Bailout Redux

Well, it did not take long. The automakers are lined up like they're in Oliver Twist, asking for more food. They all saw Wall Street bailed out, and now they believe it is their turn. Some lawmakers want the bailout for the auto industry to come out of the bazillion dollar bailout from earlier this year, and some want it to be a separate loan with certain rules. Not surprisingly, the change we can believe in is that there is not change: there is near-consensus on Capitol Hill that we need to do it, and near-consensus throughout America that we are getting hosed.

GM is begging so obviously for free money (after all, they only have $16B cash on hand), that CNN wrote this: GM executives say the $25 billion loan money would come with enough strings attached to it that they are not sure it can be used to solve their cash crisis. That's right: getting money they did not earn from taxpayers who may not use their goods cannot have strings attached. It's gotta be free and clear, or GM is not happy. The truth is GM and the other American automakers are going under unless they drastically change their business practices. A blank check is no incentive to do so.

The National Taxpayers Union has an open letter to Congress, which I'm sure will not be read, let alone considered, by nearly all of Congress. In the letter, they make some great points. First, those not working for the "Big 3" in the American auto industry make only 65% on average compared to those working for the American companies. A sound business model, for sure. Next, they say this:

Most Americans recognize that risk is a fundamental element of our economy. Some businesses succeed tremendously, some fail spectacularly. But they should do so at their own risk, not with the unwilling backing of millions of citizens' paychecks. It is little wonder so many American taxpayers feel that Congress is not looking out for them.

Couldn't put it much better.

While I'm at it, here is another good read on the issue:

Bailout to Nowhere by David Brooks Brooks supported the original bailout package, but at least he puts his foot down, albeit too late. He makes an argument against the auto bailout which many made against the financial one: when does it end?