhere from 3- to 9 million Americans gamefully employed. The thing is, they should jump through hoops for it, There should be harsh conditions put on the US auto giants who have ignored the future for so long as they looked at the profits which gigantic SUV's and pickup trucks offered them. Those same conditions which we are looking to make the US auto giants take-or-leave if they want some money are the same types of conditions which we should have set on Big Finance.
It's just too bad for the US auto makers that they didn't have a Paulson-like angel in the White House to get their piece of the pie. You can bet your bottom dollar that if they did they wouldn't only be asking for a "measly" $25 billion.
Now that we see how Bush and Paulson are treating our final trust of their administration, our buyer's remorse has kicked in, and done so in a very hard way. How much damage can they do in 56 days?
I don't know but it can really be considerable.
EPI Advocates Investing in the US Automobile Industry
The non-partisan Economic Policy Institute (www.epi.org) believes that the automobile industry is an essential industry that must be saved. In an article by Robert Scott, he makes an argument for extending a 25 billion loan to the automobile industry. Here are the main points:
1) Although domestic automakers made strategic blunders in the past, they have recently made tremendous strides in restructuring.
2) The current industry collapse is a direct result of the financial crisis rather than past industry decisions.
3) Unionized U.S. automakers are highly productive.
4) Union auto workers have already taken substantial hits on pay and benefits.
5) A collapse of the Detroit-based auto manufacturers would result in the loss of 2.5 to 3 million jobs, according to a 2008 study by the Center for Automotive Research (CAR).
6) The automotive industry represents almost 4% of U.S. gross domestic product and 10% of U.S. industrial production by value
7) An airline-style (Chapter 11) bankruptcy re-organization is not an option for U.S.-based automakers.
You can read the details at http://www.epi.org/content.cfm/pm134. I am in agreement with Democratic policy makers that the automobile industry should show us a blueprint for their future plans to build fuel efficient cars as a pre-condition for a loan. Keep in mind that this is just a loan. It should be paid back at some future point. This is NOT the same as purchasing troubled assets and/or buying shares in financially distressed companies. I have faith in EPI. They correctly diagnosed the job less recovery that followed the first Bush recession.
In response to, "Paul Krugman, who won the Nobel this year for Economics, was succinct on the Detroit bailout--it's a losing proposition. Warren Buffet, second-richest man in the world and financial advisor to Barack Obama, said a bailout of the big three spelled disaster and also said bankruptcy restructuring was the way to go," Robert Scardapane writes:
Warren Buffet would be against a bailout considering he invested a considerable amount of his money in a Chinese company that is making electric cars / batteries. Do you think he has an ulterior motive? Here's the reference:
And as far as misquoting Krugman, here's what he actually said:
Krugman says that because of the bad state of the overall economy he reluctantly favors a government bailout of the auto industry.
He gives two reasons:
The credit lines normally available to the auto companies are now frozen, so a Chapter 11, bankruptcy, would quickly turn into a chapter 7, liquidation.
Such a liquidation would mean that over one million jobs would evaporate.
And so, the net result to the economy would be a negative stimulus, and in the terrible slump we are in, a negative stimulus is the last thing we should be engineering.
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