28 December 2008


NATALIE commented in an entry some time ago asking for my thoughts on the automaker bailout. It has been some weeks ago, but I haven't had the opportunity to research it out. I already had my opinions about all of the bailouts, so I'll include the first one too.

The first bailout is known as the
TROUBLED ASSET RELIEF PROGRAM (TARP) (clickable link to see a brief explanation). I won't go into a lot of details about the particulars. I'm sure everyone has heard enough about for about three lifetimes.

These funds are basically in two parts although the first part was broken up into an initial $250 billion and then $100 billion for a total of $350 billion. The total package is slated to be $700 billion. This bailout was to buy bad mortgages as taxpayer expense. YOU AND I NOW OWN BILLIONS OF DOLLARS OF "BAD DEBT." As we all know, "bad debt" is debt that can't be collected. So the bottom line is that YOUR MONEY AND MINE is being used to eliminate that losses of
FANNIE MAE , FREDDIE MAC, LEHMAN BROTHERS, AIG, and others. The cause of this crisis was giving mortgages to people who had no business having them in the first place. If you visit Fannie Mae's website, for example, you'll see their purpose is to make home ownership possible. Problem is, mortgages were extended to people with bad credit or otherwise high risk. A tremendous amount of pressure was put on lending insitututions by the Federal government starting with the CARTER ADMINISTRATION and continued through the CLINTON ADMINISTRATION including a lawsuit led by ACORN that Barack Obama, then an attorney with the lawfirm of David, Miner, Barnhill, and Galland, forced Citigroup to make SUBPRIME MORTGAGES. And one of the chief problems identiified as being one of the major causes of this crisis? Subprime mortgages. Now, you don't have to understand what subprime mortgages to see the hypocrisy here. The proverbial chickens have come home to roost. Now the Federal government is using US the taxpayers to pay for this mess. The politicians in Washington didn't listen to us, the voters. EIGHTY-EIGHT PERCENT of the American public was AGAINST the bailout and extremely angry over this. I totally agree with the 88%. The Democrats' attempt to find a Republican to blame completely failed. That's because there was no Republican to blame. The vast majority of the American public didn't go for it. Amercia said very loudly, "NO!" Yet, as we all know, they did it anyway. I hope the 88% doesn't forget, and remembers those who voted for this bailout during upcoming elections.
I say don't distribute the remaining $350 billion until some accountability measures are put into place. Just like the Hurrican Katrina funding, this first $350 billion has absolutely no accountability measures, so there can't be any accounting for where all this money goes. Without accountability, this taxpayer money can be used by the individual companies or entities any way they like, which isn't the intention of the handing over of this money.

Now, here come the U. S. automakers
Photobucket Photobucket Photobucket while the Washington politicians are in the handout mood. I have a few of problems with this. Other than the obvious socialism involved here, in my opinion, from having lived through the '70's, the Federal government once again shares a large part of the responsibility. It was during the '70's that I saw the foreign automakers allowed to export their vehicles to the United States with no restrictions whatsoever. Now before anyone yells "protectionism" here, I'll go ahead and say "you betcha." Although I don't support massive protectionism, I think a certain amount was in order here to protect American industry. There have always been many, many other industries directly tied to the U. S. automakers. But, Washington did nothing. So the market was swamped by foreign imports produced by non-union labor and therefore could be sold at a much lower price. After a time, Washington finally placed some import tariffs on foreign imports. Then the foreign automakers started building plants here, shipping the parts from overseas, and started building their cars in the U.S. to bypass the import tariffs. Washington was again very slow to respond, but it was too little too late. The damage had been done. And speaking of the Federal government, I don't think I have to go into the massive Federal regulation of the automotive industry. As with any set of Federal regulations, only about 20% are really meaningful. The rest just drives up the cost to John Q. Consumer.
The UNITED AUTO WORKERS union is a large part of this too. Again, having lived through the '70's, I witnessed strike after strike after strike and negotiation after negotiation for more company benefits, higher and higher wages, on and on it went. These chickens have also come home to roost. A company absolutely cannot continue to pay out more and more benefits and higher and higher wages and still expect to maintain enough of a profit to remain in business. An example of this is that between fifteen and twenty years ago, a worker for General Motors was laid off. He moved from Michigan to Duluth, Georgia. According to his UAW contract, he was to received FULL PAY for TWO SOLID YEARS WITHOUT PRODUCING SO MUCH AS A DOORHANDLE. Just how many businesses can stay in business with such outgo? I'm surprised they've lasted this long.
The solution to this is not a taxpayer funded bailout, uh, excuse me, it's not a "bailout", they are "bridge loans". I think that the automakers should be allowed to go bankrupt. Again, before anyone has kittens about this, bankruptcy does not mean out of business. The type of bankruptcy the automakers should file is not to go out of business, but to reorganize. In the words of one of my readers, God knows they need to. Overlapping makes and models should be eliminated and union contracts renegotiated. Bankruptcy reorganization is the only way this could be accomplished. The U. S. automakers would emerge with a less expensive employee base, fewer product lines, and new strategic operational plans. This would also allow the U. S. automakers to bring back manufacturing which is being outsourced offshore. Employement would be provided for people no longer needed on assembly lines for duplicate makes such as the Ford Explorer and Mercury Mountaineer - same vehicle, different nameplates. It would be far cheaper for the taxpayers if this were to happen, even if extended unemployment benefits were granted by the Federal government during the reorganization time.
One last major problem with all of these bailouts is this: JUST WHERE DOES IT STOP? These bailouts just open the door for more bailouts funded with YOUR money. It shouldn't have been started, and I say end it now.


