December 3, 2008

"Everybody is disadvantaged by bankruptcy, including our economy, so that’s not an option."

Says Nancy Pelosi.

So bankruptcy is an unthinkably bad process -- yet it is the process that Congress designed.

89 comments:

rdkraus said...

Everybody = The Unions which have always supported Democrats.

The Drill SGT said...

bankruptcy is the only thing that ultimately can save the big three. They need a legal and morale rationale for shedding their labor agreements.

The Drill SGT said...

GM has 4.6 retired workers for every employed worker. That doesn't count the featherbedded Job Banks.

Totally unsustainable.

Henry said...

In the autumn because of the bullshit and high cupidity, you can literally smell congress coming into the Capitol.

Dust Bunny Queen said...

Nancy Pelosi is an idiot and a clown.

Chapter 11 Bankruptcy, reorganization of the industry, is the best thing that could happen to the auto industry. Chapter 11 doesn't mean the companies go out of business. It means that they will be able to restructure, off load the excessive debt burden that they have and the outrageous, extorted union benefit packages that are dragging them into 'real' bankruptcy.

For those who can't understand words or financial concepts (Democrats) here is a picture that illustrates, just why a financial bail out, without restructuring the industry is doomed to failure.

http://www.investors.com/editorial/cartoon.asp

TosaGuy said...

So everyone is advantaged by non-bankruptcy?

Inserting mindless liberal-speak like "disadvantaged" into a discussion of a serious issue shows me that Nancy Pelosi is not a serious person.

Also....Everyone=our economy, so she is either being redundant or thinks the two are mutually exclusive.

Balfegor said...

So bankruptcy is an unthinkably bad process -- yet it is the process that Congress designed.

Yes, let's just bring back debtors prisons.

SteveR said...

As suggested here, the completely obvious catering to the union constituency is the only basis for this position. In the real world that most of live in, getting screwed out of a job and benefits due to economics is part of being an adult, deal with it.

To hide people from reality for political gain is the worst form of leadership.

Not that I have any basis for a more favorable opinion of Ms. Pelosi, nor is a worse opinion possible.

The Drill SGT said...

For context, Ford and GM are asking for 27 Billion in funds. that is three times what the total market capitalization (e.g. hte value of all shares at todays market) of the firms is at this point.

Giving them 27 billion only would allow them to continue their profligate ways for a bit longer before they are back asking for more.

John Stodder said...

Whatever happened to competition? What Pelosi is saying is that people should pay more for cars -- a lot more -- for political reasons. But consumers want the most features for the least money and by that measure, Detroit has simply fallen too far behind their competitors. They will never catch up as currently constituted unless they are perpetually subsidized.

And that's what this is. It's not a bail-out. It's a permanent taxpayer subsidy for three businesses in one industry that happen to have a lot of political influence. I can't imagine the Democrats want to own that.

Car buyers are not "disadvantaged" by a bankruptcy, and that's the only constituency the Big 3 should have been paying attention to. If these companies had been successful at their core mission, they would have weathered the economic storm.

Flexo said...

There is ALREADY a bailout in U.S. law. No need to repeatedly reinvent the wheel here on an ad hoc basis.

And that pre-existing bailout is called bankruptcy court.

Both individuals and businesses have successfully resorted to it for a couple hundred of years -- including many everyday businesses today that are not the favorites of the elites in Congress.

wyatt gwyon said...

Given that the debtor in bankruptcy will not ever pay many of its outstanding debts and can cancel contracts without recourse, every single supplier of goods or services to the Big 3 will have its existence threatened by a Chapter 11 filing. Given that so many of the businesses in the Great Lakes states are directly or indirectly such suppliers, a Chapter 11 bankruptcy will devastate the economies of communities in those states. The "market" might someday recreate those jobs in a way that in some big-picture way is more "efficient," but in the meantime those of us in the Great Lakes will have to pick up and leave.

I guess it's one more instance of "Let them freeze in the dark!"

And if some of them are union members, so much the better, right?

TMink said...

Damn it rdkraus, quite making accurate comments first thing. It leaves the rest of us nowhere to go. 8)

I completely agree with you.

Trey

Roger J. said...

It seems that since September I have acquired quite a portfolio including shares of brokerage houses, banks, and soon, automotive stocks. Can't wait for those dividend checks to start rolling in.

Lawgiver said...

Interesting viewpoint about GM from Business Week printed in 2005

Hoosier Daddy said...

On an individual level, unless you have assets that exceed the exemptions allowed, Chapter 7 is relatively painless. Granted your credit is shot to shit but for the most part, it's already been shot to shit by the time you get to Chapter 7 anyway.

The Big Three have the option of Chapter 11 which is what they should be forced into and not force the taxpayer to bailout a failed business model.

Dust Bunny Queen said...

The "market" might someday recreate those jobs in a way that in some big-picture way is more "efficient," but in the meantime those of us in the Great Lakes will have to pick up and leave.

Such is life. In the Great Depression people from the Dust Bowl area, picked up and left. They didn't want to....they had to. Many of them came to California and created an agricultural powerhouse in the valley. People have to move all the time for various reasons, some good reasons, some not so good.

