Wednesday, September 17, 2008

American Auto Bail-out? I Think Not!

U.S.Going Overboard in Bail-Outs?

I don't know if you guys heard, but the CEO of Ford (and others) called for the Gov't to make a loan of up to $50 billion to the auto industry cause they're failing! I think this is ridiculous! If you make a bad business decision, that is the risk you take when entering into a business proposition. All of this "bail-out" crap is getting out of hand. To some degree I understand, but when is enough enough? I don't buy Ford because they suck (i.e. Found On Road Dead), so why should my tax dollars subsidize them? I understand the whole saving jobs thing, but how much can we really do before people become responsible for their mistakes? I'm afraid of all of these bail-outs because it enables people to do it again. It provides the midset that goes something like this: "Well, we did it once and the government, why not again?" What stops consumers/lenders alike from making bad loans again 10, 15, or 20 years down the road if they both bank on the government bailing them out?

This is reminiscent of the failing US Steel industry. It too was failing because of international competition and called for government aid. The gov't approved funding for large steel companies so they could improve their equipment/technology, just like the Big Three automakers want gov't loans to retool old plants and save on borrowing costs. So what happened with the steel companies? Big bonuses for everyone! Woohoo! Literally, they blew all the money, didn't use it for it's given purpose of upgrading equipment, then they horribly KEPT failing (with their old equipment). Of course they wanted more money. At this point the gov't put their foot down (finally). What was the result? The merger of #1 and #2 steel producers (both foreign steel makers) in the world creating Arcelor-Mittal, the obvious ruler of the steel industry and based out of Luxembourg and London who is now the number one provider of Steel IN THE US.

What's even worse is that there was a break out of smaller steel recycling plants that were doing the major production of steel here in America and had a chance to make it. Did they get any gov't help? Of course not! The gov't only encourages failure nowadays! What not help companies that can stay alive instead of encouraging irresponsibility. I understand with some of the financial ones so the financial industry doesn't crash, but how long has the American Auto Industry known about impending growth in popular foreign vehicles? How long has Toyota, Honda, and others growth been happening? Foreign Auto makers have been providing quality, affordable, cars AND customer service for years and I consider that the American Auto industry has done nothing to improve quality. And for some reason the American Auto Industry didn't catch on until they fail and want a get-out-of-jail free card. I SAY NO! If Congress Seriously tries to pass something to help the Auto industry then WRITE YOUR CONGRESSMAN and tell them NO!! Anyways, that's my gripe for the day.


Christopher Maloy said...

Don't forget the 85B dollars to AIG, the 10 Trillion dollars Fannie Mae and Freddie will cost us, the Bear Stearns Bail out ... shall I continue? ok, I will, a war in Iraq, Medicaid, Medicare ... You get the point.

This is freaking ridiculous and I almost agree with you 100 percent (unless it has something to do with my 401K) :)

It is OK though, we have already sold off our kid's future and our great grand-children ... I am sure that we can go one more generation and make sure that they have to dig out of a gigantic hole as well.

Errrrr.... I thought Republican presidents were suppose to be the fiscally responsible ones? You know the ones that put the pinch and influence on the Feds and Congress. You can't give rebate checks and make tax cuts and increase spending. Simple math. In my opinion I would fire them all (Blue and Red alike) and start over with some competent leaders.

I don't think you wanted this to get political so I tried to tone this down, but I am pissed. Just know I am thinking a lot of bad words right now.

Jodi Jean said...

chris ... scott actually said "I understand with some of the financial ones so the financial industry doesn't crash" which would include AIG, etc.

but i hadn't heard about this ... UGH, i totally agree with you scott. companies should be responsible for their mistakes. the auto industry in the US knew they needed to make changes for a LONG time now, and nothing has happened

Heidi Maloy said...

Amen Brother... and I can personally attest to the fact that Fords do in fact suck...and yes, companies should mostly be allowed to succeed or fail on their own- isn't that the point of a capitalistic society? It's not like Toyota or Honda or anyone else, just showed up and took them off guard- they can't keep doing the same thing expecting different results- at least Chevy (american car company), and some others have put efforts into new designs and such...ridiculous!

Christopher Maloy said...

Jodi, I am not really sure what your comment is suppose to mean except to call me out on stating something Scott had already made clear. I was just writing all that to add to the sarcasm of my point earlier.

I am not sure what you (or Scott) means by, "the financial industry doesn't crash?" It has crashed. Government bail outs are spreading the cost of that crash around to the taxpayers to keep things limping along, until they get a buyout or can sell off its securities to a more stable place like .....

My question is if it is really about bailing out only companies that will keep us from plunging into another Great Depression, then how do they pick and choose? Why save Bear Stearns or AIG and not Lehman?

Honestly, the government should have stepped in back in 2000-2005 when predatory lending and the subprime mortgage markets were handing out money like candy to anyone that wanted it (knowing full well that a borrower couldn't afford it or never had intentions of paying it back).

The SEC should have step in 3 years ago and changed the laws of Short Sells of Stock before AIG got into trouble. Sure they stepped in and updated the laws three days ago... but the damage is done.

In the early term of Bush's presidency we had a perfect example of Keynesian economics, where he gave out a tax cut where a large sum of the money went back to the richest people (who were at the highest economic earnings in a long time) in hopes to spike the economy after the tech bubble burst, and the money went overseas.

And to top it all off we had Bernanke (along with all the Federal Reserve) continually cut interest rates, to to create confidence in the markets, while we were trying to control a record breaking 10% inflation for 2007.

Our economy is in for some rough times ahead... and I am personally worried about it. We haven't seen this crisis hit the job market yet, but mark my words ... we will.

Christopher Maloy said...

And another thing ... Can you see the consolidation of power happening?

Scott H. said...

Thanks for all your active participation. Yes, the financial industry has crashed, and though that is not what irks me the most, it is still problematic. All of these "bail-outs" will just breed future "moral failures" (where people will count on future bail-outs and thus continue to engage in irresponsible activity). The only viable reason I have heard that the government bailed out Bear Stearns and AIG, but not Lehman, is that Bear Stearns was likened unto a Heart Attack, that came without warning so the government reacted to treat it. Lehman was months in the making, but no preventative treatment was given to Lehman so once the failure happened there was nothing they could do.

I don't know that that is the best example but whatever. Yes I include the financial industries in my anger. While I do understand why helping the financial sector is better than letting all heck break loose, doesn't mean I agree with my tax dollars funding it.

It is too little too late. I deal with some customers who engaged in the shady mortgage market and had millions in deposit at the bank and are now left with tens of thousands. Do I pity them? NO! Illegal lending and Illegal borrowing engaged in was wrong, common, and commonly known. But did anyone do anything about it? Nope! Now that everything is failing (including the latest dangers of WaMu and Wachovia today), NOW the government wants to do something about it.

SEC: "Oh, AIG is going under? I guess it's about time to change this messed up regulation on short sales of stock...We've been meaning to do that..."