NO MORE BAILOUTS!
When will it end, O Lord? When will it end?
GM Executive Richard Wagoner, Jr. and his entourage buzzed into Washington Wednesday in a $36 million private jet (not built by GM, by the way), which costs nearly $4,000 an hour to operate. Meanwhile, the people building his company's vehicles are struggling to get overtime and make rent.
Wagoner, along with Chrysler CEO Robert Nardelli and Ford Motor Company CEO Alan Mulally testified before Congress yesterday, and mad their pitch for a $25 billion bailout that they say would keep them from going bankrupt -- allegedly. Their most intriguing argument? People won't want to buy cars and trucks from bankrupt auto makers because ... get this ... they're bankrupt.
That's it. That's their pitch.
Just last month, Circuit City announced it was going bankrupt. Yesterday, the Circuit City here in Lancaster County, Pa. was alive with customers. There wasn't a free customer service rep in sight. I also got a new laptop there shortly after the announcement, and a week before the announcement, I got a new printer/copier/fax machine. Why? They had the best equipment at the best prices. I didn't give their bankruptcy a second thought.
The problem with the auto industry isn't that people are suddenly not interested in buying cars. In fact, gas has gone down significantly enough that people might actually be encouraged to buy more cars now. And the fear that people won't want to buy cars from a bankrupt company doesn't explain how the auto makers got into this debacle in the first place.
They got into this situation because of the banking industry. Most people don't pay cash for their vehicles; instead, they take out loans, and when a skittish banking industry that's been burned over and over -- even if those burns have come from a mortgage market -- the industry's willingness to extend loans to prospective car owners is practically non-existent. The hoops loan seekers must jump through become smaller and smaller, and eventually the process becomes unattractive and unworthy of the effort. In many cases, even if they jump through all the hoops, loan applicants may get rejected not because of bad credit, but because of marginal credit. I know how difficult the process is, because my wife just bought a brand-new Jeep last month and it was amazing how much she had to put down to make the loan work. We're talking about a woman with glistening credit, and yet, the hoops the lender made her jump through seemed excessive.
Last month was an expensive one in the Quinn household. My laptop seized up, my printer fell apart and it was cheaper for my wife to get a new car than it was for her to continue to pour money into the black hole that her old car had become. The upside was that I got to see things first-hand from a consumer's point of view.
The jobs lost in the auto industry have already been lost. Bankruptcy, although it sounds bad, won't affect that any further. If the company goes bankrupt, all it means is that its debts are wiped for the most part and it'll be forced to reorganize. The CEOs pleading for the bailout don't want to reorganize because it could mean their jobs. No more millions and no more expensive private jet flights all over the world. Every week, the CEO of Ford flies home from Ohio to Seattle at $3,800 an hour. Every week. Reorganization will help these companies, not hurt them. The companies will have to take a hard look at its bad habits. If they are left to fend for themselves, people will still come to work every day, cars will still get made and TV ads will still run. The only thing that will be different is the management of the companies and the way they conduct their affairs.
If a bailout is extended, however, the consequences could be dire. The mismanagement of the money been appropriated to banks as part of the $700 billion bailout package has been obscene ... and that's just so far. there's still about $575 billion yet to be allocated. Example of the insanity? After receiving $7.7 billion in government money, PNC bought out rival National City for $5.2 billion, leaving $2.5 billion to address the alleged problems the bank had before its bailout. How in the hell could this happen? No restrictions on how the money could be used.
While we're not talking about hundreds of billions of dollars for the auto industry, $25 billion is still a healthy chunk of change. And let's face it: it won't end there. Not only will the auto industry's bad habits keep it knocking on the Treasury's door, it'll also leave another door open for other industries. If you don't think the airline industry will be next in line for government handouts, guess again. Pretty soon, every industry from textiles to casinos will want in the action.
And Congress will have no choice but to consider every single request, because no stand has been taken. Yesterday, the auto makers were denied by the 110th Congress. My guess is the 111th won't be so stingy.
Let the good times roll.
Photo © Tim Sloan/Getty Images
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“If the company goes bankrupt, all it means is that its debts are wiped for the most part and it’ll be forced to reorganize. The CEOs pleading for the bailout don’t want to reorganize because it could mean their jobs.”
That’s only part of it. There’s another party that doesn’t want to see these companies go bankrupt; the auto workers unions. One of the things that a business can reorganize when it files for bankruptcy are its contracts with their unions, and these groups don’t want to see their lofty benefits threatened. That’s why GM, Ford, and Chrystler will eventually get that money. It’s not meant to bail out the corporations, it’s meant to bail out the unions and their status quo.
On the wake of the news that we will now be bailing out Citibank, the irony of this situation just occurred to me since probably a great majority of Americans at one time or another have had to deal with the “customer service” of their credit card company; either by receiving a call about a late payment or calling them to dispute a charge and/or finance rate. Essentially we’ve all been in the position of asking these rat bastards to give us a break or help us out when we need it or admit they made a mistake when they clearly did. And we all know what we had to deal with: rudeness, an inability to act like a normal compassionate human being, downright nastiness, being on hold for hours on end, having to interpret several dialects of Indian, repeat calls when promises are broken and the ubiquitous middle of the dinner hour call when GOD FORBID they didnt receive your payment by midnight on the due date. You with me? I thought so.
Now these heartless, rat fink %#@*holes have gone down to Congress, OUR CONGRESS, without an ounce of shame, to ask for a helping hand, a little push in hard times, something to get them over this hump, a hump created no doubt by fiscal irresponsibility and an inability to be human (see previous paragraph). And our Congress, OUR CONGRESS, threatened by the gloom and doom these bottom feeders forecast, are dishing out the money, tractor trailers full of money, while your credit card statement still sits on your desk at home, or at work, mocking you with its 23.5% rate and threats of $35 late fees. Yea, lets help those scoundrels out.
What’s next, monetary bailout for bank robbers who cant seem to make those restitution payments ?
Thanks for that, S.A.
That’s one of the best comments I’ve seen in a long time. The irony of the Citibank situation is both baffling and unconscionable.
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