Bailout
For the past month, we have all heard the term bailout. Our economy is in trouble. Our government must step in. While I have generally been supportive of a bailout, realizing we may be able to prevent turning this recession (yes, I said it, I believe we are in a recession) into a much more significant and longer lasting depression.
However, even though I support some form of a bailout, I also shudder to think our government will throw money at these companies without stipulations. Stipulations such as banks much start lending again. Stipulations such as the bailout money cannot be used to line the pockets of executives that got us this deep in trouble in the first place. Stipulations such as stubborn, stuck in 1950 American car companies must catch up to the fuel-efficient world in which we now live.
Rules. Lots of rules. You want my money and other tax-payers money? Well, I’m sorry, but if you can’t work it out on your own and you need us to run to the rescue, then you’ve got to live by some rules.
My dad forwarded an op-ed column that Thomas Friedman wrote in the New York Times. He sums up the most recent call for a Detroit (as in American car maker, not the city itself) bailout. Intelligently. With hard-hitting statements. Here are a few quotes from the column to give you a flavor of his mindset.
How could these companies be so bad for so long? Clearly the combination of a very un-innovative business culture, visionless management and overly generous labor contracts explains a lot of it. It led to a situation whereby General Motors could make money only by selling big, gas-guzzling S.U.V.’s and trucks. Therefore, instead of focusing on making money by innovating around fuel efficiency, productivity and design, G.M. threw way too much energy into lobbying and maneuvering to protect its gas guzzlers.
…
The blame for this travesty 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. That shielded General Motors, Ford and Chrysler from environmental concerns, mileage concerns and the full impact of global competition that could have forced Detroit to adapt long ago.
…
In return for any direct government aid, the board and the management [of G.M.] 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 G.M. with a viable business plan and return it to a private operation as soon as possible.
Still interested? You can read the rest of the column here.
__________________________________________________
Over 80 bloggers have signed up so far.
Where’s your name?
Submissions due this SATURDAY!!!
Learn more here!
November 13th, 2008 at 12:18 pm
I agree with this 100%, if we don’t give rules and stipulations to go along with all that money thats being given to them, nothing will ever get solved.
I especially agree with that op-ed piece on the automaking industry. It’d be great to see a turn around in how cars are made and to make them more efficient at the same time as getting themselves back on their feet. Thanks for sharing this!
November 13th, 2008 at 12:37 pm
I agree. I love the op-ed too. Thanks for sharing.
November 13th, 2008 at 2:04 pm
To me this is really interesting. I do not know enough about this to comment, but I agree that there need to be rules set in place if tax payers money is to be used.
November 13th, 2008 at 2:21 pm
Yikes, they are due tomorrow?!? Ahhh, I thought it was Saturday!!!
On your post topic… I’m mad that we gave them a bailout and they got bonuses! HELLO! Bonuses are rewards for GOOD behavior! You shouldn’t get a bonus if your company has to be bailed out! You should be thankful to have a job!!!!!!
I think they should have to pay the bailouts back. With interest.
November 13th, 2008 at 2:47 pm
If America bails out GM and/or Ford we should demand a change in the leadership and management teams. Until someone Disrupts these companies and changes their management approach these companies will not be viable competitors. Read more at http://www.thephoenixprinciple.com
November 13th, 2008 at 3:13 pm
God I wish I could see into the future and know what is going to happen.
November 13th, 2008 at 3:36 pm
As a former Detroit-er, I agree that something needs to be done to help keep the auto industry alice and its workers employed.
What I’d really like to see is a change in the products being turned out by the auto industry so we can afford to actually buy and drive these cars without having such a huge impact on our wallets and our environment.
November 13th, 2008 at 3:46 pm
Thomas Friedman is a man after my heart.
I was saying the same thing to the BF the other day. Specifically, that this problem has been going on since the 1970s and never got better, they never learn. I know that the risk is high unemployment but they treat it like a bandaid on an heart bypass.
Our tax money is basically going to help bail them out but “we” can’t say anything. Excuse me but, I would like to put my tax money towards healthcare and education but since I have to help you I will be wanting to give you rules. In fact, I would like to set up milestones that must be met before the full payout can begin. I would also like to dole this out accordingly.
American car companies are stuck in the past where bigger was better and more is not enough.
Last night T boone Pickens was on the daily show and had such a simple idea on using natural gas. You use it for trucks, SUVs 18 wheelers and he is right. The car comanies are not forward thinkers they are not innovators and they think that they can force their visions on to us.
Sadly, things don’t work that way and even more sadly, we all have to suffer.
Whew getting off my soapbox now.
November 13th, 2008 at 3:57 pm
Well said, by both you and Thomas Friedman. I heard on the radio this morning that the banks aren’t lending the money from their bailout and they get defensive and say they don’t need to account for it when asked! We’ve learned the hard way that they can’t be trusted so now we should trust them with more?
November 13th, 2008 at 4:14 pm
“…no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste.” That was in the Washington Post this morning (http://www.washingtonpost.com/wp-dyn/content/article/2008/11/12/AR2008111202846.html?hpid=topnews). No oversight. Can you believe this??!