Life is full of changes. New opportunities arise.

Quayle said...

I've said it here before, but I am so pissed that I can't refrain from saying it again.

Imagine your highly educated and well credentialed cousin Steve said he was opening a business and solicited a $100,000 investment from you. Two years later Steven runs the business entirely into the ground through mismanagement, and your $100,000 is gone.

If Steve came to you and said he had another idea for a business, would you readily invest with him again?

Now imagine that our Wall Street and carmaker CEOs ran their banks and firms into the ground and wiped out their shareholders. Actually, don’t imagine – they just did it.

And those same guys come to the taxpayers and ask for another investment.

Why should the taxpayers give THOSE management teams and directors a dime?

I’m not opposed to bailing out the banks or big 3 for national reasons – if we have to do it to keep us going, then we have to do it.

But I am strictly opposed to the officers and directors of any company that get bails out staying in their jobs.

They’ve proved that they suck at business, and every shareholder and debt holder shouldn’t trust them again with a penny.

John Stodder said...

every single supplier of goods or services to the Big 3 will have its existence threatened by a Chapter 11 filing. Given that so many of the businesses in the Great Lakes states are directly or indirectly such suppliers, a Chapter 11 bankruptcy will devastate the economies of communities in those states.

But a bailout/subsidy will only help these companies in the very near term, whereas bankruptcy has the potential of creating a more sustainable future for them.

Detroit's problems have been apparent for a long time. If you've got a company whose business was built solely on selling in to GM, Ford and Chrysler, you were living on borrowed time and should have known it. These companies have been pursuing unsustainable practices for half my life at least. The devastation you foresee was an avoidable consequence-- and perhaps they'll avoid it. Have we heard much from these suppliers directly, or are they being pimped by the big 3 to make their sorry case?

The Drill SGT said...

Lawgiver said...
Interesting viewpoint about GM from Business Week printed in 2005


Not "interesting", a "GREAT" read. It seems at a casual read that not much has changed since 2005.

Bob said...

Wyatt, I'm having a problem subsidizing your staying in Michigan. Because the $34 billion the Big 3 are asking for now is just a first installment. It will become a yearly stipend. I've watched tens of thousands leave my company and city and no one lifted a finger to bail us out. The autoworkers and auto companies didn't cut prices when profits were big - They took care of themselves but now ask for public money rather than restructure. Into bankruptcy you should go but its the UAW so Nancy will come up with the cash.

Sofa King said...

Given that the debtor in bankruptcy will not ever pay many of its outstanding debts and can cancel contracts without recourse, every single supplier of goods or services to the Big 3 will have its existence threatened by a Chapter 11 filing.

So what? I'm a Democrat now. I don't work for one of those suppliers. What's in it for ME? I buy priuses, Toyata's not going bankrupt. Why should I care? How is this going to put money in MY pocket at someone else's expense? Anyways, the Great Lakes states aren't on the coast, right? So they're basically wastelands anyways, it's not like anyone important would be affected. Why, I bet most of those UAW workers have never even been to a fine restaurant, they probably blow their money on big trucks and kids and stuff. I've heard a lot of them haven't even been to college, if you can imagine such a thing. They probably caused the stink problem at the Capitol!

So I really don't see what the big deal is.

mjsharon said...

Sofa King,

This is embarrasingly silly. There are many perfectly sound reasons for not funding this bailout, which have been outlined by the commenters here. To make this into some sort of elitist, class thing is ridiculous.

wyatt gwyon said...

The Okies had to pick up and leave. So what? That's life, right?

Nice to know that's how our fellow countrymen feel about us. But thank you for making it plain, Dust Bunny Queen. I just wanted to make sure you all knew what you were calling for.

AJ Lynch said...

Best Comment of the Week Althouse!

Roger J said:

"It seems that since September I have acquired quite a portfolio including shares of brokerage houses, banks, and soon, automotive stocks. Can't wait for those dividend checks to start rolling in."

LOL.

mjsharon said...

Yes Wyatt, we heartless bastards are calling on those employed by failing businesses to consider relocating to find other employment. How dare us!

Bob said...

Poor Roger. As he waits for his dividend check he first must pay his credit card bill. And the CEOs of his companies are Obama, Reid, and Pelosi. Might want to make sure that dividend check clears first before writing checks against them.

Sofa King said...

To make this into some sort of elitist, class thing is ridiculous.

But hasn't that been the case with every non-union "heartland" issue for the past decade? Surely it wasn't ridiculous then!

Dust Bunny Queen said...

Nice to know that's how our fellow countrymen feel about us. But thank you for making it plain, Dust Bunny Queen. I just wanted to make sure you all knew what you were calling for.

Yes, I do know. Exactly.

How much sympathy did you feel for the loggers, mills and the towns that dried up because the environmentalists decided that Spotted Owls were more important than people? People who had lived in the area for generations had to pick up and move.

How concerned were you for the people who lost their jobs (like myself)in the 80's when the phone companies were forced to divest themselves of their divisions and break up into regional companies?

