Ugh.

Thursday, September 18th, 2008

Headline:

Federal Aid to Detroit Seems Likely

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50 Responses to “Ugh.”

  1. #1 |  Ginger Dan | 

    If we nationalize the carmakers, the banks, the insurance companies, we might well just go ahead and give everyone free health care too. We can just print more money.

    (Sarcasm)

  2. #2 |  Jefferson | 

    As long as we’re at it, can I get a Realtor bailout?

  3. #3 |  Nando | 

    McCain had flatly opposed the AIG bailout and now he’s kinda for it. I wonder what he’d say to the people in Michigan (where he spoke yesterday) if one of them asked about bailing out the big 3?

    Now it just seems like companies are all standing around with their hands extended trying to get as much from the government as possible. It’s sickening.

    The GOP drops all the regulations so that our economy can grow. Yes, it grew rapidly, but now it’s correcting that rapid, unsustainable growth and it’s the little people who are seeing their life savings being wiped out. Most people, especially libertarians, will argue for less regulation but regulating financial markets can be a good thing, as we probably would’ve avoided this whole mess had we not gone crazy with deregulation.

  4. #4 |  Nando | 

    Sorry, forgot this Youtube link: http://www.youtube.com/watch?v=4e1XrsmWUkQ

  5. #5 |  Kieffer | 

    With $50,000,000,000,000 in unfunded liabilities already, a few hundred billion more should be a piece of cake.

    Look on the bright side, how many people in history have gotten to watch a civilization crumble?!

    In fact, I propose another economic stimulus package! Would $600 be enough for everyone to afford his own fiddle?

  6. #6 |  Cappy | 

    Alan R. Mulally, the chief executive of Ford, was even more upbeat. “It was a great day,” he said. When a reporter asked what Mr. Mulally might say to people who viewed the loan guarantees as a bailout, he replied in a chipper voice, “I would characterize it as an enabler.” –

    An enabler to keep putting out a shitty product.

  7. #7 |  David | 

    Could they at least take over the Lions while they’re at it? If any of the Fords’ businesses need rescuing…

  8. #8 |  Vlad Drac | 

    The GOP drops all the regulations

    Your fundamental error, from which all others spring.

  9. #9 |  Jeff | 

    I thought the headline was referring to the city… which might actually need federal help after the smoking crater Kwame Kilpatrick left behind.

    I got a bailout plan for the Big Three. Make a car people want to buy. Idiots.

  10. #10 |  Z | 

    My family has a bank account in Austro-Hungarian shillings.
    Just saying….

  11. #11 |  The_Chef | 

    What the FUCK!?

    Oh shit here we go again.

  12. #12 |  Cynical In CA | 

    Chrysler was bailed out in 1979. There’s a long proud American history of this sort of thing.

    I carry around a bucket now just in case someone uses the phrase “free market” in my presence.

  13. #13 |  AndrewRyan | 

    Instead of complaining without offering any other solutions (like liberals do), why don’t you give an example of what you would like to see (instead of a gov’t bailout)? What’s your opinion here Radley? What do you want to happen? The big 3 die, then we have no domestic company to supply us with cars (sort of an important staple of the American people)? This has nothing to do with ‘buy American’ or union-shilling, I’m just interested to know what you think instead of just complaining about the government bailing out companies.

  14. #14 |  freedomfan | 

    This makes me absolutely ill.

    McCain:

    It’s great to be here today with the assembly workers of this G.M. plant. I’m here to send a message to Washington and Wall Street: We are not going to leave the workers here in Michigan hung out to dry while we give billions in taxpayer dollars to Wall Street. It is time to get our auto industry back on its feet. It’s time for a new generation of cars and for loans to build the facilities that will make them.

    It’s not the fed’s job to subsidize private businesses, period. It’s nowhere in the Constitution and everyone who votes for this is breaking his oath. I hope McCain’s poll number go into the toilet after this. Whatever hold-my-noise good will the giant statist might have gotten with the possibly libertarian-leaning Palin pick should dissolve in this light.

