One of our readers, Jim, is strongly in favor of the auto industry bailout.  He pointed me to this article at Time Magazine:

On Monday, an auto industry consulting firm, Planning Perspectives Inc., reported that 68% of participants in a survey of executives for industry suppliers said their companies would have to downsize if General Motors declared bankruptcy, while 12% said their businesses would likely close or would definitely do so. In the Midwest alone, some 275,000 jobs would be lost as a result of a GM bankruptcy. “If they go into bankruptcy, it’s going to have a catastrophic effect on businesses across the board,” says John W. Henke Jr., president of PPI, based in Birmingham, Mich.

There will certainly be a large wave of financial pain felt by many people if these companies fail now. Michigan will likely be one of the hardest hit states in the country if the Big Three fail, and as a former resident of the state, I would hate to see it happen. So many companies are intrinsically tied to the health of the automobile manufacturers, it’s almost terrifying to think of what would happen to those communities if the companies died overnight.

We saw a similar event happen with Flint, Michigan when General Motors pulled out of that city decades ago. That city went into a spiraling decay from which it has never fully recovered.  Crime went through the roof, real estate prices plummeted, and whole communities were abandoned.  This was because the company made the decision to abandon those factories which weren’t profitable enough to maintain.

Nearly 60,000 GM jobs were cut in Flint from the 1980′s to the 1990′s, resulting in massive unemployment.  The loss of the factory jobs led to lower demand for local suppliers, restaurants, and entertainment venues.  Only in the last couple of years has Flint started to recover in terms of lower crime and population growth.  It took roughly 25 years to accomplish this.

Today, we face the prospect of the entire U.S. automotive industry failing.  If this occurs, we will see a very similar story play out in many large U.S. cities.  But, the question shouldn’t be “how much taxpayer money should we hand them?”

There’s a whole slew of questions that need to come out of this situation:

• How did all 3 companies end up in an “imminent failure” position after only a couple of consecutive years of financial losses (shortly after record profits in the late 1990′s)?
• How much restructuring did they do when profits began their decline a few years ago? Why didn’t it work?
• How much of their current losses are attributable to excessive salaries (both at the corporate executive level and at the grunt labor level)?
• Which overseas divisions remain profitable, and what are the major factors which differ there?
• What government regulations are costing the companies the most money to live up to?  Can they be modified to achieve profitability?
• How far will a taxpayer-funded gamble of $25-40 billion really go since GM managed to lose $38.7 billion in 2007 alone (granted, some of that was just a “paper loss”, but…)?
• What have each of them done in the last week to reduce costs in their organizations?
• Why hasn’t fuel efficiency changed dramatically since the Ford Model T (which could get up to 21 mpg)?
• What guarantees do we have that they won’t just close down the U.S. factories anyway and increase foreign production once they have the money?  After all, most of the screaming politicians don’t care about these companies.  They just care about getting votes from the workers and receiving UAW endorsements.
• What’s the criteria that we’re going to use for the “Too Big to Fail” slogan to apply?  10,000 employees? 100,000?
• Should the government have stepped in to prevent the closing of the factories in Flint in the 80′s? Or, was that type of “failure” okay because it was a private-sector business decision?

There are countless more questions to ask, but the “solution” will still be to just hand over more taxpayer money.  We’ll consider it an “investment”, since there are immediate social and economic consequences whenever a large employer shuts down completely.

What are the long term consequences of these actions, though?  How much are we, the taxpayers, willing to give away before actually letting these companies die?  Will we nationalize the auto industry like we did with the banks?  Are there any lines left to be drawn?

I’m interested in your feedback.  Leave a comment below, or sign up for our newsletter.

City of Lansing Michigan’s Mayor, Virg Bernero, has some muddled thinking on how the auto industry should be dealt with regarding bailout money.  He doesn’t seem to understand that the money comes from the people.

Here is his email address:  mayor@ci.lansing.mi.us

Feel free to correct him

Here is a youtube video courtesy of the Campaign for Liberty in which Peter Schiff attempts to inform Virg on a few key issues.

