So, if I’m reading you correctly Kearson, you would advocate for having let AIG, BoA, Chase, etc. go into bankruptcy. Then allow GM and all of its suppliers to shut down.
And in the face of the fact that the banks have largely paid back their loans, and that the government stake in GM is going to be sold imminently (and for not much of a loss, and with GM much leaner and profitable), you still maintain this would have been a better course of action for the US and world economy?
It’s a bad business decision to make payroll? Your employees must love you. :dubious:
They bought their tickets, they knew what they were getting into. I say, let 'em crash.
I actually don’t have a problem making payroll.
How many other companies go under if you do? How important are you to the economy of the state and the nation? Not very, I’d expect. Remember, along with the money, they fired the old CEOs ass, an excellent move.
As for banks, they did let one bank fail. How did that work out? If they attached the same kind of strings to the TARP money they did to the GM money, we might be in better shape today. And much of the TARP money (except for AIG) has gotten paid back with a profit. Preventing a new depression and a profit isn’t a bad day’s work.
Only problem is, when they fall they fall on you, and you get squished. Want to change your opinion?
Devastating rebuttal !
But it would have been at $19 if the government had just stayed out. 
So you’re saying that the fact that Ford, which didn’t take a bailout, has done really well is proof that the bailout worked? Interesting logic.
One of the reasons that Ford has done so well is precisely because it didn’t take a bailout. Go look at Ford’s brand value and general public perception of Ford products in the aftermath of the bailout - they skyrocketed. Many people of the ‘tea party’ variety started buying Ford instead of GM or Chrysler in solidarity with Ford’s refusal to take a bailout.
In addition, Ford’s value has jumped because they have introduced a whole slew of new vehicles that are just killing the competition. The new Focus, the Fiesta, the Edge, and the Fusion are all doing extremely well. Ford’s reliability is among the top group in the industry, and their vehicle satisfaction rates are sky-high. The Fusion hybrid and Escape hybrid are among the most popular out there, and the new Fiesta with its direct-injection engine gets 40 mpg highway/32 city, which may make it more efficient than a Prius in typical driving, at half the price.
The theory that the entire supply chain would go under if GM were sold was certainly pushed by the pro-bailout crowd and used as justification by the government, but there’s no way of knowing that that would have happened. After all, all the customers who bought GM cars last year would still have purchased cars - just from other manufacturers. It seems likely that GM’s market share would simply have been absorbed by the other auto manufacturers, who would have increased their manufacturing accordingly.
There were also other options for saving the supply chain were that necessary, such as taking the money spent on cash for clunkers and using it to provide interest-free bridge loans to suppliers while they retooled to match the new market share mix.
The problem now of course is that we can’t know the path not taken, so there’s no way to prove one side is right and the other wrong. But what we do know is that government bailouts also create moral hazards - corporations now have the goal of becoming ‘too big to fail’, and once they do, they may tolerate more risk because they know the government has their back. The fact that big corporations will be bailed out will also cause their bonds to be rated better, which will bias the investment market more towards them and away from smaller companies.
The net result of this could easily be to create even more systemic risk in the economy, and to create the kind of economy where the marriage of big government and big business works to destroy entrepreneurship and innovation. Crony capitalism and corporatism, brought to you by the very ‘progressives’ to claim to be completely against that sort of thing.
By the way, nice work conflating this with bailing out the financial system. They are two very different things. If an auto maker fails, it doesn’t bring down the entire economy. If the financial system shuts down, it does. I favored TARP precisely because the financial meltdown was causing massive systemic effects - ships loaded with goods sitting in ports unloaded because no one could figure out how to pay for the cargo. That sort of thing.
Making sure the financial system continued to operate smoothly was critical. Saving GM was not. And I’d be willing to be that if GM’s workforce had been non-unionized, the Obama administration wouldn’t have lifted a finger to save them.
Is your company large enough to enable you to make significant campaign contributions and/or hire lobbyists? Do you have enough employees to make your laying them off an embarassing news story? Is your workforce part of a politically powerful union?
No? Then fuck you, you don’t count, Mr. Small Businessman. Come back when you have something to bribe and/or blackmail the government with.
Now shut up, pay your taxes, and hire some people, you selfish rich bastard.
We did not just give them tax money and but the toxic assets. We also continue to give them money for free. They are buying treasury bonds and making certain profits without risk. It was a bad move, They have no incentive ti loan when they have locked in profits. They don’t care about the country. they just want to make more money for the workers and especially the execs.
There is risk in lending. They know they can pile up salaries and bonuses as things are. They do not care about helping keep small businesses afloat. Jobs don’t mean a thing to them. They just want short term profits.