    Moreover, rewarding the bad decisions that got these businesses where they are is declaring that this sort of subsidy will be there the next time they are in trouble, too. This is textbook bad precedent. Why should they try to avoid costly mistakes when they can reach into the taxpayers’ wallets whenever things don’t turn out?

    Anyway, now the two statist Presidential wanna-bes are advocating that the taxpayers subsidize the bad decisions of other industries as well. [sarcasm] That’s a great idea! Let’s further disconnect those companies from the consequences of their poor decisions and then pretend to be shocked when they make more of them. [/sarcasm]

    And, make no mistake about two related things. First, all of these bailouts will come with strings attached. Any time politicians throw money at something, they have a rationale to further control it because “it’s the public’s money at risk.” Second, there is no floor to this trend. If this policy is the right way to go for the Big (read “Politically Important”) Three automakers, then there is no reason the government shouldn’t bail out any and every failing business. After all, it’s small businesses that create most of the new jobs, so why not cut them a check? You know that crappy restaurant with the mediocre menu and slow service? Don’t worry, it will be around for a long time, kept afloat by your tax dollars.

    The good news is that I have something to throw in the faces of the people who tell me that I have to vote for McCain because “at least he’s better than Obama on the economy. He’s for economic freedom.” Well, guess again; when the rubber hits the road, he’s another watered-down socialist. The Democrats who have been taunting McCain as “McSame” are correct: He’s McSame as Obama.

  15. #15 |  Gonzo | 

    Free market woooo!

  16. #16 |  freedomfan | 

    BTW, I completely disagree that deregulation of private industry caused this. For example, in housing, most of this is directly attributable to government intervention in the markets followed wholly predictable by lack of oversight of the institutions that government created. There never should have been a Fannie (or later Freddie), but the government-sponsored enterprise (GSE) was created to lower the perceived risk of buying mortgages from banks by having Fannie guarantee them. Of course, having the government guarantee those loans, banks were able to loan to people who were bad credit risks and probably weren’t financially stable enough to have a mortgage. That’s a disservice both to the lender holding loan (who is now the taxpayer) and the borrower who will be foreclosed upon. And, of course, direct mortgage lending by the GSEs lowered the credit standards even further because they knew that the fed would bail them out if worse came to worse, so why not lend to people who would not be able to pay? Freddie/Fannie ultimately aren’t risking their own money.

    All this made mortgages effectively cheaper, with government subsidizing the risk, and cheap money naturally encouraged inflation (the “boom”) in the housing market. And that in turn compounded the problem as homeowners became speculators, buying houses they couldn’t afford on the hope that, if the time came when they couldn’t make the payments, they could always sell the house and pocket the capital gain.

    It was largely government doing something it never should have been doing that lead to the instability we are seeing today in the housing and credit market. It wasn’t deregulation of the private market that was the problem, it was government interference in the first place. If there was any player who needed more regulation, it was the GSEs themselves. But, of course, they were “insiders” and played the Washington game quite well. The answer has long been to break-up and truly privatize both GSEs with an ironclad declaration that the government will not bail out any of the resulting smaller enterprises. That would force them to evaluate risk responsibly and not give people mortgages before they can afford them. That’s where long-term stability in that market will come from: getting the government out of the mortgage business, not getting it more involved.

  17. #17 |  Ginger Dan | 

    FreedomFan,

    That quote is indeed repulsive and troubling, I think it speaks not only to McCain’s complete lack of economics, but also how out of touch he is. There is a reason why American car companies are stuggling, namely a crap product, but also pension and health care committments to labor unions which (if any politician cared to point out) are a microcosm of what is going to happen in this country when the Boomers need their Social Secuirty checks. All the factories in Detroit aren’t going to help pay for the Big Three’s pension obligations, but something tells me, they’ve wanted the American taxpayer to help pick up the tab for a long time now.