From the Associated Press:

Stock intended to eventually earn taxpayers a profit as part of the Bush administration’s massive bank bailout has lost a third of its value — about $9 billion — in barely one month, according to an Associated Press analysis. Shares in virtually every bank that received federal money have remained below the prices the government negotiated.

“We’re not day traders, and we’re not looking for a return tomorrow” said Neel Kashkari, the director of Treasury’s Office of Financial Stability…

Of course you’re not day traders.  You are thieves that didn’t bother to listen to the public when we told you NOT to bailout the banks with our money.  You’re also terrible business people.  Making bad investments is one thing.  Making bad investments with other people’s money is something else entirely.

As an example, let’s say that someone were to give me $3,000 to protect them and for the general welfare of their family for a few weeks.  Now, an appropriate use of that money would be something like installing some sort of security system in their home (e.g., a local police force) or ensuring that they have enough food to survive.  What’s entirely inappropriate would be something like me taking that money and buying 10,000 rotten eggs with the hope that the eggs will get better with time.

Well, the U.S. Federal Government has just spent a few billion of our collective money on spoiling eggs.  If they aren’t “day traders”, then they should stay the hell away from the stock market.  We the people gave our government very explicit authorities in the Constitution.  Under no circumstances did we give them the authority to take our money and throw it at failing companies with no regard for the risks involved.

From the guy who brought us Monopoly, Bailout Edition, comes the top “10 Better Ways to Use the Bailout Money”:

Watching the news lately has made me fear for my wallet. It seems that almost every day brings America an exciting new round of recession-edition Monopoly, in which Henry Paulson gives yet another mismanaged company a Get Out of Bankruptcy Free card, then argues that the player using the car gamepiece is “too big to fail.”

 
There’s an excellent Chance that all this money is coming out of the national Community Chest
 

There are many who believe that the debt-laden avalanche of clusterfucks we call “bailouts” will not only fail to fix our current economic situation, but will actually make it worse, and make the coming recession longer. As someone who thinks that blindly handing trillions of dollars to companies that can’t make money is kind of like blindly handing trillions of Nintendo Wiis to quadriplegics, I happen to be one of those aforementioned “many.” So if propping up a bunch of fundamentally flawed companies will make things worse, what could we do with the money that would be more effective?

I’m so happy you asked….

Read the full top 10 list here.

At least people are paying attention, I suppose…

NEW YORK – “Bailout” and “change” were crowned on Monday as the words of 2008 after a year in which a huge financial crisis hit the United States and Barack Obama celebrated a historic victory as the first U.S. black president.
 
Merriam-Webster Inc., the publisher of a leading U.S. dictionary, said “bailout” — meaning “a rescue from financial distress” — was the word that received the highest intensity of lookups over the shortest period of time.

John Morse, publisher of Merriam-Webster Inc., said this was not surprising given that the word ubiquitously featured in discussions of the presidency and fiscal policy.

He said the presidential campaign also produced voluminous hits for words like “vet,” which ranked second in the 2008 list, “bipartisan,” “misogyny,” and the word used to describe both candidates on the Republican ticket, “maverick.”

He said one of biggest event-related words of the year was “socialism” which came third in the list of the 10 top lookup requests.

Courtesy of Reuters.

I still think that the government might have angered fewer people if they had simply renamed their proposal to something like the “Save the Children Act of 2008″.  Then, nearly every member of Congress would have never even read the legislation.  They would have all been cheerleaders for it and lambasted those who actually took the time to read the bill.

This way, the media wouldn’t have picked up on the story, and John Q. Public wouldn’t be so upset about corporate executives receiving billions of their taxpayer dollars.  All Congress needs is a better P.R. campaign to make us entirely ignorant of their theft policies.