Did you weep for the commercial fishermen who went out of business and had to move because the government decided to restrict the level of fish that could be caught? Do you feel for the people in related industries who have also lost their jobs?

Such is life. And guess what...it's still true what your mother told you. Life isn't always fair.

The Drill SGT said...

Given that so many of the businesses in the Great Lakes states are directly or indirectly such suppliers, a Chapter 11 bankruptcy will devastate the economies of communities in those states

OK, so you were an autoparts maker. you've had the same 40 years to see this coming? The big 3 only have a 50% market share in the US, half the cars are made in Toyota, or Honda, or VW plants spread across the South and the border states. Dont they need auto parts? or is it an issue that your quality isn't up to their standard. If the Big 3 disappeared. Vanished today. would the number of cars bought in the US decrease? No. Would the number of cars built in the US shrink? maybe a bit as some sales went overseas to niche players. So the autoparts makers that service Toyota today would have a 100% increase in their business. If those Delco plants in Michigan that sell to GM could compete for the work, they'll be fine, else some plant in Kentucky is gonna be hiring to make batteries.

that is the market. efficent and cruel.

will the US be better after the market realignment, perhaps. It will cost white collar overhead jobs in those big Detroit offices, but those guys had their chance to reduce their models from 8 to say 3 (a Chevy, a Caddy, and Saturn). Like the dinosaurs, they have not adapted.

garage mahal said...

Who ?wouldn't want to buy a car from a bankrupt company not knowing if or where it could get serviced, if the warranty will be honored, or if parts are even available for it.

garage mahal said...

that is the market. efficent and cruel.

Not if you're a failed bank. Then you can get a cool 150 bil with no strings attached.

The Drill SGT said...

another piece of the blame lies in the 50 states, that protect their auto dealerships. The big 3 have 3 times the dealers, each less efficent, lower volume and lower quality than the local Toyota guy. dropping brands, has a huge cost in dealership closings.

Darcy said...

Hang in there, Wyatt. I recognize the hard truth of all of this, as a lifelong Michigan resident, but it still bothers me to read the seemingly callous statements here, too. They're right, but it doesn't make it any easier to read.

Dust Bunny Queen said...

Who ?wouldn't want to buy a car from a bankrupt company not knowing if or where it could get serviced, if the warranty will be honored, or if parts are even available for it.

This is why sales are down now. There is no certainty that GM or Ford will still be in business in a few years with their current business model that is certain to slowly bleed the companies to death. Why buy a car or truck from these guys until they have some stability and a future?

You need to understand that Chap 11 BK doesn't mean that the business is going out of business. It is a restructuring and like most businesses that have used this route, the auto industry will likely emerge stronger, leaner and able to compete in the market place.

If they don't do major restructing and reduce the obscene Union costs, they are doomed. Giving them money without making substantial changes is just going to prolong the death of the industry and frankly, I'm sick of bailing out bad business models.

Bob said...

Garage, with your logic then who would fly on a airline that went bankrupt? Well actually it turns out quite a number of people did. Bankruptcy is designed to restucture a company. It does not mean its operations halt.

Michael said...

If GM goes bust, just watch car part prices.

Michael said...

GM ad Ford aren't going anywhere.

Too important, too valuable to America, too many people effected.

Hide and watch.

garage mahal said...

Bob
I'm pretty sure everyone that flew on a bankrupt airline was at least confident it was going to land safely, which is the only thing people care about. Anyone that buys a new car from a bankrupt company is seriously rolling the dice. Then again I haven't bought a new car in 15 yrs either.

Dust Bunny Queen said...

Anyone that buys a new car from a bankrupt company is seriously rolling the dice..

Try reaaaalllly hard. Maybe if you squint your eyes you can understand the differences between Chapter 11 reorgainization bankruptcy and going out of business bankruptcy, never to open your doors again bankruptcy.

Bob said...

Garage, flying means you bet your life. Buying a car is a much less risky decision. Given all the doom and gloom talk in media its no wonder people are postponing buying cars (from not just Big 3 cars but all automakers).

garage mahal said...

Squint real hard and read this then.

Jeremy said...

garage,

Anyone that buys a new car from a bailed-out or almost bankrupt company is seriously rolling the dice. Given what we know about GM & Chrysler, it'd be crazy to buy from them regardless of whether or not they file.

Further, if the issue is that consumers will stop buying Big Three because there's no confidence in the warrantee, couldn't the gov't just guarantee that all Big Three warrantees will be honored for 10 years? There's zero dollars in outlay unless the companies do actually fold.

Widmerpool said...

Michael,

Plenty of competition in the auto industry without these dinosaurs, with more on the way (India, China). Prices don't budge.

Also, this "too big and too valuable to fail" malarkey is not convinsing anyone.

Jeremy said...

garage,

Good link. But that survey doesn't indicate what pct would be willing to buy a new car from a company barely treading water and hanging on to a federal lifeline. Nor does it indicate what pct would be willing to buy a new domestic car period. You said you wouldn't/haven't. I wouldn't either.

Bob said...