    So, if we give money to the Big Three, do we all get the new electric car for $10?

  18. #18 |  Danno49 | 

    “I would characterize it as an enabler.” – Alan R. Mulally

    I know of certain 12 step programs who would agree wholeheartedly with this assessment.

  19. #19 |  freedomfan | 

    Ginger Dan, you are spot on about the automakers hoping that the taxpayer will take over the crippling benefit obligations they’ve made in their death-spiral dance with the unions.

    This is another area where many people fail to realize how much these companies love big government. There was some health insurance “summit” or other a couple years ago where the automakers (and maybe some other corporations) pleaded for socialized health insurance. Someone prodded me with “Well if these [implied greedy and evil] Big Businesses want nationalized health insurance, then it’s obviously time for it,” with the implication that they would be the most strident in opposing it. Well, of course they want it! They would love to unload the bill for their overpriced insurance plans onto the taxpayer. Why would they want to compete with companies that have more flexible and cost-effective plans when they can just have the government take away that advantage from their competitors?

    So, if we give money to the Big Three, do we all get the new electric car for $10?

    Ha! Yeah, ten bucks up front and then $45k on April 15th. :D

  20. #20 |  Matt | 

    Freedomfan is dead on in comment 14. The real question is…how to fix this mess? Should investors lose their money because of bad government policy? And if the gov has to be held accountable, they pay for with it our taxes. I don’t know if there is any good way to deal with this at this point.

    It also makes me think, if greedy CEO’s need to be held accountable for their excessive pay for lack of performance according to some politicians, shouldn’t congress get their paychecks taken away for the same reasons? They sure haven’t earned it as far as I can tell. Besides, they’re all rich anyway, they don’t need that taxpayer funded salary.

  21. #21 |  Dakota | 

    @ AndrewRyan

  22. #22 |  Nando | 

    #13 | AndrewRyan | September 18th, 2008 at 11:14 am

    Instead of complaining without offering any other solutions (like liberals do), why don’t you give an example of what you would like to see (instead of a gov’t bailout)? What’s your opinion here Radley? What do you want to happen? The big 3 die, then we have no domestic company to supply us with cars (sort of an important staple of the American people)? This has nothing to do with ‘buy American’ or union-shilling, I’m just interested to know what you think instead of just complaining about the government bailing out companies.

    The problem with bailing out any company is that you are basically rewarding them for making bad decisions. Not only that, but you encourage others to make bad decisions and rely on a government bailout if their risky behavior goes south. Why should I have to pay for their bad choices?

  23. #23 |  Mike Leatherwood | 

    The US Treasury: America’s collective corporate golden parachute.

    These businesses NEED to fail. Just because it sucks doesn’t mean it shouldn’t happen.

    FYI: Survived Ike by evacuating. House is ok. Still without power in most of my area. Fortunately my office does and makes a quite comfy apartment. Hoping that Htownguy is doing ok as well.

  24. #24 |  Ginger Dan | 

    Matt,

    You certainly raise some good points regarding the government’s (and taxpayer’s) culpability for the collapse of these institutions. I would hesitate to start a huge finger-pointing match, though. At the end of the day these financial institutions have whole divisions that do market forecasting and risk assessments, so for me it’s hard to believe no one saw this coming. Certainly, as we have found out, there have been economists who predicted this sub-prime mess several years ago.

    The debate over the folks in Congress losing part of their paycheck overwhelms me and I don’t feel like filling up this space with 17 paragraphs of obscenity-laced tirade.

  25. #25 |  Robert | 

    The GOP drops all the regulations so that our economy can grow. Yes, it grew rapidly, but now it’s correcting that rapid, unsustainable growth and it’s the little people who are seeing their life savings being wiped out. Most people, especially libertarians, will argue for less regulation but regulating financial markets can be a good thing, as we probably would’ve avoided this whole mess had we not gone crazy with deregulation.