Rob from the poor and give to the rich seems like an interesting plot for a movie… maybe starring a mysterious figure who runs around the woods in tights…

Well, at least the three that I wrote to. I think Baron Hill has the most favorable response. At least his letter felt less like a ‘form letter’ than the others. But, it was not recently written, as he is still referring to ‘current gas prices’. I also believe he does the best job at sitting on the fence because of his unwavering non-commitment to the Picken’s Plan. Note the second paragraph in his response. I will post the Picken’s Pledge for those who did not learn it during our recent $4 per gallon gasoline crisis.

Source: http://www.pickensplan.com/thepledge

T. Boone Pickens’ Energy Independence Pledge
We will no longer stand by and watch as America’s national security and economy become
more dependent on the unstable foreign nations that we rely on for nearly 70% of the oil we
use each day.
We spend nearly $700 billion every year buying foreign oil, which represents the greatest
transfer of wealth in the history of mankind.
President‐elect Obama and the 111th Congress need to enact an energy plan that reduces our
foreign oil dependence by at least 30% within ten years.
This plan must include proven American technology and resources; the development of new
energy sources; and the expansion and modernization of the national electrical grid to
transport renewable energy to homes and businesses.
Delaying any further means tacit support for continuing America’s addiction to foreign oil.
I join with T. Boone Pickens and his army of supporters in calling for an
Energy Independence Plan to be enacted within the first 100 days of the
Obama Administration.
__________________________________________________________
Signature Date
__________________________________________________________
Name (Please Print) Organization
__________________________________________________________
__________________________________________________________
Email Address Phone Number
__________________________________________________________
Address
__________________________________________________________
City, State, Zip Code
Comments:
Please fax to (888) 2829754
Paid for by Pickens Plan • PO Box 12123, Dallas, TX 75225 • (877) 872‐3247 • PickensPlan.com

Now read Baron Hill’s response. This is an email paid for by the American taxpayer, and as such, should be public domain. I have removed some line breaks. Source: My Mailbox…

Dear Mr. Green,

Thank you for contacting me about T. Boone Pickens’ energy pledge. I appreciate hearing your concerns on this matter.

I share T. Boone Pickens’ belief that we cannot continue to be dependant on unstable regimes to supply fuel for our citizens. There is no silver bullet to solving our energy problems, but there are a multitude of technologies and approaches that can reduce our need for energy, cleanly produce energy, and make more efficient use of our existing infrastructure. While I share the core assertions of the “Pickens Pledge,” I will not sign the pledge because I do not want to favor one particular energy source over another. During these tough times, I believe all options should be discussed to help our nation become more energy independent.

I am happy to report that during the 110th Congress I have supported several pieces of legislation that would help end our dependence on foreign oil and foster the continuing development of alternative and renewable fuels. The President signed H.R. 6, the Energy Independence and Security Act, into law on December 19, 2007. This legislation is designed to increase and expand domestic and renewable energy sources, as well as increase conservation. Long-term solutions must include a realistic and comprehensive national energy policy without the political partisanship that has plagued recent energy legislation. Many alternative fuels, such as corn-based and cellulosic ethanol, biomass fuels, and clean coal fuels, have the potential to reduce our dependence on foreign oil. In order to fulfill the potential of these new forms of fuel, we need to continue to fund research that helps bring these products to the market.

To that end, I supported H.R. 364 which creates an advanced research project agency focusing on transformational research in the energy field. This bill was included in the larger energy package that was signed into law last December. By passing H.R. 547, we will invest in research that will allow alternative fuels to be transported to delivery stations through our current fuel delivery infrastructure. Lowering the cost of switching to alternative fuels should encourage local businesses to make the switch. I have also cosponsored H.R. 635, which requires all gasoline sold to have 10% renewable fuel content by 2012. To address energy efficiency, I have introduced a bill with Representative McCaul (TX-R) to help create more energy efficient buildings.