Well then they might have to offer bargains to entice consumers to buy their products. Americans have shown themselves to be price sensitive. Or maybe we just let one or two of the Big 3 die.

And of course the other unspoken threat here is that the non-union auto plants will ramp up to meet the demand. Why isn't that talked about?

OSweet said...

"Everybody" means "we Democrats"

"Our economy" means "UAW jobs, benefits and pensions"

Darcy said...

Give me a small break, OSweet. It may not affect you, but there are plenty of people, not just Democrats, union workers or people connected to the Big 3 that this will hurt. Plenty.

I understand that is no concern for you, but let's get it right.

Ralph said...

Why should the taxpayers give THOSE management teams and directors a dime?
The only possible reason is that the government's Wagner Act and CAFE standards have a significant role in the companies' problems. Their UAW contracts restrict the number of non-union cars they can import, but they lose money making union small cars. That's why GM is spending billions on the Volt, which will always lose money for them--but they can then sell more trucks.

I have a little Ford and GM stock, but I'd rather they go Chapter 11 now, then depend on government subsidies for years.

Who here has union-style job security, besides Althouse?

MadisonMan said...

I swear I've read all these comments before!

Money from the govt should go to actual improvements: Infrastructure, for example. Giving it to companies that are failing because their executives have lead them to the brink, and are still leading them, is just throwing away money.

Dust Bunny Queen said...

Like Jeremy says and like I have said. People won't buy from a company that has an uncertain future. I don't dispute this in the least. Chapter 11 at least would give some certainty to the process. Either they emerge or they go Chapter 7.


Nearly three-quarters of Americans wouldn't buy a car from a bankrupt company, according to a recent survey.

Color me unimpressed. Three quarters of Americans don't know much about much

Darcy said...

I agree with you, MadisonMan. Do you hold this same view on government welfare for individuals?

Bob said...

I am unmoved that CAFE standards are a big cause of their woes. Its their business model. Cut union wage and benefits by 40 percent so that they are on par with Toyota so they can compete. Eliminate the job bank saves a half-billion per year. Cut dealerships by 1/3. But none of that happens unless they go thru bankruptcy because its extremely painful.

And painful not just for workers or suppliers but also for Democrats. Because that pain translates into less campaign support. Which is precisely why the bailout will happen. Maybe not in this Congress but in the next.

Shanna said...

Yes Wyatt, we heartless bastards are calling on those employed by failing businesses to consider relocating to find other employment.

I’m pretty sure if I couldn’t find a job and asked the government to provide one in my neighborhood for the sole reason that I didn’t want to move, they would tell me to jump in a lake. The people in Detroit could have saved their companies by making wise decisions. Why should we subsidize failure? Maybe those plants can start making something else. Maybe there are solutions that can create a different kind of job there and maybe the big 3 can reorganize under bankruptcy and manage to be profitable again.

But if they are never going to be profitable, why should the rest of the country have to subsidize them?

rdkraus said...

DBQ

Ouch. Those links hurt.

Don't ever forget. Half of all people are below average. Yes, really. They are not like you, your friends, or commenters here ... well, maybe except for [fill in favorite commenter]

Michael said...

Widmerpool - I know all about the "competition," and how many are in right to work states without union protections, and they also make many of the same SUV's etc. as GM and Ford.

Most of this tripe is related to anti-union bullshit, and anybody who thinks losing GM and Ford won't dramatically effect America is lacking in business sense...and we heard exactly the same thing when Chrysler asked for and got guarantees from the government.

Oh, and the next time you call an auto parts company, ask how many parts are made by GM...who will be making them in the future and how much more they'll cost.

And don't forget: They also make the Hummers for the military an all kinds of other equipment for them, too.

Darcy said...

Shanna, there are plenty of people in Michigan, not related in any way to the auto companies who aren't simply not wanting to move!

In a perfect world for you, I guess, we all would have forseen the drop in property values well before it happened and moved to an idyllic place in advance.

Do you understand that you are talking about a great many people who now will not be able to afford to move?

Yes, they can abandon their mortgages and build it all back somewhere else. But that will take time. In the meantime, it's nice to know that so many can lump us all in with the Big 3 and feel smug and smart that you don't live here.

I don't want your money (via the government), trust me on that. And I will be fine, eventually...probably somewhere else. I do have a lot of sympathy for those that won't be so fortunate and have nowhere to go.

Darcy said...

P.S. I gave a thought to correcting my spelling and grammar.
Pfft. I'm from Michigan. We're too lazy and dumb.

veni vidi vici said...

"They also make the Hummers for the military..."

And GM has been loudly trying for how many years now to shed their non-performing Hummer division? (A: many, many years).

Bradley Fighting Vehicles (to name only the one that comes first to mind) are not made by the Big 3, nor are many if not most of the specialized and non-specialized military vehicles out in the battlespace. This isn't 1942, it's 2008. If we were talking about bailing out Northrup Grumman, you'd have a point, but we're not.

Even if GM got broken up in BK, does anyone seriously think that divisions like Electromotive wouldn't survive intact as entities? The stuff that works and is key to infrastructure (ie. that will always have customers because there is a need and the division provides quality to fill it) will survive regardless of whether the vaunted "Denali" nameplate survives to see the 2011 model year.