Missy said...

I don't like GIVING my money away either Dirk; I already don't have a lot to give. I agree with you in this entry. *HUGS*


lisa jo said...

Bush dropped the ball and ruined THOUSANDS of lives with his pathetic Katrina relief efforts. Thank GOD he is on his way out forever.
my brother has worked for Honda for 20 yrs. Honda is not asking for a cent. Honda is not union. Both of the bailouts are bull and only teach these higher ups that they can go right ahead and screw up and they'll be rewarded. The Big 3 should go bankrupt and be FORCED to produce a car i can afford to buy and that will last.

REGINA said...

dirk, though i haven't done extensive research on the matter, i agree with most of what you are saying. when a consumer takes out a loan, he/she is expected to follow very tight guidelines in paying that loan back. so why aren't the bigwigs required to do the same? they have already shown how pompous they all are by the way they have abused the money they have already received. they should be held accountable for every single penny.

be blessed,


Carolyn said...

Excellent post as usual Dirk~ your amount of research for your posts is not lost on most of us. I've known a lot of successfulbusiness people in my life, and they all say the same basic things. find a product that the general population will need and can afford, keep your overhead low, your product the best you can make and be honest. SO far, I've not seen much of this advice in many companies, especially those wanting bail out money. I feel badly for the employees who may lose jobs. I've had friends who have worked at all the "big 3" in Canada. I don't have much respect for the unions, as all I know about them is mst places I know who have a union- the workers are usually on strike, and I know the union bosses and big shots have a lot of money and power- more so than those they claim to represent. I agree with you that most people didn't want these bail outs, and I don't want any more than they've already done. I doubt though that they are done. When it's someone eles' money, it's easy for them to spend. Thank you Dirk for the time and effort you put into telling the truth. God Bless and you and Nelishia have a Blessed and Happy New Year!

Heli gunner Tom said...

For the most part- I agree with most of your fine post. However, having worked hard for over 30 years at AMC/ Chrysler, I truly worry about my pension and benefits going South if my old company goes broke. We are already taking many cuts across the board in medical. The Union mostly wanted the COLA in our contracts over the years [cost of living allowance] like everyone else got to stay afloat. The Congress always had COLA! Also, not many people could stand the hard, dangerous work of the auto assembly line year after year with multiple injuries and many are semi and skilled jobs.

Tom S
"Old Soldier Tom's Journal"

Heli gunner Tom said...

I don't have much respect for the UAW Unions either, and in our Local 72-UAW in Kenosha, WI, the UNION LET THE COMPANY STICK THEIR HANDS INTO OUR PENSION LOCK BOX..'so that they could pay off workers to retire early and also give auto and truck buyers a super big discount. That was STUPID and dangerous for our Union to trust the greedy Company!!

Tom S

Liz in Virginia said...

I agree with what you said too!! The government has screwed us again!!! We all will pay for there out landish expensive cars!!! I want a quality car at a affordable price!!! Never been able to be an owner of a new car, the prices are rediculous!!!
I am an angry American!!! They don't listen to us!!!!

Lisa said...

I am glad you've done a post on this Dirk and I agree with you on the issues of which you write. I am happy that you made note about the workers of the Big 3...along with poor management the workers are the biggest problem. You are right, strike after strike, outrageous packages and yet they are not willing to concede to anything? HUH? If I was going to lose my job I would give some concessions. It just ticks me off so much I can't see straight.

I have a Chevy, a Ford and a BMW. I can say the quality of the BMW far surpasses that of the American made vehicle and it pains me to say it. The foreign auto plants are not union, pay less and have better quality...what does that say?

When I was in mortgage banking my job was to sell our mortgages to the secondary market, ie Freddie Mac & Fannie Mae. I knew it was a trainwreck back in those days.

Gerry said...

I have been listening for hours to some of what I consider the best conservative talk radio shows on the problems of the autoworkers as well as other bailout packages, also trying to understand the mortgage mess. Arizona has been hit very hard with foreclosures of houses sold to people who could not in any way afford what they signed up for. I guess we will eventually understand what happened somewhat but whether we can get our opinions out there to make a difference I dont know there, but I believe that forming opinions after study and talking about them is the first step, so I applaud you for this thorough discussion of what is happening. Sounds pretty sensible to me, let us hope that others will think through all this more thoroughly than they have in the past, leading to trouble down the road. Gerry