Investing in new technologies will spur American innovation and business development and create thousands of new jobs. Recently, I supported H.R. 6049, the Renewable Energy and Job Creation Act of 2008, which passed the House on May 21, 2008 by a vote of 263-160. H.R. 6049 would extend and expand tax incentives for renewable energy and close loopholes allowing U.S. corporations and executives to avoid U.S. taxes by shipping jobs and investment overseas. Additionally, I am a cosponsor of H.R. 6709, the National Conservation, Environment, and Energy Independence Act, which would provide tax extensions and tax deductions of 5 years or greater for solar, biodiesel, and plug-in hybrid cars. The bill also would create a fund that devotes resources to researching and developing wind, solar, and carbon capture and sequestration programs.

Current gas prices are a burdensome reminder of our dependence on an unstable energy supply. We must work together toward a future in which we have a stable, domestic supply of energy. Thank you again for contacting me about this critical issue. Please do not hesitate to write or call me at 202.225.5315 if I can ever help you in any way. If you would like periodic email updates on my Congressional activities, please visit http://baronhill.house.gov.

You will note that Picken’s Plan does not mention any specific form of energy except electricity, which could be produced by any number of economical sources. Now, the only reason I can think of that he would hedge on backing Picken’s Plan is that it doesn’t specifically mention ethanol. Remember, Indiana is a corn state, intent on making food into fuel, increased carbon footprint notwithstanding. Perhaps he is the last to know that the truth is out about ethanol. To wit, in my hometown, there are no less than 50 empty, brand new railroad tank cars being stored by the local rail company. These cars were intended for the boom in ethanol. They now sit idle, future unknown, except that they will probably never contain the food-become-fuel.

This post has gone on long enough. I have 2 other replies from Evan Bayh and Dick Lugar, both Senators from the corn state of Indiana. As they are obviously form letters, and not very up to date, I will save them for later Congress-bashing.

Don’t forget what $4 per gallon gasoline felt like. Make our deadbutt Congressmen (I know… there’s a woman banging the gavel) take action. Remember, they don’t give a rip. They don’t buy gasoline, you buy it for them.

Wishing for some Common Sense,

Duke Green

That stupid f***in news media. Had me all pumped up for another session of hand-wringing. They promised me, and all of America, that Black Friday would truly be black, in the vampirish sense of the word. But wait… Americans spent more money this year than last year. What gives? While the news talking heads keep looking for the black lining around the silver cloud, here’s an opinion. Bear with me a minute.

We have all heard about the email bombs. The endless email viruses that, apparently, are looking for the chink in the armor, so one day the death knell may be dealt. I wonder if this financial-sky-is-falling may be one of the same things, a hysteria bomb lobbed just to watch the reaction of Americans. The email bombs look for the best delivery system so that one day the perfect virus can be delivered. All the reactions to all of the latest threats are catalogued in the database of some anarchist organization, so when the time comes, the best one can be chosen for use. It is all automatic. When you train the news media to read only what comes up in the teleprompter, the rest is easy. The BubbleHeadedBleachBlonde (Ted Koppel), comes on at five, tells you ’bout a plane crash with a gleam in her (his) eye… The general pessimism that we all share is further fueled. Since we are waiting for the latest devastating financial report anyway, as trained by the talking heads, the stage is now set.

I can believe that Paulsen is part of the America-haters, or at least a crook. I can also believe (now) that Bush is an unwitting pawn. [For those of you that do not know me, I was a rabid Bush supporter. I truly believe that going after Saddam was necessary. The United Nations (joke) had 2 dozen resolutions slapping Saddam's hand, and Bush was the only one that had the gonads to take him on. Weapons of mass destruction? Quit saying there were none and start asking where they went. Saddam killed much of the eastern part of his country with chemical weapons, and the EIEIO (International Atomic Energy Agency, IAEA, otherwise known as the Keystone Cops), spent months trying to do inspections which were routinely thwarted, re-routed, postponed, and otherwise de-railed to look for suspected nuclear weapons, the development of which Saddam kept hidden. I do not think that they never existed, instead I think they have been hidden with the highest bidder. Don't take my word for it, look at the headlines of the late 90's. And, if you think we fought this war for oil, then why are we paying so much for gasoline?] I don’t believe Al Qaeda is a fundamentalist Islamic organization. I don’t think Allah ever enters their thoughts. They are simply an anarchist group, bent on mob rule and the destruction of America and Democracy, where ever it resides. Whatever it takes to stir up a s**tstrorm, that is what they will do. And, if some money can be made in the process, so be it.