If Wag-"Goner" at GM was as smart as his pay package would have us believe, he would've announced GM's entering Chptr 11 BK the morning after Nancy's "Bankruptcy is not even an option" statement.

I grew up in Windsor and Detroit and lived through the early 80's, Chrysler bailout, "Buy the cars your neighbors help to build" bumper stickers, etc. Rick Wag-gonad is no Lee Iacocca.

MadisonMan said...

Darcy, I'm a little more sympathetic to individuals who collect welfare, briefly. A culture of welfare -- well, I don't think that's very productive, and giving money now to the Big 3, is likely guaranteeing a future handout.

We shouldn't encourage a culture of welfare among individuals or among corporations.

Darcy said...

Thanks, MadisonMan. I agree with that.

Dust Bunny Queen said...

Shanna, there are plenty of people in Michigan, not related in any way to the auto companies who aren't simply not wanting to move!

I know it is hard and I'm not without sympathy.

The town where my husband grew up used to be a thriving community of 25,000 near a larger town of about 115,000. They had several lumber mills, processing plants for wood products, restaurants, hardware stores, movie theaters, library, elementry and high school, several motels and an old historic hotel. Today the town is barely alive with no schools because there are not enough children in the town. None of the above amenities exist and now only one grocery store and a post office. Whole neighborhoods are 50% vacant. Empty mills and manufacturing plants are dangerous firetrap eyesores. It is practically a ghost town.

The nearby town also took a major hit because the people who USED to live in the little town are no longer around to patronize their businesses. County tax revenues took a nose dive and services across the entire county were cut.

Those who could, who owned their homes and were already near retirment stayed. The rest of the people sold their homes if they could and moved to other areas to continue to work in their industry. Some moved to other countries. Other younger workers were able to go to community colleges and learn other trades.

What happened? It wasn't because the mill owners or the other industries were being badly run. No they were thriving and people had good jobs and good lives. The government, urged on by special interest groups who had never set foot in the area, shut down the industry and ruined the lives and futures of the people.

Where were you and everyone else who is crying about the failing auto industry, to demand bail outs for the timber/lumber industry which wasn't failing?? Where was the crying about people who had to sell farms, houses and property that had been in their families for generations? They didn't want to move either.

So, yes it is tough. But at least the auto industry has the ability to emerge from this as a viable industry that will be able to produce product and employ people, unlike the industries and small businesses that went bankrupt, like my Father-in-Law's, through absolutely no fault of his own, but because they were forced into bankruptcy by their own government. No one cared. Did you?

AlphaLiberal said...

You know, I'd be a bit more favorably disposed to the "let `em fail" line if we weren't in the worst financial downturn since the Great Depression and teetering on the edge of our own depression.

There's a lot of anti-worker rhetoric out there and I simply do not understand why so many people demand working people have low wages, low benefits and a lower standard of living!!

It also doesn't help that US auto makers have to pay health care costs which are separately financed in other countries.

Finally, if a giant redwood falls in the forest, does it smash anything else?

Dust Bunny Queen said...

You know, I'd be a bit more favorably disposed to the "let `em fail" line

God you people are stupid.

Chapter 11 is not failing. It is reorgainzing and eliminating the things that are now guaranteeing failure. Chapter 11 is the best thing that could happen to the auto industry.

The Drill SGT said...

My father was a Union railroad guy for 40 years with the same firm, now out of business. Western Pacific. I was a Teamster before and after I went to Vietnam. My Mother, Grandmother, sister in law and brother were/are union teachers. I know what featherbeddeding is. It was created by RR unions. The benefits package that the UAW gets from the Big 3 is NOT sustainable. The work rules are not viable, the Job banks are morale sapping.

Things must change at the Big 3, and bankruptcy apears the only way that will happen. pissing good money after bad, won't change anything, just buy 6 months before they are back asking for more.

IF the UAW head was sitting in front of Congress testifying about givebacks, pension cuts, work rule liberalization, and an end to the job bank, I might think there was hope. But the lack of the UAW at the table means that there still is no change in the combative work environment (on either side) and those firms are destined for failure.

SteveR said...

I don't think anyone reasonable person would see this as a negative view of union workers or the job they do. But the fact is for most of the last fifty years, the American auto industry has chosen status quo over innovation and competitive advantage which resulted in the foreign companies gaining huge footholds in technology (e.g. fuel mileage), labor costs and quality.

The UAW leadership was only secondarily at fault for this problem.

Who can forget the absolute crap that the US companies produced in the 70s, while companies like Nissan, Toyota and Honda gain market share and loyalty.

The Drill SGT said...

DBQ.

Redding? Shasta? Ukiah?

I was born in Oroville. Another dead gold and lumber town.

Widmerpool said...

AlphaLiberal,

No one is demanding that working people have low wages. We are demanding that the Big Three pay its workers sustainable wages. That's the only way it can work. Otherwise, we could just set the minimum wage at a rate that pays, say, $100,000 a year and call it a day. There's no free lunch. To continue to pay these UAW guys $70,000 a year, a taxpayer subsidy (ie direct wealth transfer) is required.

