Friday, December 12, 2008

Three is a Magic Number

The Republican Senators who killed the proposed bridge loan to the Big 3 automakers did the people of America a disservice last night. The southern Senators who have big foreign car plants in their states have a two-fold agenda. First they want to try and kill the domestic competition for their new best friends and secondly they want to break the UAW. Last night they succeeded in killing a bill that would have helped to keep Ford, GM and Chrysler out of bankruptcy. By doing so, they have left a handout from the previously approved $700 billion bailout as the option left to help the companies.

There are multiple reasons why I believe the loans to the car companies was the right thing to do, but there is one that is paramount. The 3 major car companies are directly tied to millions of jobs in this country. If they are allowed to fail, literally entire towns and cities will be devastated. 1.5 million auto workers will have to find other jobs to help pay their mortgages and credit card bills. Retired or disabled auto workers who rely on their benefits to get by will either have to go back to work or receive government help. The state of Michigan would probably default on every loan it currently has outstanding and would certainly not be able to pay its healthcare bill. The ripple effect on the US economy would be catastrophic.

The reason that the bridge loan was my preferred way to go about a temporary solution was that it came with strings attached. The car companies would have to be accountable to Congress for their actions. Their was going to be oversight and they would have make positive steps to creating more fuel efficient cars and funding alternative fuel research. Bailout money for AIG didn't have any strings attached. They are currently funneling millions of dollars to their high ranking employees. They aren't calling them bonuses of course. They are called "retention payouts" or something equally ridiculous. So a company, whose business it is to assess risk is rewarding the very people who failed to see the risk involved in their business practices. That is appalling to me. The bank bailout, in which the bill to the American tax payer was $700 billion has had no effect on the credit markets that it was supposed to help free up. In fact, most of the banks that have received money from the bailout have spent it by buying other banks and laying off employees. That feels like money well spent, doesn't it?

The ridiculous statement about the employees of the American car manufacturers making $70 an hour has been used over and over to justify beating down the UAW and trying to get concessions from the workers. That dollar figure takes into account all the retirement/disability payments that are being paid to millions of people who no longer work for the companies. The actual hourly dollar figure is almost exactly what Honda and Toyota pay their employees. The Senators who continue to harp on the higher number know exactly what they are doing. Their goal isn't based some high minded ideal about being fiscally conservative. They want to help big business at the expense of the worker. Auto workers and the UAW have very willing over the years to help out when their was a crisis, after all, having a job is better than being unemployed (even if it is one that pays less than it used to). But asking workers to take less because the people who run the company have been incompetent is just wrong. Where is the accountability for the people in the board room? American auto workers want to make the best cars in the world. They want to make cars that make sense for the future, but they don't decide what they build. It wasn't their idea to keep on building more and more SUV's, but they are the ones who are being asked to pay for the mistakes made by people who don't have to worry about living paycheck to paycheck.

I understand the feeling that we should let the free market decide who makes it and who doesn't. However, the government has already decided that it can play God. Is now the time to say enough? Does that not seem arbitrary to you? It does to me. This is just another example of the class warfare that takes place in this country every day. The Government acted with all speed when the financial markets needed help. The Fed Chairman and the Secretary of the Treasury were on TV every day explaining why a bailout was needed. We couldn't allow these institutions to go under without facing an economic catastrophe. Well some of those institutions did go under and despite almost $350 billion in aid, there has been no tangible evidence of any change in the situation. Of course their answer to that is to ask for Congress to release the other $350 billion that it approved. I guess it doesn't hurt to have friends in high places. People on Wall St. ask DC to jump, the only question coming back is, "how high?". The bailout still hasn't addressed the millions of people who will be defaulting on their mortgages, but then again, those people don't have the Fed Chairman's cell phone number handy.

The Big 3 have agreed to repay the loan from the Government, they have agreed to federal oversight, they have agreed to design and build more fuel efficient cars, they have agreed to work on alternative fuel research, they have agreed to wage concessions, and yet, unlike the financial institutions (who didn't have to promise anything in return for their payday), they have yet to get any help from Congress. I personally don't care about the people who run these companies. Clearly they are all really bad at their jobs. What I do care about are the millions of regular Americans who will suffer if these companies fail. I don't know if America can sustain three car companies anymore. Perhaps there needs to be a merger (Ford and Chrysler merging would seem to make sense from a size perspective) of some sort. I do know that without some Government aid these companies will go bankrupt in the very near future. They can file for Chapter 11 reorganization but that would mean that some of those bailed out financial institutions would have to give them loans and they seem to be too busy giving out bonuses and buying each other to actually get around to lending any money these days.

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