Will the White House Bail Out Detroit? 28 comments
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The ball's in the White House's court; there's no chance of Congress passing a Detroit bailout bill before it reconvenes next year. The White House has TARP funds, but only $15 billion remains from the first $350 billion tranche; that's barely enough for Detroit, and in any case it's needed as to backstop Treasury commitments to the financial sector. So here's one question:
What does this all mean for the probability that Paulson will get the second $350 billion?
On the one hand, if Congress won't give Detroit a fraction of that amount, it's really hard to see why they will be so generous to Wall Street. Clearly any bailout is supremely unpopular among both voters and their representatives, and of all the bailouts to attempt, Wall Street is probably the most unpopular.
At the same time, however, Congress has already passed the $700 billion TARP bill, and clearly something needs to be done: Maybe a case can be made that now it's obvious $700 billion is not nearly enough, it would be silly to block the release of the second tranche. But I'm not hopeful.
I do wonder whether the White House might be able to find Detroit bailout money (or, at the very least, debtor-in-possession financing money) somewhere other than TARP -- a bit like Bob Rubin managed to find Mexico's bailout money in some hidden corner of the Treasury, using a dusty old piece of legislation for a purpose it was never designed for. Paulson's quite open about the fact that he's happy to make decisions first and worry about their legality later -- can't he do that now, with Detroit?
The problem is that it might be a stretch even for Paulson to decide that Detroit really falls under his purview. Congress has spoken, unambiguously: it doesn't want a bailout. (Or, rather, a minority of Senators has managed to block a bailout.)
And while the stock market was down this morning, it didn't plunge in the way it did after TARP failed the first time around. I don't believe that the stock market is pricing in some kind of Deus ex Machina from the White House, which would imply that maybe it's not as worried about the fate of Detroit as many of the rest of us are. And if Wall Street isn't worried, then the chances are that Paulson isn't worried, either.
Which is bad news for Detroit, I fear.
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This is criminal:
www.bloomberg.com/apps...
A failure to support that sector will derail economy and likely magnify the negative psychology.
The SEC should impose moratorium on short selling for a period of six months in order to allow the TARP and other measures to be effective.
Mr.Salmon should be writing comic books .His economic theory applications would send the U.S economy (rest of the universe would follow)into tailspin exceeding definition of Depression.
In the meantime the coordinated effort to stabilize economy should continue and we will see a rebound by the end of the first QTR of 2009 and a major rebound by the second half of 2009.
Let's see if anyone cares anymore.
On Dec 12 03:58 PM L Moore wrote:
> The government should buy a large number of cars from detroit and
> give them to taxpayers. It would be just as good as any infrastructure
> stimulas package that might get passed for Obama.
>
> You want to stop losing jobs? Put a ban on M&A. And, take big
> companies, break them up, and make several smaller ones of of them.
On Dec 12 03:51 PM briacal wrote:
> President George W.Bush saved the country after the terrorist attack
> of 9/11.Now he has been using everything available to him to repair
> the economic disaster created by the many financial terroristic groups
> that for years have been undermining all the american ideals "ONE
> NATION UNDER GOD WITH LIBERTY AND JUSTICE FOR ALL" I would like to
> suggest that the american people should start considering the reality
> that President George W.Bush is the best President theUSA ever had.
> Shame on you Oliver Stone
I don't think its a matter of restructuring debt, the money will be used for items like paying the electricity etc.
I also think Ford will survive, can you imagine USA without an American car company! This would become a culture and security issue.
A sad day for America.
All of the above made it possible for every Tom, Dick, and Harry, and his wife, and his daughter to have one of those things parked out there in the driveway.
In my opinion, any so-called Car Czar that can rescue these two companies with $14 billion, also wears a cape and can leap off tall buildings. This whole deal strikes me as a way to buy time. The auto industry has a long row to hoe before they reap any results, what with restructuring, slashing their work force, closing plants, dealing with UAW, etc not to mention actually producing cars that consumers want.
So what exactly is on the Car Czar’s to-do list? So far it sounds like he’ll come up with some guidelines for restructuring GM and Chrysler by the first of next year. But if the auto execs can’t prove that they have a plan to reinvent themselves by Feb 15, they have to give the money back. Give me a break!
If the $14 billion is an emergency loan, it’s just a survival kit, so what money will be left to give back? One forecasting firm is saying that with or without the bailout, Chrysler is already a lost cause. And what restructuring plan? Didn’t they already submit a plan? Furthermore, under whose leadership will these terms be set? A lame duck’s or will they be enacted after Obama takes the oath?
Apparently the bill will restrict executive compensation, but why are these two CEO's still there? I personally would have resigned a long time ago. But these poor excuses for leaders either weren’t paying attention to the mess they were creating, or they just didn’t care. Who are they going to blame now? The reluctant consumer? Oil prices? Japanese and Korean cars? The economy? Who?