Ron said...

Darcy, I would accept harsh comments about Michigan if I had a sense that a New York banker might have to forgo a few things as well, but it doesn't seem to be looking that way, does it?

The same week the big 3 were chastised for asking for $25 billion, they toss $20 billion at Citibank without a glance! This on top of an earlier $25 billion that just Citi got.

If Wall Street needs trillions, perhaps their business model is "unsustainable" as well. Or is it OK to just let their managements sit in the same chairs as well?

Bob said...

For those who seem to believe that GM makes military vehicles, they don't. DOD buys the standard cars and trucks for non-tactical use. The GM Hummer is not what the Army buys. We buy the HMMVV from AM General. Have for several years.

If we are going to bail out automakers then will the UAW agree to work rules changes plus wage & benefit cuts so that they are equivelent to US Honda or Toyota workers? Ditto for management compensation. If the answer is No then I'm not interested in subsidizing the automakers.

Widmerpool said...

Ron,

What are you smoking? Tremendous job losses up and down the line at Citi and elsewhere in the financial sector. Those jobhunting may, gulp, have to relocate! The industry is changed forever and thousands of jobs will never return.

Bob said...

Ron, Citibank is restructuring to the tune of 35,000 layoffs. Year-end bonuses - zero. New York state expects a $2 billion drop in income tax collections from Wall Street types because bonuses are being zerod out. Tens of thousands Wall Streeters being laid off now and most will leave NYC. All this in past few weeks despite bailouts.

Detroit, to date, hasn't changed their previous restructuring plans. They are set to get $25 billion to retool for Green vehicles and now want another $34 billion. Last few months have shown US auto market will be much smaller for next few years. But UAW workers weren't let go, they went into job bank. Their compensation wasn't reduced. They chose to go to Congress and beg for money rather than restructure to a marketplace where they have lost 30 percent of sales.

I was against bailout of Wall Street just as I'm against Big 3 bailout. But Wall Street has begun restructuring while Big 3 resist.

Dust Bunny Queen said...

Redding? Shasta? Ukiah?

I was born in Oroville. Another dead gold and lumber town.


I live in North Eastern Shasta County now, but lived in Paradise for about 12 years so I am very very familiar with Oroville. It's actually growing somewhat lately. The place I was referencing was where my husband lived in Humbolt County. His father was a logging contractor. Had a pretty good business that employed about 20 to 30 people until they were put out of business by government regulations.

Original George said...

Three years.

That's how long the manager of my bank thinks it will be until the economy recovers.

Three years.

Ron said...

Bob, the big three has restructured its contract with the UAW, but that hasn't kicked in yet, and they got caught with the housing/credit crisis.

Yes, I am familiar with the Citi layoffs...of a type Detroit's been doing for years, so I'm glad to see they're catching up.

As for bonuses going to zero, long overdue, yes? Weren't the '06 Wall Street bonuses greater than the GDP of Guatemala?

New York state losing tax revenues? Welcome to Michigan!

I'm sorry this is happening to New York, but hey, they didn't give a damn when the costs they were cutting weren't in their backyard!

Ron said...

Note, I'm not even saying the Big 3 should be bailed out; just that far, far larger sums are tossed around for the banks with a different tone which is what I find objectionable.

Ralph said...

The unions have agreed to temporary concessions. Which means if the companies become profitable, they'll take it all back.

Darcy said...

Dust Bunny Queen, why are you accusing me of not having sympathy for other people in the situation that the rust belt is in? What did I write that conveyed that idea?

I am not advocating the bailout, as I agree with others that it is probably too little, too late. I hope the Big 3 try to reorganize under bankruptcy.

And thank you, Ron. We'll have a drink together soon to commiserate. I expect there will still be a few establishments open your way. ;-)

Dust Bunny Queen said...

Note, I'm not even saying the Big 3 should be bailed out; just that far, far larger sums are tossed around for the banks with a different tone which is what I find objectionable.

The difference is that the money tossed to the financial institutions is supposed to be used to put liquidity back into the financial system. Banks can lend again, people will be able to borrow....maybe even to buy a new car. The banks and financial institutions are integral to the entire economy of the United States and the world, so this bail out was needed to keep the broader economy from collapse.

The money being proposed to go to the auto industry is to continue to pay the exorbitant and ursurous greedy union penion and benefit packages. The money would not be used to streamline the business, to become more competetive...It would go directly into the pockets of the retireed workers and to shore up the Defined Benefit Contribution plan that is now seriously underfunded because of the market decline.

While it would be a terrible painful thing for the big 3 to go out of business, (something that will not happen unless they don't reform their business model), it won't affect the entire economy of the US or of the world.

Michael_H said...

Roger J said:

"It seems that since September I have acquired quite a portfolio including shares of brokerage houses, banks, and soon, automotive stocks. Can't wait for those dividend checks to start rolling in."

Wouldn't it be great if Congress were subject to Sarbanes-Oxley now that Congress is responsible for oversight for investing the peoples money in banks and industry?