    I hate to break it to you, but deregulation didn’t cause this mess. The Federal Reserve along with the government created it. In an effort to stimulate the economy, the Fed kept interest rates artificially low, which fostered mal investment. The federal government in an effor to make homes, education, etc. “affordable” enacted programs to guarantee loans.

    Between the two of them, they’ve caused prices to skyrocket. Homes are way overvalued, and people have borrowed money against those inflated prices. Now they can’t pay it back, and rather than let the companies that made the mistake of lending that money out go broke, we’re going to nationalize the debt.

    We’re acting like someone who offered someone else a plate of cookies, now acting outraged and indignant because they ate them.

    Of course we can’t tax or borrow enough to cover these massive losses, so we’ll just fire up the printing press and destroy our currency. In 10 years, when it takes a wheelbarrow full of cash to buy a loaf of bread, people will be looking around all stunned saying “we never saw it coming”, but the writing is clearly on the wall now.

  26. #26 |  Andrew | 

    Instead of complaining without offering any other solutions (like liberals do), why don’t you give an example of what you would like to see (instead of a gov’t bailout)? What’s your opinion here Radley? What do you want to happen? The big 3 die, then we have no domestic company to supply us with cars (sort of an important staple of the American people)? This has nothing to do with ‘buy American’ or union-shilling, I’m just interested to know what you think instead of just complaining about the government bailing out companies.

    What’s wrong with the Big 3 dying? Seriously? The Japanese manufacturers make better cars anyways, and most of them come from production plants in the US.

    Oh, and when I saw the headline, and at first thought it was the city and not the automakers, I was wondering “why doesn’t OCP just step in?”

  27. #27 |  Dakota | 

    @ AndrewRyan

    Yes let the big three die. If there is no American car complany that can produce competative cars so be it. Or likely a new better run american car company would spring up.

    Besides are American car companies really American? I belive that Toyota and Daimler Chrysler have about the same amount of assembly plants. Chrysler I think is owned by mostly private equity firm based in the US but has ownership in Europe as well.

  28. #28 |  Dave Krueger | 

    The government has become so accustomed to thinking its financial giveaways (of all kinds) are backed with real money that they can no longer even relate to anyone whose understanding is based on the concept of a balanced budget. They have become like the kid who is convinced magic is real because the trick seems to work flawlessly every time.

  29. #29 |  Lee | 

    Here is an interesting article about how exemptions to the regulations caused the failure of Lehman Brothers, Bear Stearns, and Merrill Lynch.

    http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/

    Lots of financial speak in the article.

  30. #30 |  Lee | 

    Put me on the ‘let’m die’ list.

    I doubt they all would completely go under. You would probably see massive layoffs and probably a merger.

  31. #31 |  Michael Chaney | 

    The big 3 wouldn’t all die – but likely one would. And its assets would be bought by better companies. That’s how markets actually work.

  32. #32 |  Lee | 

    Found another interesting tidbit.

    It’s all Clinton’s fault

    http://www.wsws.org/articles/1999/nov1999/bank-n01.shtml

  33. #33 |  Ragnar Danneskjold | 

    They’re going to have to lift the ban on offshore money printing to keep up with all this bailing out. I’m sure all of our on shore domestic printing is running at capacity.

  34. #34 |  Lee | 

    The best quote out of the article. I had to chuckle when I read it.

    The separation of banking and the stock exchange was ordered in response to revelations of the gross corruption and manipulation of the market by giant banking houses, above all the House of Morgan, which organized huge corporate mergers for its own profit and awarded preferential access to share issues to favored politicians and businessmen. Such insider trading played a major role in the speculative boom which preceded the 1929 crash.

  35. #35 |  Ragnar Danneskjold | 

    United Auto Workers
    F**cking Ourselves Since 1935

  36. #36 |  Mike T | 

    How about a purchase order for 5,000 Tesla Roadsters for local police forces instead? With that kind of cash, Tesla would be put on the map, local police forces would have rechargeable, green cars and it’d be probably less than 1/10 of a % of the cost of bailing out just one of the big three.

