Your Take 

Your Take: All These Bailouts…

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Toyota PriusI’m getting a little tired of reading about all these bailouts. In fact, I’m so tired of it that I debated even offering this up as a Your Take! However, I felt that it’s the news of the day and you all probably want to vent your feelings and frustrations about it. As I write this, the House has approved a bailout measure and it appears that Senate Republicans are going to block it unless some significant changes are made (heck, they didn’t even participate in the meetings).

Incidentally, the bailout appears to be dead in the Senate.)

I personally think that the companies should be allowed to go bankrupt, restructure their contracts, and then leave bankruptcy able to compete better financially. I don’t think bankruptcy automatically means one of them will disappear and millions of jobs will be lost. Look at the airline industry, how many of those airlines have been in and out of bankruptcy? They were able to renegotiate with the unions and come out leaner than ever. Incidentally, airlines are now calling for some economic stimulus too, to upgrade the aging airport and ATC infrastructure (which is sorely needed).

What do you think about all these bailouts?

(Photo: six27)

{ 14 comments, please add your thoughts now! }

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14 Responses to “Your Take: All These Bailouts…”

  1. Tim says:

    i agree, we can use the govt money to guarantee without things like warranties without having to actually use govt money. we shouldn’t be bailing out a private company like chrysler, especially when the parent, cerebrus, isn’t willing to sink more money into the company and since the parent wants essentially the same amount of money that they paid for chrysler. whatever their LLC rules that they say limit their investment amount, so what, then change the rules and dump more money in. the fact is that cerebrus never intended to make chrysler viable. if chrysler’s parent isn’t willing to make them viable, then chrysler should be let to fail.

    the bailout’s failure in the Senate over UAW not wanting to concede to wage cuts in 2009 is exactly the reason why the house version was doomed to fail: there was no ability for the “car czar” to force the sides to do anything, and shows that if there isn’t someone like a chapter 11 judge, all the sides will never agree to actions necessary to restructure on their own. ch 11 also doesn’t mean all 3 million jobs somehow disappears all at once. the pro bailout folks want to make this a zero sum game when it is not.

    whining that financials got a bailout so why not us is childish and simply irrelevant in my mind. financials are unique to the auto industry or other industries because without the financial system we simply cannot move money around. that is the main reason the financials needed to be saved, not all of them, but the main ones. second, you can’t point fingers at someone else for your industry that you have not done anything to improve or fix. the problem is that the detroit is broke which has nothing to do with citi getting a bailout.

    congress and others need to stop whining about oversight on TARP, because they voted the legislation as is and could vote more oversight restrictions now if they wanted to do so. fact is, we have no idea the overall impact of TARP for at least another year if not longer. what i do know is that our economic system did not collapse into Armageddon, and perhaps that was due to the injection of the TARP funds. again, we won’t know the cause-effect for some time because there is always a delay in stimulus and a delay in effect from policy.

    congress should give back their automatic pay raises, since they were asleep at the wheel, too. they sure the heck should vote to not accept automatic pay raise for next year.

  2. Scott says:

    I agree, auto industry bankruptcy is the best option for the country and for the big three in the long term.

  3. Personally, I think that all of these bailouts and assistance plans are too much. The government in this case is sort of like the parent who spoils their kids: allowing them to go out and do whatever they want, whenever they want with little worry of consequences; even when the kids screw up (and badly at that), coming to the rescue and bailing them out of a jam. I agree with Jim, that all of these companies should have been forced to seek out bankruptcy protection while restructuring and actually learning how to handle their mistakes rather than simply have money floated down to them.

    With regards to the airline industry, I agree again with Jim. They weren’t given any assistance, and from the way that most of the companies the survived are managing right now, it appears that they each learned how to better use their resources and manage their costs while remaining viable companies.

    I’m just curious to see what happens with all of the bailout money and how each of these companies manages their operations going forward. Companies are run by people after all, and people do have a tendency to fall back into bad habits. I hope for everyone’s sake that the county (and world) as a whole has learned something from this mess.

