Sunday, November 16, 2008
Why the Auto Bailout is Bullshit
Increasingly, we're hearing calls from Detroit and the Big 3 for a bailout of the automotive industry comparable to that of the financial sector. The suggestion is essentially pure, unadulterated, bullshit. The financial bailout was necessary because the financial sector is a lynchpin for the rest of American business. Without the lifeblood of money, the rest of American business would be in jeapordy of collapsing itself. The same cannot be said of the Big 3. In fact, the failure of GM, Ford, or Chrysler would not even spell the demise of the U.S. automotive industry, as "foreign" firms like Honda, Toyota, and Hyundai with U.S. manufacturing remain relatively healthy. Moreover, unlike the financial sector, Chapter 11 restructuring remains a viable option for automotive firms. This option would mean that GM, Chrysler, or Ford would remain ongoing business entities, only with different capital and cost structures. While Detroit tries to convince us that they deserve a bailout as much as Wall Street, "deserve" has got nothing to do with it, to borrow a line from the movies. We didn't loan money to the banks because we felt sorry for all of those poor investment bankers and traders. We lent them the money because it was in our own interest to do so. That is by no means clearly the case here.
Finally, and perhaps most importantly, this entire scheme reeks of a poorly designed con job. GM, the most clear-cut candidate for assistance, has been taked aobut as receiving $10 billion in "loans". However, GM currently has a burn rate of $4.2 billion per quarter. No one has given me any evidence of any plan, strategy, or expectation, beyond praying for divine intervention, that said burn rate is likely to be reduced any time in the near future. This means, then, that if we loan them this $10 billion, we'll find ourselves in roughly the same position next July or early August.
So, why is this being offered as a "bailout"? My suspicion is that this is political decision by Big 3 management and the UAW to get us sucked in. $10 billion, as shocking as it might seem, isn't near the kind of money and regulatory favoritism we're going to be asked to pony up. I suspect that they judge the incoming Congress and administration, however, as much more willing to give them the kind of money and protectionist support they're really looking for. Of course, given the currently asked-for initial infusion, this will be sold to us as "protecting our investment".
As I said, pure. unadulterated. BULLSHIT.
Increasingly, we're hearing calls from Detroit and the Big 3 for a bailout of the automotive industry comparable to that of the financial sector. The suggestion is essentially pure, unadulterated, bullshit. The financial bailout was necessary because the financial sector is a lynchpin for the rest of American business. Without the lifeblood of money, the rest of American business would be in jeapordy of collapsing itself. The same cannot be said of the Big 3. In fact, the failure of GM, Ford, or Chrysler would not even spell the demise of the U.S. automotive industry, as "foreign" firms like Honda, Toyota, and Hyundai with U.S. manufacturing remain relatively healthy. Moreover, unlike the financial sector, Chapter 11 restructuring remains a viable option for automotive firms. This option would mean that GM, Chrysler, or Ford would remain ongoing business entities, only with different capital and cost structures. While Detroit tries to convince us that they deserve a bailout as much as Wall Street, "deserve" has got nothing to do with it, to borrow a line from the movies. We didn't loan money to the banks because we felt sorry for all of those poor investment bankers and traders. We lent them the money because it was in our own interest to do so. That is by no means clearly the case here.
Finally, and perhaps most importantly, this entire scheme reeks of a poorly designed con job. GM, the most clear-cut candidate for assistance, has been taked aobut as receiving $10 billion in "loans". However, GM currently has a burn rate of $4.2 billion per quarter. No one has given me any evidence of any plan, strategy, or expectation, beyond praying for divine intervention, that said burn rate is likely to be reduced any time in the near future. This means, then, that if we loan them this $10 billion, we'll find ourselves in roughly the same position next July or early August.
So, why is this being offered as a "bailout"? My suspicion is that this is political decision by Big 3 management and the UAW to get us sucked in. $10 billion, as shocking as it might seem, isn't near the kind of money and regulatory favoritism we're going to be asked to pony up. I suspect that they judge the incoming Congress and administration, however, as much more willing to give them the kind of money and protectionist support they're really looking for. Of course, given the currently asked-for initial infusion, this will be sold to us as "protecting our investment".
As I said, pure. unadulterated. BULLSHIT.
Sunday, November 09, 2008
Attorney General Nominee
Gee, isn't it great to know that, with 0bama and the Democrats in the White House the era of political hacks and incompetents is over. I mean, just look at one of their leading candidates for Attorney General: Jamie Gorelick
What a resume! Created the wall between FBI and CIA cooperation on terrorism matters. Sat on the commission investigating one of the consequences of the wall between FBI and CIA cooperation on terrorism matters, refusing to recuse herself. Fannie Mae lead counsel. Isn't it great to know that 0bama (Who doesn't have any Fannie Mae connections!!) is leaving behind the old ways of cupidity and corruption?
Now, if you'll excuse me, I'm going to go puke.
Gee, isn't it great to know that, with 0bama and the Democrats in the White House the era of political hacks and incompetents is over. I mean, just look at one of their leading candidates for Attorney General: Jamie Gorelick
What a resume! Created the wall between FBI and CIA cooperation on terrorism matters. Sat on the commission investigating one of the consequences of the wall between FBI and CIA cooperation on terrorism matters, refusing to recuse herself. Fannie Mae lead counsel. Isn't it great to know that 0bama (Who doesn't have any Fannie Mae connections!!) is leaving behind the old ways of cupidity and corruption?
Now, if you'll excuse me, I'm going to go puke.
