Monday, December 29, 2008

Bail out after Bailout..Where does it end?

Old Soldier Tom's Journal.

I felt that Dirk's post was so truthful and important that I had to "borrow" it. Thank you, Dirk!

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.


Jen said...

Enjoyed this post! I have never been a fan of the UAW. My hope is that we can realize that we have all been feeling a little too entitled here in the States. People wouldn't need unions if they worked hard and did the right thing. And maybe took a little responsibility for themselves here and there......

Cathy said...

Notwithstanding how natural it comes to our government to explain the lost jobs and ruined economy if citizens don't help keep these mismanaged, greedy, suffocating-in-their-golden-parachutes conglomerates, here's something not many realize: You are in a very real sense obligated to pay higher taxes when job-generating companies like the big 3 are in danger of going under. If you're under a certain age, look at your birth certificate - your name will be in caps. This makes you "collateral" of the government it makes you the "serf" or possession of the Republic; on any legal document prepared, the proper names are ALWAYS capped, having worked in the legal field many a year I can attest to this. My B.C. has lowercase letters, I was born 1950. That simple means I'm a less-valuable commodity because I'm older and not as able to work as a younger taxed voter, same as you Marc. Anyone else who reads this should have a look, see if your name is all in CAPS then you'll understand how slavery is flourishing in another form. said...

The thing with the bail out is it is a never ending thing...they bail out with no how about if we bail out you the car companies you then don't take jobs that could be here in the US...all car parts made here insuring also the other businesses hurting such as US machine shops etc have work as well and don't go under...AS said it is going to get worse before it gets better...I only hope that I have enough time to prepare for the worse cause it is coming..have a good week..TerryAnn

Dirk said...

Hi Tom,
Thank you for posting this in your journal! I'm honored & thankful that you are trying to get the word out to as many as possible.