Dust Bunny Queen said...

why are you accusing me of not having sympathy for other people in the situation that the rust belt is in? What did I write that conveyed that idea?

Sorry Darcy. I didn't mean to accuse you/the personal you....more like the generic you, to all the people who are vapor locked about the poor auto workers workers and the local economy. I mean to point out that other industries have gone completely out of business and there were no alligator tears for them.

Possibly the difference is that the dumb loggers didn't have a union to extort and lobby for them.

Bob said...

Ron, hey when Big 3 was cutting in New York they couldn't drag their behinds up to DC to ask for help. So why should I care now? The Big 3 and the UAW have delayed and delayed making painful structural changes. This bailout is a way to delay some more. No one relishes the changes. But the bailout delays bankruptcy which is what each of these is going to go thru because the other US automakers are responding to the market in a cost effective way. The only reason Detroit is at the window is because Democrats control Congress and UAW has been a huge supporter of Dems. If these were non-union workers Pelosi wouldn't have had the time of day for them. Just ask loggers, fisherman, or workers at Polaroid, Kodak, DEC, IBM, the tool & die shops, etc. Nancy can buy labor support with our cash to good Dem constituency. Thats all this is. And $34 Billion is just a down payment.

The Drill SGT said...

Ralph,

I read it.

- suspend the featherbed Job bank. that's 500,000,000. minor
- no change in salary
- no change in benefits
- suspend payments into the retiree health trust. All this does is lower cash flow, and ultimately doesn't save a dime, just shifts the payment sched. In fact, since ultimately GM will go belly up, it shifts costs to the taxpayer (PBGC)

Ron said...

The difference is that the money tossed to the financial institutions is supposed to be used to put liquidity back into the financial system. Banks can lend again, people will be able to borrow....maybe even to buy a new car. The banks and financial institutions are integral to the entire economy of the United States and the world, so this bail out was needed to keep the broader economy from collapse.

This excuses their bad management? I think not.


The money being proposed to go to the auto industry is to continue to pay the exorbitant and ursurous greedy union penion and benefit packages.

Because Wall Street salaries and bonuses are reasonable. Check!

The money would not be used to streamline the business, to become more competetive...It would go directly into the pockets of the retireed workers and to shore up the Defined Benefit Contribution plan that is now seriously underfunded because of the market decline.
Which, if you had been following, was in the process of occurring with the auto industry. The UAW was in the process of taking over the pension system of the retirees, with the manufacturers paying into that system, less and less over time. The market decline was not incidental to that process, so it's collapse derailed something that was in progress. Sorry if it didn't occur fast enough for everyone, but to say nothing was being done is flat out false.


While it would be a terrible painful thing for the big 3 to go out of business, (something that will not happen unless they don't reform their business model), it won't affect the entire economy of the US or of the world.


Why must the existing system of banking be excused in this fashion? If Goldman Sachs, et al, folded, it's not as if lending will cease; rather, another system might well emerge without the problems that have come about with this one, which has affected the world's economy far worse than the Big 3, with their bad contracts. I'll trade Chrysler for Citi and an Auto Company to be Named Later, deal?

Bushman of the Kohlrabi said...

I am against any bailout for the automakers. I have nothing against the unions. It makes no difference to me if they exist or not. I do believe workers have the right to organize and more power to them if they can work out a good deal. However, I fall off the bandwagon when I'm asked to pay for agreements that prove to be unsustainable. This is between those companies and their unions. They should either come up with a workable solution or go chapter 11. Taxpayers should not be asked to make up the difference. I particularly dislike the idea of paying for the retirement health and pension benefits of others. Especially since I have never been offered these benefits myself.

I'm not unsympathetic to those involved. I work in the tech industry where we have been downsized, rightsized and outsourced to oblivion during the last 15 years. Unfortunately, that's life. You learn to deal with it or move on to something else. As DBQ said above, “life isn’t always fair”.

Bob said...

Ron, first off the existing banking system didn't fail. But some companies did fail. All of the Wall Street trading firms (Lehman) did. Right now none of the Big 3 have. As the US automarket is down by 35 percent, why shouldn't one fail?

Second, unsticking the lending freeze was the reason given for the first bailout. The aurgument was companies could not get capital to operate. The Big 3 chimed in their support to that aurgument. Now forgotten is the initial "loan" of $25 Billion already given in summer to Big 3.

Wall Street compensation does allowed for changes due to market conditions (bonuses). UAW contract does not. If conditions have so drastically changed in past two months then why wait to implement changes agreed to in new contract? And are those changes sufficient to make the Big 3 viable?

Darcy said...

Well, thanks Dust Bunny Queen.

I do want to say that there are a lot of auto workers who are just going to be innocent victims of this. They're not the UAW. Yes, they vote, and the majority has been voting disastrously in the last years, but plenty of these people understood that they were killing the golden goose. All they could do was vote.

I blame the Big 3 management, the UAW and Democrats. Oh, and the local media, for propping up the UAW always.

There are plenty of victims here to have genuine sympathy for, though. Hard working people who just were happy to have a job through the years. Not to mention the rest of Michigan that is looking at becoming a possible Rust Bowl. That's my point, and I know you understand that.