I’ll tell you who’s to blame. It’s you, the auto industry CEOs who bear the full responsibility. You were the ones who were either too complacent or else didn’t have the vision to foresee the geopolitical and economic forces that shaped competition as you continued to crank out gas-guzzling SUVs. It is you who have not mastered the core principles of leadership or even the most basic skills required to manage. I’m referring to the bottom-line business basics of planning, organizing, motivating, performance management, risk management, forecasting, and so on. It’s all there in Management 101!
And I also fault the boards of directors for failing in their oversight. Boards are charged with the responsibilities of setting broad policies and objectives, selecting, appointing, supporting and reviewing the performance of the chief executive, ensuring the availability of adequate financial resources, approving annual budgets, being accountable to the stakeholders for the organization's performance.
These are standard duties for members of any corporate board, but they should be even more rigorously adhered to by high-profile publicly-traded corporations. I give these CEOs and their boards a failing grade on all points –they not only failed, they failed miserably!
And what’s worse, millions of people are being affected, not only throughout the Rustbelt, but millions more across America and around the globe in places like Argentina and other countries where there are manufacturing plants. You have let down all your stakeholders!
Perhaps the savior in the cape, the one they will call the Car Czar, will do a better job than the two CEOs have done. And while the czar will only be a puppet position until Obama takes the reins, I’d like to suggest this as the first order of the day—fire everybody at the top of the auto industry chart who was responsible for creating so much grief.
This comment was posted by Jose Roncal, co-author of "The Big Gamble: Are you investing or speculating?" - For more information, visit financialspeculation.c...
What's happening over the last decade is Asians like Chinese and Indians have become more educated and smarter to realize that Americans are not as productive in comparison as decades before and they are being pampered by the foreign debt. Decades ago, Americans were a productive country in the real sense until they've become to always way overstress the importance of the businesses of "moving money around".
That's whay I learned and observed when I had my further studies in the States. This years and years of complacency amongst the Americans especially the young generations led to this financial meltdown in which the world is starting to realize that the businesses of "moving money around" must be analyzed based on the real merit and not analyzed based on the fact that they're businesses of "moving money around".
Americans are trying to come out of this by ONLY bailing out with TRILLIONS of national deficit and foreign debt on the money-related businesses since they realize that their best way of maintaining the status quo (American is the no. 1 country in the world) is not to let these money-related businesses to go down. The big 3 are not Americans' bread and butter businesses anymore since Asians have become and will become much "better in all sense" at manufacturing businesses.
As long as the Asians do not fully realize this fundamental fact of life, Asians can only rise slowly against Americans. Of course, these are watershed times where the wealth of Asians are steadily rising due to the complacency of Americans. They think they deserve the current standard of living when most Americans do not even care and understand about the world outside the States. They think the world revolves around them.
Full economic decoupling between Asians and Americans would not happen since it's an interconnecting world out there. However, Asians are not experiencing full impact from the American-led meltdown since Asians have been steadily shielding themselves from external adverse impacts by developing their domestic markets.
Believe me, the day will come when the Asians become so fed up with the lofty standard of living that the Americans were having in the past and are still having nowadays are never justified and the Asians will keep on slashing their country financial reserves from the American debt. Of course, there will be economic impact to the Asians themselves but do you think Americans can keep on being complacent and inflating the deficit to trillions and trillions of dollars? In the real sense, countries are like individuals. One cant keep on borrowing money throughout one's life without being "more productive in the true sense". Americans will continue to feel these excruciating pains until they truly realize that the world doesnt revolve around them only.
Money is the sole responsibility of the legislature...that would be Congress, the House and the Senate. THEY have power of the purse.
On Dec 12 03:55 PM shadrach wrote:
> I realize Bush is our president and I've supported his decisions
> including the wars but when the majority of the people have said
> they don't want to bail out the auto industry and the congress has
> said no to bailing them out, just who the $*@&^ does Bush think
> he is to give them the money anyway.
>
> I think the same can be said of Obama as well with his continuing
> calls for this to be done. I know the dems love the unions but the
> people you are supposed to be representing are telling you no. What
> part of that don't they understand?
>
Make small companies from big three, believe me, I am from Austria. Small countries work much better than the large ones. We still have personal interest in what happens, large systems become too anonymous. There is also Switzerland, Luxemburg etc., maybe you don't hear too much of a 8 mio country, but we live very fine here.
big does NOT have to be good !!!!!!
On Dec 12 03:58 PM L Moore wrote:
> The government should buy a large number of cars from detroit and
> give them to taxpayers. It would be just as good as any infrastructure
> stimulas package that might get passed for Obama.
>
> You want to stop losing jobs? Put a ban on M&A. And, take big
> companies, break them up, and make several smaller ones of of them.