  4. Dave says:

    Plain and simple – survival of the fittest. I don’t care what business you’re in – if you can’t make money, you don’t deserve to be in business. I completely disagree with the bailouts – all it is doing is proping up poorly managed companies and is creating a burdon on all taxpayers. A bunch of mortgage brokers suckered uninformed, ignorant people into signing huge mortgages that they couldn’t afford. The mortgage companies certainly didn’t complain when they were making billions of dollars, but now now that the coin has flipped they have their hands out.

    If the big 3 fail, the world will not come to a screeching halt. Millions of jobs will not be lost. People will still need cars, and if all the GM, Ford, and Chrysler plants close in the US, other plants will get built and take their place (Toyota, Honda, etc). I think bankruptcy is the only way for them to get out from under the crushing union contracts and inferior management and infrastructure they have. If they don’t restructure, its only a matter of time before they really fail.

    All in all, you can’t blame the companies for asking – hey, they are trying to survive. I blame the goverenment for thinking that they can come in and save the day. Yes, short term, the bailouts will save jobs, keep some companies afloat. Long term, the US will only lose more jobs because these major industries will continue to stick to old ways, and never be forced to improve the way they do business.

    Oh, and don’t even get me started on executive pay… those weasels should be shot.

  5. Sheila says:

    As painful or difficult as it might be, I think we should just let nature, err the economy take its course. In my opinion, the bail outs only prolong the inevitable.

  6. Jeff says:

    Remember, this calamity is a result of the Bush administration incompetency. Vast quantities of capital are required by industry and consumers and it’s not available now. No auto industry management could have foreseen 11-12 million annual units. They need bridge loans now only available in size and low cost that government as lender of last resort can provide. The balance sheet is there – use it.

    Most observers now admit allowing Lehman to fail was a mistake.

    Allowing the American manufacturing base to dwindle will be unquantifiable in money and sorrow. National defense issues are at stake also.

    If the strident Republicans in congress allow Detroit to go bankrupt they will back themselves into a Hoover corner they will not escape for a generation or more.

    The southern Republican legislators think they can break the will of UAW. What other financial employee group did they try to squeeze. The loan/contract is with the corporations not with employees.

    If citizens are experiencing bridge loan fatigue now – just wait.

    Much more will be needed to avert a modern day DEPRESSION.

    Let’s hope the next administration has the fortitude, wisdom and empathy necessary to serve the general welfare of the people of our country.

  7. Dave says:

    Jeff – I completely disagree that any part of this mess has anything to do with politics – regardless of whether Republicans or Democrats have office. The Bush administration didn’t write loans to people who couldn’t pay. The Bush administration didn’t hire incompetant management at the automakers. The Obama administration will do their best to get the country out of this mess, but regardless of how much money they throw at the problems. Many of these companies will restructure or fail, and it has nothing to do with home much money the government loans them.

  8. tom says:


    Wow… lots of anti-Republican rhetoric there.

    What you’re saying makes non-Republicans look like fools.

    The Bush Administration had little to do with the business plans of the Big 3. The UAW demanded too much, and the Big 3 gave in. They are now facing $80 billion in entitlement programs. That’s not the Bush administration! The auto companies had horrible business plans, unwanted products, and were gouged in their Union contracts when that money should have gone to retooling.

    Bridge loans will only take them so far… GM and Chrysler will use it up in a few months and will be back begging for money again. Letting them go bankrupt will allow them to restructure their entire organizations, retool, and renegotiate these ridiculous contracts (yes the union did give in on some major issues in the last round, but not enough).

    You probably cried “DEREGULATION WAS THE CAUSE OF THIS” many times. FYI… CLINTON started really deregulating Wall Street, Bush just continued it.

    Also, it’s the idiot taxpayers who’s eyes were bigger than their wallets who started this whole thing. Mortgage Backed Securities could not have been formed if these idiots didn’t take on stupid mortgages. You’ll probably cry predatory lending and lack of education, but these idiots signed the papers, with no guns to any heads.

    Bottom line, get off your soap box, you look silly up there.

  9. Hawkmoon Nine says:

    In 2007, Toyota sold 9.37 million vehicles.
    In 2007, General Motors sold 9.37 million vehicles.

    In 2007, Toyota made $17.1 billion.
    In 2007, General Motors lost $38.7 billion.

