What nonsense. No precedent was set. Are you under the impression that federal bailouts are a new idea?
In the early 1970s, the Federal Government bailed out the Penn Central Railroad, Lockheed, Franklin National Bank and New York City. The men behind the bailouts were noted progressives Richard Nixon and Arthur Burns.
Your corporate bail out examples don’t exactly show positive results for bailouts.
The Penn Central bilout wasn’t working until the Staggers Rail Act deregulation took effect some 5 years later.
The Lockheed bailout for the Tristar jet didn’t work out that well either. In fact Lockheed bailed out of aircraft production 10 years later.
Your corporate examples aren’t exactly positive precedents. By all accounts the GM rescue is positively glowing and sure to lend support to future government bailout proposals.
Ahhh, that great progressive, George Bush :rolleyes:
We purchased the former largest car manufacturer in the world and now we have the world’s largest pension fund in the world. We’ll have to rescue that too in a couple of years.
We didn’t rescue a car company as much as a retirement fund.
I would have a hard time conceiving of a scenario where a bailout of WalMart would be good. For Exxon, however, what if Exxon going belly up was going to result in a major reduction of refinery capacity and oil production until things got sorted out?
The two positions are not bailouts are always bad vs bailouts are always good. They actually are bailouts are always bad versus bailouts are good when there is a good reason that they would further the national interest.
For your last point, definitely. Each case needs to be looked out carefully, and a rapid exit strategy (like we’re seeing for GM) defined…
As for the first, ideological rigidity is fine in church or academia, but is dangerous in the real world. That goes for left or right. One of Regan’s great assets was that no matter what his previous beliefs were, he raised taxes, saved social security, and talked to the Russians when it made sense. We’d be in much better shape if Bush had shown that kind of flexibility earlier, before he became the lamest of lame ducks.
Any nasty thoughts about the opposition comes from them being really upset by the prospect of people not being thrown out of their homes or tossed out of work or getting “undeserved” health insurance.
Sorry, you’re going to have to have a point if you want a response. Are you under the misimpression that I’m a fan of GWB? Hint: conservatives can take their fair share of the credit, too.
Are you kidding? Walmart is the largest corporation on the planet and, by a mile, the number one employer in America (8 times bigger than GM). They represent over 10% of the entire retail market. If they were faced with a bankruptcy or restructuring, the possible consequences would dwarf GM. You don’t think saving hundreds of thousands of jobs would be a good reason to bail them out?
“Gas prices will soar! We have to bail out Exxon of we’ll have $6 a gallon gasoline and that will destroy the economy.”
Uh-huh. And who gets to pick which bailouts “further the national interest?” If a Republican administration says that bailing out an oil company, or Halliburton will “further the national interest,” you’re okay with that?
You and I have different definitions of ‘precedent’
Lockheed certainly didn’t bail out of aircraft production. Lockheed bailed out of the commercial jetliner business. Its successor company is still by far the largest supplier of military aircraft in the US.
In any event, perhaps the point to be made here is that Democrats are better at bailouts, or something. My point, which you missed entirely, is that bailouts are not a “progressive” idea.
What is your definition?
Perhaps not exactly wanting a new Depression, although bear in mind that not everyone lost money during the depression of the 30’s - those who had cash as well as an amount of ruthlessness were able to make their fortunes.
In this case some folks may have been looking forward to picking up assets for tiny sums, and flipping them for quick profit. When a large company goes into the toilet, there are plenty of opportunities for vultures to make a lot of money.
Whether or not THIS bailout set a precedent, one of them did. And more have followed.
Of course one of them did. In fact, that’s exactly what I was pointing out. Now, in what way do you think your definition of precedent differs from mine?
On the retail side, the cost of entry is pretty low, and I suspect the customers and the employees would be picked up by existing retailers expanding. More at risk would be factories in China with a significant amount of their business turning out WalMart stuff, but protecting them is not in our national interest.
The issue would be a real shortage, not a manufactured shortage. Prices going to $6, while bad enough, would be less disruptive than rationing.
I thought it went without saying that each case needs to be decided on its merits. The interesting thing here is not that the right opposed the bailout last year - it was hardly a slam dunk that it was going to work. The interesting thing is that they oppose it as a bad idea even after it did work. It has become an unfalsifiable matter of faith, just like creationism.
Premise: bailouts are bad because they cost us lots of money and encouraging creeping socialism by unending government control of private industry.
Fact: A bailout made a profit, and the government did not micromanage the industry and got out very quickly.
Conclusion: Bailouts, especially successful ones, are really bad because they might encourage more bailouts and we know bailouts are always bad.
I think this is an accurate summary of the position of some people in this thread.
I don’t recall the reasons for bailing those 1970’s companies (and haven’t looked yet) but the precedent that is being set now is that a company can get too big to let fail
I think the conclusion has not a lot to do with whether it was good or bad but rather the fact that it could have been disastrous. What would we be saying right now had we just thrown money at GM and it died anyway?
What would be saying right now had we not thrown money at GM and it took down Ford as well, leaving us with no large domestic automobile manufacturer?
The conclusion must have something to do with whether the policy worked or not, or you’re not dealing in reality any more.
And of course a company can get too big to fail - that’s why an essential role of the government (IMO) is to not allow them to get so big by not approving every merger and having strict regulations about spreading beyond a specific purpose (banks in particular need these limitations, IMO).
Unfortunately, I don’t see a lot of support for this from the free-market types. The preferred method seems to be to let them get as huge as possible, and then crash disastrously, as if this will be some deterrence to the next company that comes along.
And that exact same argument can be made for letting GM go belly up – others will fill in the market gap. (and you are aware that most Chevys are about 1/3 imported parts, right?)
Have you seen how Americans react to high gas prices? Are you implying that no president would try to placate the populace by bailing out
Because some things are wrong as a matter of principle. Say I’m the Sales Manager at a car dealership and I loaned one of my employees $1000 to pay for his rent because he blew his money on beer this month. Say he repays me $1100. It’s safe to conclude that that transaction “worked.” It was still a bad idea for all kinds of reasons:
[ul]
[li]It still hasn’t addressed the fact that this guy is, apparently, an alcoholic.[/li][li]He may hit me up again, and then not pay, wiping out my investment. [/li][li]It increases the likelihood that other employees will hit me up for money in the future, and they may not pay.[/li][li]If I don’t pay them, now I’m seen as the bad guy and playing favorites.[/li][li]There’s going to be the perception, rightly or wrongly, that I’m going to send better customers to the guys that owes me money (so he can make it back and repay me).[/li][/ul]
The fact that a manager can, on some occasions, loan money to employees and get it back doesn’t change the fact that it’s a bad practice that has the potential to lead to chaos.
You’re not under the impression that we’re out of GM, are you? We still own 26% of the company, and unless GM stock rises to $53 a share, we are still going to lose money.
Cite There’s a looooong way to go before we know how this shakes out.
Bailouts are really bad because when they fail, it’s taxpayer money down a rathole. But even when they succeed, they’re still a bad idea because