by Damozel | Huh. If we've really got to have a bailout to prove we're not socialists, it should at least come all tied up with string. It's not going to work, and so it's a waste of money, but at least the taxpayer dollars shouldn't wind up in the overstuffed pockets of the nation's top suits.
Top advisers to President-elect Barack Obama are helping to draft an auto industry rescue plan that would bring new government oversight, including the possibility of an auto czar who could ensure the money was being used wisely.
Aides said Obama is also open to an oversight board that would perform the same function as one individual. The proposals come as the estimates of the cost to fix Detroit's three largest automakers continue to mount.
Certainly he wouldn't believe in it being a blank check," said an Obama adviser.... "He wants oversight to be making sure the auto companies have figured out how to become viable, ongoing concerns." (WaPo)
I hope they also intend to limit executive pay. And what do you know, Senator Charles Grassley agrees. In fact, he wrote Detroit's top executives that perhaps this would be a good place for them to start if they're really serious about wanting to save the industry.
Sen. Charles E. Grassley (R-Iowa) told Detroit's top executives in a letter yesterday to follow the example of former Chrysler chief executive Lee Iacocca, who slashed his salary to $1 after Chrysler's federal bailout in 1979.
"Many men and women are pinching pennies just to get by, making sacrifices and changing their lifestyles to stay in their homes, send their children to school, and grow their retirement savings," Grassley wrote. "I think it's highly appropriate, if not absolutely necessary, that you do the same." (WaPo)
Wish he'd started with a similar letter to the financial industry.
At present, there probably aren't sufficient votes to get Obama's plan implemented. Sadly, a previous bailout seems to have gone awry. Badly awry.
A few months ago, a $25 billion loan package to boost Detroit's production of energy-efficient vehicles seemed sufficient to help automakers and suppliers get over a rough patch and steer the industry towards a greener future. The legislation was rushed through Congress. The Energy Department wrote the rules of the program in half of the time it was allotted. (WaPo)
And there are more auto industry emergencies in the mail.
An increasing number of analysts say the cost of reviving the American auto industry is not likely to stop with the current plans. Citigroup analyst Itay Michaeli said a General Motors bailout alone would exceed $21 billion. J.P. Morgan Chase's Himanshu Patel and Barclays Capital's Brian A. Johnson both speculated that federal assistance for GM could easily reach $30 billion.
At the pace GM and Ford are burning through their cash -- at a rate of least $4.9 billion a month -- $25 billion won't last much longer than five months. And that's not taking into account what Chrysler might need.(WaPo)
StephenBainbridge.com thinks that the Obama plan reeks too much of socialism. Oh well, then.
Injecting capital into the automobile makers does not address the underlying structural problems faced by this industry. It does nothing to give them leaner bureaucracies, less expensive legacy health and pension costs, more flexible work rules, less restrictive and costly union contracts, and, to put it bluntly, products somebody would want to buy. All it does is delay the inevitable by giving them more money to burn through.
News reports indicate that President-elect Obama is unwilling to give the automakers at a blank check. Fair enough. Yet, his proposed solution of a government czar for the auto industry smacks way too much of government control over the means of production. Setting aside the ideological question of whether de facto nationalization of the auto industry amounts to socialism, one is still left with the question of whether it is reasonable to expect some government bureaucrat to do a better job of running the automobile industry than businessmen and women.
Of course, requiring oversight by an official who is accountable to the president is not necessarily exactly the same as putting a "bureaucrat" in charge of "running the auto industry."
Let me be clear---I don't think anything they do is going to work I think we're going to have to scrap the whole rotten system and start over fresh. I hate throwing good money after bad, but that's what they're going to do.
But IF that's going to happen at least I want an accounting. I want oversight.
But never mind that. As long as Bush remains in charge, no oversight is needed!
As Deb Cupples explains, the ever-resourceful and not-at-all-socialist Secretary Paulson does seem to have found a way to slip a few bucks to the auto-industry.
Mr. Paulson publicly growls against using the Big Bailout Funds to help bail out our nation's auto industry, which is understandable given that Congress already agreed in September to lend that industry $25 billion.
Yet, for some reason, Mr. Paulson found a clever, back-door way to increase the auto-industry bailout: sending money to the financing subsidiary companies of Ford, Chrysler and GM. (NYT)
You see, Bush administration both strongly opposes the Dems' wish to direct bailout funds from the $700 billion package to the auto industry and doesn't want the American auto industry to fail. (WaPo)
Speaking of Paulson, he seems to feel that we have "humiliated ourselves as a nation." From Calculated Risk:
"We have in many ways humiliated ourselves as a nation with some of the problems that have taken place here," Paulson said in an interview with CNBC television.
Speak for yourself Mr. Paulson.
Stormy at Angry Bear, my favorite econoblogger, comments dourly on Paulson's flexible strategy.
Belay that last order. Forget the financial system. Helm hard a starboard! Keep a weather eye on the consumer! It's not the banks that we need rescue. It's the consumer.
Now, after panicky cries that we must rescue the banking system, Mr. Paulson, our first mate, tells us, "No, lads, the banks will not help. They are not lending us a hand." They want to sit on their cash, pay out dividends, and keep credit tight. "
We are off now to, of all things, institutions that issue credit cards and consumer loans.
And warns that these band-aids are not only not going to work, but are going to cause the sickness to spread further and faster.
Not that I want to, but I am going to suggest a radical alternative. This ship is going down, fast. Financial capitalism is broken. (Note the adjective, please.) Nationalize the banks and all lending facilities. Just do it. Set a reasonable rate for credit cards and other types of loans--and mortgages. Set up real lending standards. No one gets ten credit cards; they get one, if that. No more multi-billion dollar CEOs and their cadres of wolves. No more figuring out ways to game the credit system.
For those of you who still believe in free market banking and lending, here is the bottom line: If you thought Ben Laden was a threat--or that Saddam Hussein, a third world dictator was a threat--, well, I have news for you. We are looking down the barrel of a real threat.
If this system really crashes, you will know what a security threat really is. (Angry Bear)
Deb Cupples has discussed some of the problems with the current bailout philosophy:
More Sleight of Hand re: Bailout Funds?
Waxman Wants Executive Pay Data from Banks Getting Bailout Funds
Are Bailout Funds Being Misused?Cutting Executive Pay Would Save Jobs
Lehman Execs Redistribute Shareholder Wealth (to Themselves)
Comments