Ron said...

Ron, first off the existing banking system didn't fail.
If they've come, hat in hand, for half the GDP of the US, (Forbes) what am I to call that but failure on a scale we have never seen?


But some companies did fail. All of the Wall Street trading firms (Lehman) did.
And why haven't they all folded? Do they have the same managements? And if they do, why have we not suggested they change their business practices? Why not just divert their bonuses into paying back the monies their asking the US to secure, for starters?

Right now none of the Big 3 have. As the US automarket is down by 35 percent, why shouldn't one fail? Frankly, they could all fail, but I am disturbed far more by the excuses given for the failures of the financial system without nearly as much hue and cry as we're seeing over the autos, at least given the much greater magnitude of the effect.

Second, unsticking the lending freeze was the reason given for the first bailout. The aurgument was companies could not get capital to operate.
Again, this assumes that the existing companies have to exist, under the existing rules. We could still allocate capital, but do so with a different system, which, one hopes, will emerge from this mess.
Why are we not seeing this discussion, daily? Instead we see nonsense about corporate jets! (The autos plus AIG!)

The Big 3 chimed in their support to that aurgument. Now forgotten is the initial "loan" of $25 Billion already given in summer to Big 3. As a taxpayer, I've been asked to forget the S&L debacle and Enron, and, given what is now occuring, I can't see an industry that has learned from past failures. If anything, they've gotten worse instead of better. Or is the operating belief, "screw up, wait a little while, and then carry on as before because no one will remember or care."?

Wall Street compensation does allowed for changes due to market conditions (bonuses). UAW contract does not.
It does, and it has.

If conditions have so drastically changed in past two months then why wait to implement changes agreed to in new contract?
Because companies and governments that have plans that take years to implement due to their size don't change them in 48 hours? Go figure! You want all the troops in Iraq home for The Super Bowl? Ain't gonna happen.

And are those changes sufficient to make the Big 3 viable? If I could answer that question...well, perhaps, but the crucial point is that they were getting their costs down to Honda/Toyota levels and, presumably, that will make them competitive. (Plus, it's not as if Honda, Toyota, and others don't get some form of support from their governments as well!) Even if they did this today, how long would it take to have an effect, 6 months? A year? I don't know how to answer that question.

Cedarford said...

garage mahal said...
Bob
I'm pretty sure everyone that flew on a bankrupt airline was at least confident it was going to land safely, which is the only thing people care about. Anyone that buys a new car from a bankrupt company is seriously rolling the dice. Then again I haven't bought a new car in 15 yrs either...


As Romney said, the only way you can force the (formerly big) Big 3 to restructure is Chapter 11. If they do not fix the 2200 price disadvantage against what American auto workers in other States have over them, they will never be competitive.

If they do not become competitive, Romney and other experts like him have warned - then any bailout is just a welfare payout bound to be repeated again and again. A payout by taxpayers making an average of 24 dollars an hour to sustain the lifestyle of workers making an average of 73 dollars an hour in pay and benefits.

24 dollar and hour workers subsidizing 73-dollar wages for a noisy few who come back to beg more taxpayer money every quarter?

That is unsustainable, and knowing that, we would be stupid to give them the 1st round of endless bailouts...

Romney added in his NYT editorial and on Capital Hill that any Chapt 11 bankruptcy would have to maintain sales and thus not eliminate or jeopardize sales, distribution, parts and warrantees on sales.

That is what other firms that go into Chapter 11 and emerge sucessfully have to do. Before you even think of workers and CEOs - you maintain production and sales.

And unfortunately, only Chapter 11 will allow the Big 3 to shed ruinous legacy costs like contracturally-set pensions and deluxe retiree health care. It sucks for the union and the execs and the salarymen - and yes, they all didn't create the Free Trade/Globalization mess that is gutting America of High Tech and manufacturing jobs. But absent Chapter 11 Reorg or a voluntary giveback by retirees(not f*cking likely) the two non-Chapt 11 alternatives are worse:

1. Taxpayers making far less than Detroit workers commit to endlessly subsidizing them and their better paychecks.

2. No bailout, business as usual, until Detroit is destroyed past any hope of recovery, along with the jobs and pensions resting on viability of the Big 3.

An example of how things can go right in a manufacturing-UAW showdown is Caterpillar, which was almost killed by Kormatsu and Allied in the early 80s before Chapt 11 was a good alternative. Rather than lose it all, they reorganized and management and the union agreed to painful givebacks. Once they had done so, they attracted investment that kept sales, warrantees, and distribution going strong. The union people were far less hardcore without the antagonistic history of Detroit.

Caterpillar is now profitable, growing - and the UAW workers - every bit as skilled as Detroits (actually, they always made better quality goods) - now make about 42-45 an hour in wages and benefits.

They also got the extra benefit of shareholders not finding their stock worthless, but a solid value after reorg and union major givebacks. That is highly unlikely in Detroit where older workers and "it's all about the fight!" retirees outnumber the younger workers - will not do what workers at Caterpillar did voluntarily.