November 13th, 2008 at 4:49 pm
Our blogs must be on mind meld…I am from Detroit and just wrote a depressing post about bailouts!
But you (and Mr. Friedman) are so right…I know we (and by ‘we’ I mean the companies AND the population of Michigan) need to money to stay afloat, but I do hope it’s not just a blank check with no rules.
November 13th, 2008 at 4:49 pm
Our blogs must be on mind meld…I am from Detroit and just wrote a depressing post about bailouts!
But you (and Mr. Friedman) are so right…I know we (and by ‘we’ I mean the companies AND the population of Michigan) need to money to stay afloat, but I do hope it’s not just a blank check with no rules.
November 13th, 2008 at 4:55 pm
Yes, exactly. BUT (and this is where I start to sound Conservative) I am frustrated that the government has a mortgage bailout plan for people who bought more home than they could afford and that they even considered relieving individuals of 40% of their credit card debt (3carnations brought that one to my attention). Far too many people live beyond their means. I generally understand the whole ‘predatory lending’ thing, but if some mortgage broker told me I could afford a $700,000 house, I’d find a new mortgage broker. I get that there are nationwide (and global) effects of the housing and credit market collapse, it just pisses me off that the government is basically encouraging bad financial behavior.
November 13th, 2008 at 5:21 pm
The whole bailout makes me sick to my stomach! Where the fuck is the accountability?
These big business Republicans, who have so proudly shunned any sort of government interference, are now the ones running with their hands out.
I agree -- there needs to be stipulations…as any Republican would say, there’s no such thing as a free ride.
I also think about what $700 billion could do for education and healthcare and then I just want to puke all over again!
November 13th, 2008 at 10:14 pm
Why is it that every time I read something like this, I feel like the Bush administration is somehow culpable?
November 14th, 2008 at 12:42 am
Thanks for sharing th op-ed piece. It was really on target.
Now I’ve got to go write my blog secret -- ack!
November 14th, 2008 at 3:06 am
The big three need to file for bankruptcy and undergo re-organization. New management, new business models, and no more unions. Toyota factory workers in America make $48/hr. A worker for the big three? $72/hr. No wonder they haven’t invested in smaller, cheaper cars. There is no profit margin. In the late 19th and early 20th centuries there was a role for unions in protecting workers from injury, overwork, and low payment. But in these times of workplace safety, unions are outdated and are bankrupting the big three and my state. (Our budget woes are due, in large part, to unions of govt employees and crazy benefits.)
As far as the bank bailout, I’m sure you can guess that I was against the whole thing from the beginning.
November 14th, 2008 at 3:06 am
The big three need to file for bankruptcy and undergo re-organization. New management, new business models, and no more unions. Toyota factory workers in America make $48/hr. A worker for the big three? $72/hr. No wonder they haven’t invested in smaller, cheaper cars. There is no profit margin. In the late 19th and early 20th centuries there was a role for unions in protecting workers from injury, overwork, and low payment. But in these times of workplace safety, unions are outdated and are bankrupting the big three and my state. (Our budget woes are due, in large part, to unions of govt employees and crazy benefits.)
As far as the bank bailout, I’m sure you can guess that I was against the whole thing from the beginning.
November 14th, 2008 at 3:19 am
I really should be finishing up my BlogSecret post. But noooo, you have to go and share an awesome piece of writing. Gee whiz!
November 14th, 2008 at 9:19 am
I know something has to be done here, but if we were talking about a small business in this mess, it would have to go to a bank or other financial institution, put in an application for a loan, and if approved pay back the loan and hefty interest, or seek out an investor and pay back a share of future profit. However in this situation, with the tax payer, essentially being the bank this money is coming from, what is the tax payer getting back, or am I missing something here? As for accountability -- there definitely should be accountability. I’m held acountable for everything I do, both in business and personally but no, these companies just keep being allowed to pay out massive bonuses they can’t afford, to the people sending them broke. What the mortage brokers have done, and I know as an earlier commentor stated, the mortgagee should have known better, but hey the lenders being in that business, should have known better. I see as what they have done as criminal. What GM has done with its big car production, in this time of climate change I think also borders on criminal. Harsh yes, but look at our future.
November 15th, 2008 at 4:41 pm
Nichole nailed it.
November 15th, 2008 at 5:28 pm
Why thank you, Mega. Did you know you’re awesome?
November 15th, 2008 at 5:28 pm
Why thank you, Mega. Did you know you’re awesome?
November 19th, 2008 at 9:54 pm
These quotes are perfect. I work indirectly with the auto industry. It frustrates me how the Big Three can ask for money to keep them afloat. They’ve made their own bed, now it’s time they lie in it too.
I don’t see Toyota, VW, or Honda asking for allowances. Why? Because they innovate. GM claims it’s because their customers couldn’t finance cars the second half of this year. Whatever! Other manufacturers had the same concerns, but aren’t in the same predicament.
By the way, I don’t think this is a partisan issue… although it seems to be playing out that way in the media now. I saw someone comment about how Republicans are evil. It’s more complex than the two political parties.