Do you bother to read the threads you post in?
The claim was made that the bail-out of GM “harmed Ford”. That claim is divorced of any reality. The reality is that the threat of GM folding had threatened Ford and that GM’s survival allowed Ford the opportunity to skyrocket, an opportunity that would not have been open to them if the whole supply chain imploded and a Great Depression ensued. Or at least such was what investors apparently believed. Ford had been trading in a range of $6-8 for years. Yet despite improving quality and solid enough financials the threat of GM’s demise resulted in them losing 65-75% of their value. Investors were duly fearful that if GM fell then others, including Ford, would be sucked down in the wake as well. Once that threat was removed Ford immediately returned to its baseline and then never looked back. They were not harmed by the bail-out and would have been harmed by failure to prevent GM’s collapse. Or least, by the stock action, so Wall Street believed. (I am open to an argument that Chinese companies would have swept in and bought up the empty plants for pennies on the dollar and manufactured some here, keeping the supply chain alive enough for Ford to stay alive. But price action showed that Wall Street was not betting on that. And I do not wonder why.)
You are right that we cannot say with certainty that the fears of those progressives of Wall Street were well founded. Maybe everything would turned out okay with all of GM’s employees on unemployment and the supply chain would somehow have managed on bridge loans waiting for new manufacturers like SAIC and Chery to fill the vacuum. I can’t say I know that that path not taken wouldn’t have turned out just hunky dory. But I can say that after doing what we did we are going to get out of this without a complete collapse of American auto manufacturing, having saved “more than 1.14 million jobs last year alone”, with a supply chain intact, without a Great Depression, with American companies that are competitive in the world markets, with the government getting out of a majority shareholder role in record time, and having to have spent little, if anything, to do it at the end of the day.
The bail-out was a hugely unpopular thing to do. It helped incite the Tea Party movement. Sometimes in the real world unpopular decisions are still the ones that work. This decision worked.
Solid posts DSeid - thanks for digging up the cites.
This is a problem with ideological rigidity. Should the government rescue failing business as a principle? Of course not. In the face of an entire economic sector collapsing and taking a million jobs with it, however, sometimes ideology needs to bend in the face of reality. You make a decision and hope it works. In this case it did, and I think the architects (Bush, Obama, and countless others) deserve credit.
I wonder if they are so blind to reality that they refuse to accept that in this case the government did something good, or if for some reason they want a new Depression, and were thwarted by that traitor Bush who actually did the right thing. I suspect the former (many are true believers in other things, after all) but I sometimes wonder if the latter isn’t the real answer.
I’m not sure it’s either - I think imputing bad intentions on people with different political ideals is a bad idea in general.
I think it’s just very difficult to allow for exceptions to firmly-held beliefs. And a large government bailout of private industry goes against many firmly-held beliefs of libertarian and small-government types.
I certainly wouldn’t want to use the apparent success of the GM bailout as a carte-blanche for future government intervention, but I think it is at least an indication that there are circumstances in which using public money to make restructuring of a private company possible is not by default a bad idea.
No question that I supported the bail out of GM.
But the free market worshipper in me sees possible downsides for the future as as well. In short, it ain’t over yet.
There was an opportunity for the stake holders, particularly labour, of the auto industry all around to develop more realistic bottom lines when going into future labour negotiations. It remains to be seen if the pare back of exhorbitant wages and benefits, (compared to competitors) that drowned GM, can hold on reasonably when the next contract is up. Its nice to know, especially if you are the union, that the government will guarantee you a workforce that can pay dues, even if the company goes bankrupt. If not, we can go through this scenario again and again
You still have to deal with the stupid system of GM providing health care for the employees and competing with companies that don’t have that cost.
That why you need UHC in the States.
And that is precisely the problem that us small-government types have with it.
Even if we grant that the GM bailout “worked” in the sense of bringing that company back from the brink of bankruptcy, the issue is what kind of precedent is set. Other corporations have seen the precedent and are going to act accordingly. If we’re gonna bail out GM, there’s no reason not to do the same for Wal-Mart or Exxon when they go belly up.
And if a given administration won’t, well that’s a pretty powerful reason for a corporation to oppose that administration, isn’t it? And given that more and more major corporations own media outlets, we can expect them to use them accordingly. We’ve already seen newspapers arguing that their industry needs a bailout; if Disney hits the skids, you can expect to see ABC News talking daily about how we have to save a quintessentially American company.
We’re selling our virtue for a short-term-fix and saying “it’s just this one time.” Sure, baby. Every crack whore said that.
If someday we do end up in the corporate-owned dystopia that so many scifi stories predict, progressives can take their fair share of the credit.