  37. #37 |  Nando | 

    #25 | Robert | September 18th, 2008 at 12:09 pm

    I hate to break it to you, but deregulation didn’t cause this mess. The Federal Reserve along with the government created it. In an effort to stimulate the economy, the Fed kept interest rates artificially low, which fostered mal investment. The federal government in an effor to make homes, education, etc. “affordable” enacted programs to guarantee loans.

    Between the two of them, they’ve caused prices to skyrocket. Homes are way overvalued, and people have borrowed money against those inflated prices. Now they can’t pay it back, and rather than let the companies that made the mistake of lending that money out go broke, we’re going to nationalize the debt.

    We’re acting like someone who offered someone else a plate of cookies, now acting outraged and indignant because they ate them.

    Of course we can’t tax or borrow enough to cover these massive losses, so we’ll just fire up the printing press and destroy our currency. In 10 years, when it takes a wheelbarrow full of cash to buy a loaf of bread, people will be looking around all stunned saying “we never saw it coming”, but the writing is clearly on the wall now.

    Robert,

    I’m not an economist and haven’t really taken more than the basic economy classes in college, but I’ve read that most of these failings are due to regulations concerning how companies were allowed to increase their debt-to-assets ratios and they were allowed to keep less cash to secure those debts with, therefore creating the situation where they’d fail if something went wrong (like the mortgage crisis). Also, it’s not just the removing of regulations, but the lack of oversight (which, in a way, is a regulation). There was nobody watching the egg basket.

    I can’t recall what office in the government was supposed to be watching all this Wall Street stuff, but I remember reading that the staff went from about 1500 people when Clinton left office to just over 200 this year. And, the big reason was financial lobbyists convincing Congress and Bush that their oversight and regulation wasn’t needed. However, had they been able to keep up and not been so understaffed, the problems could’ve been avoided.

  38. #38 |  Salvo | 

    Should the Big 3 be allowed to die? Should the investors lose all their money? Should we be subsidizing their bad decisions?

    Yes, Yes, and hell no.

    You enter the market, you take your chances. You put up a shitty product, that’s your own damn fault. Businesses fail all the time. Did we subsidize Pets.com when it went under? I don’t think so. There is no god given right to have a successful business. The car companies mistakes have been tremendous.

    I had a 1997 Ford Escort; it ran great, got 37 miles a gallon with careful driving, handled fine, and was major repair free for almost 300k miles. When it died, I would have liked to have bought another one….oh wait. Ford discontinued that model to focus on the Explorers and Excursions and other cars that I wouldn’t touch, because I’m on a budget. I’m a Michigander, but I’ll apologetically buy Japanese, because, get this, in a free market, I’ll buy the best product. You don’t make the best product? Tough shit. Learn to compete.

    Oh, but the poor investors? Yeah, fuck them. Nobody held a gun to their heads and told them to invest in the Big 3. My understanding is that investment is what you do when you see a company that’s putting out a good product, and you feel that by putting money into the company, you’ll get a return back. You couldn’t have forced me 8 years ago to invest in these companies; it was shitty then, and any idiot could see that a product line of gas guzzlers was a short term proposition at best. Now, they’re crying for bailouts because their gamble didn’t pay off? Too bad, so sad, now go away.

  39. #39 |  Chance | 

    Even a statist and collectivist like me is starting to get a little nervous with all these bailouts.

  40. #40 |  The_Chef | 

    Come on over to the dark side Chance. It’s infuriating over here. But at least we can say “We told you so.”

  41. #41 |  perlhaqr | 

    I like Mike T’s idea, and Freedom Fan’s words even more.

  42. #42 |  Aaron | 

    Fannie Mae and Freddie Mac worked, and worked well for many years. The big problems came when they were “half-privatized”, with private profits, but socialized risks and losses. I’d prefer they were entirely privatized, but all-government would also reduce the chances of crazy risk-taking.

