Bailout Watch 10: TTAC Called It– Wall Street Journal Reveals Motown's $25b Bailout Plan

Robert Farago
by Robert Farago

And so it begins. The Wall Street Journal' s lead editorial makes it perfectly clear that Motown's plans to tap your taxes is well advanced. And guess what? It's a god damn conspiracy! "Earlier this month… the top dogs at Ford, GM and Chrysler had a meeting of the minds and decided that the way out of their current losing streak would be to ask the feds for a lifeline. They figure they'll need $40 billion or so to ride out their current troubles until they reach the promised land of hybrids, the Chevy Volt, and, who knows, maybe even profits. We've since heard that lobbyists for the car makers are taking their pitch for direct federal loans around Washington, with a goal of unveiling the plan after Labor Day — conveniently in the frenzy of the fall election campaign. They've briefed Congressman John Dingell, the dean of Michigan Democrats, as well as officials in the Bush White House… The plan is for the government to lend some $25 billion to auto makers in the first year at an interest rate of 4.5%, or about one-third what they're currently paying to borrow. What's more, the government would have the option of deferring any payment at all for up to five years." TTAC will have an editorial on this shortly.

Robert Farago
Robert Farago

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  • Pch101 Pch101 on Aug 24, 2008
    When did we get more focused on protecting a certain amount of jobs as opposed to creating and building wealth? Except for politicians in Michigan and the Rust Belt, this would not be about jobs. This would be about preserving the capital markets and the banking system from further erosion. If this had occurred during the economic boom of the 1990's, we could wring our hands for a bit before saying "Thanks GM, it's been nice knowing ya, now don't let the door hit you in the ass on the way out." However, we are now in the midst of the greatest retraction of the credit markets since the Great Depression. These conditions are not business as usual, but a uniquely difficult time that, if mismanaged, could put the US economy into a very deep toilet. The decisions undertaken during the next couple of years will be critical to the entire future of the country. A high profile blow out of this sort could present a stiff blow to Wall Street, because it could be perceived as a symbol of the failure of the American corporate system and the stock exchanges that support it. In the worst case scenario, it could spark a flight of capital away from the US as money seeks safer places to play. Maybe that won't happen, nobody knows for certain how this would go down. But do you really want to find out? GM is a Dow 30 component, so it is not a trivial matter. Again, it's not an either-or. I doubt that a GM bailout would occur without strings attached, because GM generates major operating losses that suggest that the loans would default in no time, something that even Washington wouldn't want to have happen with their money. If there is a bailout, it probably won't help the current GM management. (Personally, I sure hope that they dislike it, because they need to go yesterday.)
  • Morea Morea on Aug 25, 2008

    There is a perspective that has not been voiced in this, or the other, thread about a possible Detroit bailout: the corrupting effect of such bailouts on the Federal government. As we ask the Federal government to do more and more for us the temptation for corruption within the Federal government grows. This could be in the form of bribes, kickbacks, illegal campaign contributions, or other malfeasance. It becomes increasingly difficult for politicians to avoid temptation and thus they become entangled in legal (e.g., "pork") and illegal activities that are unsavory to the average citizen. Note that this is not an "anti-government" position but rather strongly pro-government in the sense of good government. I have read and taken to heart the position that a failed Detroit will cause economic havoc and I believe it to be essentially correct; however, I feel the threat to the Federal government of a bailout is worse for the country in the long run.

  • Sherman Lin Sherman Lin on Aug 25, 2008

    I'm pretty sure a bailout is coming but my main fear is that unfortunately there will be no strings attached and that the current management and culture will remain intact and in charge.

  • Anonymous Anonymous on Apr 26, 2009

    [...] Wal-Mart Working to Defeat Democrats First saved by pleasantvienna | 4 days ago TTAC Called It: Wall Street Journal Reveals Motown’s $25b Bailout Plan First saved by XdieyippeescumX | 9 days ago The Wall Street Journal and San Francisco [...]