Enter Paulsen and the pawn.

Paulsen may be a simpleton that looks at the indicators, then makes the call. The President hears his whimpers, figures WTF, I only have this job another few weeks, then makes the speech. Paulsen starts the printing presses and off we go. The thing I find unbelievable is that the rest of Congress is that dumb. But then, in Congress, it only takes a majority, and I do believe there are that many dumb ones, the Dreamgirl being chief. But then, she is so focused on providing a continuing welfare check for do-nothing Americans that she sees nothing else. Those folks and the tree-huggers are her only source of support. What a shame, there are that many uninformeds that have a voting right.

In case you missed it, our economic downturn is probably media-induced. It’s hard to see the sunshine when you’re looking for the rain. We have problems, but we are looking in the wrong direction. The policy makers have us all screwed up, people! They have mis-directed our thinking. Consider this:
How do you give a tax break to someone who does not pay taxes?
How do you support animal rights and human abortion at the same time?
How do you keep sending someone back to Washington that keeps doing all the wrong things?
Why do you buy a gallon of overpriced gasoline instead of walking or buying an electric car?
Why should someone on welfare be given a raise for birthing another child?
Why should the government care if you have a firearm?
Why should the term ‘illegal alien’ prompt a legal discussion?

If any of the above subjects cause you to stop for an instant and think, then you are ready to take on the government. Those elected officials are elected by US! It is a simple matter of common sense. I am tired of having my opinion told to me by CNN or FOX. But, it is not so much my opinion I am worried about, it is the opinion of those who will not take the time to form their own opinions. Whatever they hear on MTV, Oprah, South Park, Family Guy (wait, Peter is always right), seems to be what they will vote. I have strong feelings on all the subjects listed above, plus many others. I gotta think there are enough of us that can take the country back, it just ain’t right what is happening.

It is simple. A person goes to work, saves enough money to start a life. Maybe a banker looks at the person and believes an investment in this person will provide a return. The working person prospers and cares enough to provide some relief for those in need. Those in need who are capable go to work themselves, providing others in need with some relief. The banker soon has more people worthy of investment than he has funds for, ushering in another banker, in turn supplying more return on investment, in turn providing more relief for the needy, in turn going to work and providing others with relief….. Maybe we think we have gotten to the point that the worker is no longer necessary. Leaving us with only needy…. spiraling downward….. voting for whoever will give them a free ride. The Congressman doesn’t care, it will probably last her lifetime, anyway….

blip!

BusinessWeek is reporting that BayernLB has just received more taxpayer-funded bailout money from the German government:

BayernLB has already earned itself the unenviable accolade of becoming Germany’s first bank to request help from the government bailout funds. On Friday it added a massive bailout package to its trophy shelf: a €30 billion lifeline will be thrown to the ailing business.

To restore it to health, Bavarian Governor Horst Seehofer said the Munich-based BayernLB would be granted €10 billion ($12.9 billion). He also said the bank requires lending guarantees to the tune of €20 billion. Of that he said he would seek €15 billion in interbank lending guarantees under the federal plan.

Germany’s second biggest regional bank has been hit hard amid the financial domino effect. First, the US subprime lending crisis and subsequent credit crunch left it, and many peers, with hefty write-downs. Then, BayernLB’s problems deepened with losses generated by bank failures in Iceland.

(Original article here)

Dennis Kucinch spells out the “bait and switch” that was pulled by Henry Paulson and the corrupt administration:

Kucinch states, “This is a major economic matter that isn’t being appropriately addressed by the Bush administration and by his treasury secretary. Congress was sold a phony bill of goods…  Now you’ve got money for bank consolidation, money for parties and for bonuses.  What’s going on in America?”

Hit ‘em hard, Dennis.  The media seems to like you now that you’re not running for president…