Bailout Watch 174: Left and Right Agree: No Blank Check For Detroit

by Edward Niedermeyer

Published: November 12th, 2008

bailout watch 174 left and right agree no blank check for detroit

It’s something of a long-running joke among local editorial writers that everyone cribs from either the New York Times or the Wall Street Journal‘s editorial boards. The two papers tend to lead opinion on either side of the spectrum, with the mainstream left taking its cues from the Grey Lady and free-market business types following the WSJ. If this theory still holds true in these ideologically confused times, the worm has certainly turned on the bailout. Both papers are running prominent and well-reasoned editorials against the bailout, from Thomas Friedman on the left and Paul Ingrassia on the right. Taken with the recent bad news from DC, this editorial one-two punch may just mark the high-water point for pro-bailout momentum. Though Thomas Friedman has generally been pro-market compared to many center-left commentators, his progressive credentials are well established. Or at least were before the Iraq War ( Friedman Unit, anyone?). Anyway, in his latest column the author of the Lexus and The Olive Tree makes no bones about his lack of sympathy for Detroit’s self-made hell. Friedman recalls listening to ChryCo CEO Bob Nardelli angling for retooling loans a few months back, arguing that the handout was not a bailout. Friedman’s reaction? “We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation? If we give you another $25 billion, will you also do accounting?” And though it would have been nice if Friedman had made his views a little clearer at the time, he now has nothing but scathing criticism for Detroit’s congressional enablers. “The blame for this travesty,” reckons Friedman, “not only belongs to the auto executives, but must be shared equally with the entire Michigan delegation in the House and Senate, virtually all of whom, year after year, voted however the Detroit automakers and unions instructed them to vote.” So where does Friedman go for the next step in this mess? Directly to cross-town rivals, the Wall Street Journal, and former Dow Jones exec Paul Ingrassia.Ironically, the free-market advocate Ingrassia believes that some form of government intervention is probably unavoidable for political reasons. If that can’t be stopped, he believes in a tough-love approach to any assistance. “In return for any direct government aid, the board and the management should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver — someone hard-nosed and nonpolitical — should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others, and downsizing the company. After all that, the company can float new shares, with taxpayers getting some of the benefits. The same basic rules should apply to Ford and Chrysler.”This worked for airline restructuring, argues Ingrassia, and it’s the only well to prevent what he calls “pouring taxpayer billions into the same old dysfunctional morass.” If political pressure creates an irresistable force for some kind of bailout, Congress had best heed the words of these two opinion leaders. There’s simply too much at stake to not. [thanks to MgoBLUE for the links and the link between the links]

Edward Niedermeyer

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Think on Nov 12, 2008

America is Sick innovation has been replaced with stagnation. knowledge has been replaced by willful ignorance. Optimism has been replaced by pessimism. Can do attitude has been replaced with every excuse in the book. Foreign car companies have Unions Foreign car companies have factories in North America. The quality is better the mileage is better the design is better. During WW2 we turned Cadillac factories into tank factories in months. American car companies make the fuel efficient cars now in Europe there are models in Europe ford makes that get 40mpg The excuse Car companies give that "we cant possibly make fuel efficient cars here it will take Years is Utter BS". Perhaps having board members on oil companies and Car companies has something to do with it. You cant give bail out money to companies with 1000s of vps presidents board members who have managed there companies into the ground money to do it again; if they want tax dollars it should come with strings you must produce vehicles to x fuel efficiency standards all trucks run on diesel or turbo bio diesel HYbrid trucks. People who think less regulation is the key to innovation How did that work for you? America already produced an electric car pulled it out of service destroyed the cars and the blue prints for them. Not a big secret battery companies that have invented technology for lighter more powerful batteries have been bought out by car companies to prevent the innovation of more fuel efficient or zero emission cars. The Morgate industry and wall street innovated new ways to sell and package the same morgate 25 times so by the end it wasn't really worth anything because it required the other 24 packages it originally came out of to all increase in value to give each subsequent made up package have some kind of value but what the morgate was worth was just the 1200 bucks joe blow paid each month on his morgate and the subsequent 23 made up morgate mutual funds or bond like packages could have been worth 100 times that its phony money, buying and selling the same debt over and over again. The cost was calculated to be somewhere far less then 300 billion to just give every home owner money to pay there morgates which would have stoped the foreclosure crisis and bailed the companies out at the same time; but we have spent 700 billion to bail out the companies that screwed up and instead of pumping that capital into the financial markets to bring up business they used that capital to monopolize and buy up other banks its complete insanity. If you think free market is the answer with no regs then let GM die only the strong survive and someone will come and take there place. If you want to blame the unions because they wanted health care and it costs too much meanwhile other car companies that are foreign do the same but kick our butts who is really to blame. Anyone who's 401 k has disappeared can tell you hmm maybe it would have been a good idea to regulate some of those financial instruments it turns out if you let someone do something that will hurt a company long term but you make a quick buck up front people take the quick buck. Design a better car no excuses. You do not get to retain control and keep your job managing a company if you can not keep it running hit the bricks.

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Psarhjinian on Nov 13, 2008

That's a nice chart. Pity that extremists on both ends tend to see everyone who doesn't agree with them as an extremist of the opposite persuasion.

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