News came out today that the bailout money for AIG is not enough. The tab is up to 150 billion and the government is now saying it would spend another 40 billion to buy a stake in the company. So the original 700 billion bailout for everybody is not going to be nearly enough. And we have started the process less than a month. Already the auto companies are calling for bailout money also. If this is not socialism, I don't know what is. Well, in socialism I don't think a company who gets a handout would immediately throw a big party as AIG did a month ago. If this is a communist bailout the executives of these companies would be in hard labor camp by now.
Speaking of communists, China is coming up with a stimulus plain of its own. I actually think the communists have a better idea here. They are investing mostly in infrastructure. So if the stimulus does not get the desired economic effect, at least they have new roads, bridges and hospitals. With companies like AIG and Fannie Mae still struggling even with the infusion of cash, you wonder if we are throwing good money after bad. I always thought that bailing out companies or have government take over parts of them was what communist countries do. But we are doing that now while China is investing in its infrastruture. Something is wrong here.
Obama has no choice but to call for the Bush administration to help out the auto companies. He owed the unions for their support. But he should make sure there are union concessions and strategy changes in the companies before the loans are approved. If the companies don't have a new strategy of making cars that are more energy efficient or use alternative fuels, they are not going to survive. They would just die in two or three years instead of next year even with the cash infusion. If there are no union concessions the big 3 will not be competitive, and again they will die off sooner or later. Didn't they learned the lessons of Chrysler years ago?
Tuesday, November 11, 2008
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I don't have a solution to this mess. My main concern is that if these companies are bailed out, what guarantee do we have that the fat cat execs won't run their companies down to the ground again?
ReplyDeleteThey now have no fear of losing it all if the government has shown a willingness to bail them out. So the ultimate losers become the taxpayers.
I'm torn about a bailout for the auto industry. The economy here in Michigan is so tied into it that if the Big 3 were to disappear or shut down, it would be catastrophic. We're not talking about people directly related to the Big 3, but suppliers, and even businesses that rely on the auto workers to shop and eat at local establishments. We can blaim the auto industry all we want on why it's losing money and why it's putting out inefficient cars but the bottom line is that we need the auto industry to survive this hit and become serious about building eco-friendly cars for the future.
I think government's been handling the bailout all wrong. Do I think they should have a bailout? Yes. But it needs to execute it with a tough love approach and as far as I've seen, it doesn't look that way. How else could you explain the big parties and costly trips by the execs? They obviously have not learned their lesson and need to be out of a job.
It does smell of a hint of communism though I guess when it comes down to it, government will always take care of what it deems important.
-LBOAYM