  43. #43 |  Robert | 

    I’m not an economist and haven’t really taken more than the basic economy classes in college, but I’ve read that most of these failings are due to regulations concerning how companies were allowed to increase their debt-to-assets ratios and they were allowed to keep less cash to secure those debts with, therefore creating the situation where they’d fail if something went wrong (like the mortgage crisis). Also, it’s not just the removing of regulations, but the lack of oversight (which, in a way, is a regulation). There was nobody watching the egg basket.

    My point is that there would be no need for oversight if it weren’t for the government intervention in the first place. Unless there is some sort of government meddling in the markets, either by the federal reserve, or by some other “well intentioned” government program, the market will govern itself.

    To put it in terms of your example, it’s like the government taking all of the eggs from the farmers, and setting them in a basket out front with a sign saying “free eggs” then complaining because people are taking too many eggs. Then, when there are no eggs, the people are pissed and demand that the government hire people to protect the eggs.

  44. #44 |  Chris in PA | 

    The big 3 are even worse off than it appears. Something like 40% of their US sales are rental fleet and police/municipal – i.e. not people looking to get the most for their own money.

    Not only should they die, but once our police departments start buying American-made Toyotas and Hondas, we’ll save money by having more reliable cars that don’t need to be replaced every three years.

    All that valuable capital (human and otherwise) could be put to better use.

  45. #45 |  Lee | 

    Actually Freddie and Fannie were completely private until the bail-out.

    They did have a charter from the government (e.g. do no evil) or some such, but that was it.

    I believe Fannie WAS a government entity until LBJ sold it to fund the Viet Nam war (or some such).

  46. #46 |  Frank | 

    According to El Neil:

    Rotarian Socialism: A free market, and keep those subsidies coming!

    “So, if we give money to the Big Three, do we all get the new electric car for $10?”

    Feh. After what GM did with the EV1, I wouldn’t drive a Volt if it was free and came with a teenage granddaughter of the CEO as my personal sex slave. Badwill lasts a damn long time, and charging people for body damage when you’re sending the cars to the crusher constitutes a gigantic ‘fuck you’ to the consumer.

    Free market doesn’t mean being nice to big stupid corporations. Free market means letting big stupid corporations out on their own and let the forces of free market make short work of them if they continue being stupid. I hope the Volt becomes GM’s Electric Edsel, and I say that as someone who *likes* the idea of alternative fuel vehicles. I’m going to try really hard to be in a position to buy an Aptera Type-1h when they become available.

  47. #47 |  Salvo | 

    Oh yes. Aptera. I’m am actually salivating over this car. Further showing that the Big 3 are dinosaurs that are more interested in giving out the same old tired products than actually, you know, innovating. I just wish I could get one outside of CA when they become available.

  48. #48 |  rustbelt | 

    Yes, please lets have the us-based auto industry die. We’ll all be so much better off with all the retirees pension $ coming from the government (PBGC) and on medicaid instead of private money. Building stuff is so over, we’ll all get sexy high-paying jobs in finance and tech, and really, we can import everything we need from China. Make ya a deal: you don’t buy our cars and we don’t have to pay to rebuild after the hurricanes and earthquakes.

  49. #49 |  Aaron | 

    Fannie Mae was public until 1968, but even after that still effectively heavily regulated. Freddie Mac was created in 1970 so Fannie Mae wouldn’t be a monopoly, but was effectively under government control as it was overseen by HUD (though owned by FHSB0. Both were deregulated in 1989, but still had a perception everywhere of implicit government backing. Lo and behold, the government nationalizes them to keep them from failing.

    As I said, the profits were private, but the risks of failure were socialized.

  50. #50 |  Chris M | 

    Matt:

    “The real question is…how to fix this mess? Should investors lose their money because of bad government policy? And if the gov has to be held accountable, they pay for with it our taxes. I don’t know if there is any good way to deal with this at this point.”

    Armed revolution IMO.

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