    Yeah, it’s all Bush’s Fault™

  10. jim says:

    I don’t think you can blame Bush. Remember that Democrats controlled Congress the last two years too, if you want to play the political finger pointing game, both parties can take some blame.

    The bottom line is that businesses messed up, businesses should feel the same system of capitalism that made them rich in the first place.

  11. saladdin says:

    Small correction. The Dems had the House the last 2 years, not Congress. The Senate was split even but there were/are 2 Senators who call themselves Independants. Yes they caucus with the Dems but one of those Demcorat caucusing Independants was a prized speaker at the Republican National Convention. He didn’t even win his state primary as a Democrate, he ran and won as a Independant. So to call him a Dem is a stretch (Lieberman). Go figure.

    To say the “Dems had control of Congress the past 2 years” is just not accurate. House yes, Senate no. But if I was a Republican or someone who wanted to lay blame on the Dems that’s what I would say too.

    Just wanted to add that. No political slant intended. Just a lover of politics.


  12. jim says:

    Saladdin, you are right, they didn’t control both chambers, but they had more “control” than Republicans. I’m not a Republican but I don’t think Bush shoulders the blame for the economic issues plaguing us now and certainly he’s not to blame for the US auto industry producing cards Americans don’t want to buy.

  13. Tim says:

    Free money has been around for a very long time. The critical moment was the policy decision in 1991 to push heavily for affordable housing for everyone. We had years of cheap money, when interest rates should have been driven up, not down. this happened under different flavors of presidencies and congresses. this is why, no matter what people say today, we will not know the impact of any policies until farther in the future. we surely didn’t know the impact of a decade’s worth of policies until recently.

    the underlying premise of a bridge loan is to allow the big 3 to burn cash until the market picks up. unfortunately, the car market isn’t going to pick up in 2-3 months. $15b at the current cash burn rate by the big 3 will barely last to february. the proposal was designed to enable all parties to sit down and hammer out deals. if they cannot hammer out a deal in a week at the gates of their purported economic Armageddon, then there is no way they are going to agree on anything when they can relax over the holiday’s and for a month afterwards.

    it is also absolutely ridiculous to suggest the big 3 are american automakers. has anyone looked at the composition of cars made by the big 3?

    last, why do we need to dump money for them to restructure at all to build fuel efficient cars? They already build them overseas. none of the big 3 will import their 45mpg cars. they have the tech already to produce. the problem is that UAW would strike because they weren’t assembled in detroit. then again, look at how many of the big 3’s cars are assembled in canada or mexico and not in detroit.

    @Saladdin: the fact is the dems did control the senate and house regardless of the margin. The same yardstick would be used by the dems if the republicans were in control with the same numbers. the bottom line is the irrelevant nature of who was in control or not. whether control was effective control or not is up for debate. both legislative and exec branches for over a decade have followed policies promoting too free cash and too much risk.

    EVERYONE is to blame for the mess. consumers devoured loose credit and extended debt like nobodies business while saving nothing; companies pursued high gains and took on more risk and did not properly valuate securities; govt failed at fiscal and monetary constraint. not all companies did bad, though. my whole belief that the economy was fundamentally strong is based on the fact that there are lots of companies who sat on a ton of cash and could absorb this saucer shaped recession. the problem was the big moves by hedgies and the 24/7 sky is falling which completely shattered consumer and investor confidence driving everyone to pull money out of the markets at substantial losses. if it weren’t for the companies who sat on lots of cash, we would be in far graver situation than we are today.

    we needed this severe correction, because we have been an entitlement society for over a decade; two generations of work force do not know what it means to have a job, being able to hop jobs over something trivial; it is forcing companies to become more efficient; it is forcing people to think twice about their personal financial situations; and perhaps force the govt to realize that the baby boomer generation, which makes up govt, is going to have to suck it up and pay the high cost of their consumption to pay for the next gen’s social programs.

  14. Gates VP says:

    @Tim: financials are unique… without the financial system we simply cannot move money around

    My thoughts exactly. If the government doesn’t bail out the financials industry, they end up having to take on more of the roles played by the financials just to keep the money flowing. (and money flow is essential)

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