The Giant Pissing Contest over the Auto Bridge
(Mackinaw Bridge photo from Three if by Bike)
Ian and Jane described the solution Dems are crafting on the auto bailout: Roughly $15 billion from the DOE funds (originally intended to help automakers retool to make more efficient cars) would be repurposed into providing bridge loans for Chrysler and GM. After President Obama and the new Congress come in, that money will be replaced with TARP money, and a longer term plan will be developed to see the companies through this crisis.
Keep in mind though: this is just one battle in a giant pissing contest that is far from resolved. There have been three original positions in this pissing contest:
- Pelosi, Dodd, and Frank (and, presumably, Obama): Give the aid from TARP; save the environment and the domestic auto industry
- Bush, Paulson, and McConnell: Give the aid from the DOE funds after asking for the first born of every union worker
- Shelby and Corker: Bust the union and to hell with Toyota’s domestic competition and the Democratic voters it employs
A couple of events set the background to hearings in the last two days. Hank Paulson has begun calling for the second half of the TARP funds, as he has blown through most of the first $350 billion. Yet Democrats want to force Paulson to start bailing out homeowners struggling to avoid foreclosure, rather than just bailing out Paulson’s friends on Wall Street. And since Paulson wanted to avoid spending any TARP funds on the auto industry, he wanted to avoid discussing TARP before the auto crisis was resolved.
In fact, in a stunning bit of arrogance that no one besides Jane really reported, Dodd had asked Paulson and Bernanke to attend Thursday’s Senate hearing on the auto crisis–and they refused! These assholes, who are preparing to ask Dodd for another $350 billion of our money, refused to show up before Congress, presumably because they simply didn’t want to talk about using TARP funds for bridge loans to the auto industry (note: at the hearing GAO agreed with Dodd that the auto loan request would qualify under TARP guidelines). I suppose because they simply believe the auto industry doesn’t fall under their mandate to keep the economy healthy?!?!
And then, of course, yesterday’s jobs report came in, with the news that our economy is hemorrhaging jobs. Which is reportedly when Pelosi blinked, and agreed to use the DOE funds.
Yet, in spite of the news that a deal has been reached, that deal has only been struck between the Democrats and Bush. Mitch McConnell, who has supported using the DOE funds for a bridge loan in the past (and whose state’s Toyota factories are planning longer holiday closures than before), refuses to comment on this deal.
The Republican leader, Senator Mitch McConnell of Kentucky, said Friday he would have no comment on the Democratic proposal until after the details are released.
Kit Bond and George Voinovich have already supported this deal, but to avoid a filibuster, this deal is going to need the support of McConnell and a number of other Republicans.
Which brings me to the third side in this pissing contest: Shelby and Corker. The villagers are only now catching up to Jane and me in noticing that two anti-labor senators have been the chief opponents of any assistance to America’s domestic auto industry.
News reports are dominated by quotes from two Republican Senators, Richard Shelby and Robert “Bob” Corker who come from states with large Japanese automaking plants and who, surprise or surprises, oppose a bailout of American firms. And the network news echoes propaganda about overpaid American autoworkers. CBS’s Katie Couric (whom I had to started to watch after the Sarah Palin interview, but am now thinking better of it) has been trumpeting the $70 vs. $24 an hour canard that our Jonathan Cohn has so artfully exposed.
I would like to see Couric and other networks consider two relevant questions about the auto industry. First, haven’t Japanese and South Korean auto companies benefited from enormous government help themselves–and subsidies were the least of it. For decades, Japan–and currently South Korea–kept out American car companies. And the United States turned a blind eye, respecting the desires of these countries to have their own industries. Why should we begrudge our own companies a modicum of what we have tolerated from Japanese and South Korean companies?
Second, are these foreign auto companies engaged currently in lobbying people like Corker and Shelby to shut down their American competitors?
Shelby and Corker are, I think, feeling pretty good about their propaganda campaign so far, and I think they will press for ridiculous further concessions from the UAW. In fact, Corker even threatened to make any assistance to GM contingent on its acquisition of Chrysler, basically forcing that company to make a shitty business decision so Corker can bail his conservative buddies at Cerberus out of their own bad business decision (do read that article–it’ll make you spit).
The question, then, is whether Bush and McConnell–who seem to be responding to Corker’s and Shelby’s goading of late–will serve as honest brokers for that middle position, agreeing to a real solution and allowing it to pass the Senate?
And all the while, Frank and Dodd are still wrestling with Paulson over whether he’ll ever begin saving the homes of the 10% of homeowners who are facing foreclosure. We maybe short one President, but that’s not preventing the Bush Administration from holding an economy at risk of slipping into a Depression hostage, while they try to force more conservative dogma down our throats.
Apparently Geithner is with Paulson on bailing out homeowners, and wants Bair out of the FDIC. I think that if that’s true, he should be dropped, and someone put in who has a view that sees that the economy is a lot more than Wall Street.
Perhaps it is time for a counter-attack against Tennessee and Alabama, states that get a lot more federal money than they contribute.
Thanks for your cogent analysis.
Replace Pelosi with Barney Frank.
We need to preserve the union.
I am not a fan of Pelosi but there really was no other option in this situation if GWB is threatening a veto. Getting the money to the auto industry is priority #1. Which pot it comes from can be sorted out after GWB is gone.
eCAHNomics did a nice article on unemployment numbers.
Great post EW. I sincerely hope that when Paulson and Bernanke come hat in hand to Congress again that they get raked over the coals for the totally FUBAR TARP bailout. And I hope Congress tells ‘em, sorry guys, wait ’til the end of January.
That said, I am a bit concerned that Geithner isn’t really going to step up and do what needs to be done given the hissy fit he seems to be having about Sheila Bair.
i would dearly love to see each and every company that turns up looking to tax money to save their corporate bacon have to agree to three things:
1) the removal of all corporate officers and their boards (or at least a replacement of the majority of them), with government regulators appointed to positions where they can really open up the books and fully evaluate the business practices that led to their difficulties,
2) regulations that curtail those practices,
3) that every company deemed “too big to fail” (and hence deserving of a bailout) gets broken up into smaller pieces, that way if one piece fails, they don’t bring down the entire economy. The tax payer should never again be held hostage (”your tax dollars, or your economy”) by large corporate entities that assume no risk of failure.
See, but even there it doesn’t make sense. At Ford, at least, those executives have ALREADY been replaced (ditto Chrysler, but not as effectively bc Nardelli wasn’t hired to do what Mulally was). So you want to change leadership again, just to make a point?
And the problem is not, just, that GM is too big to fail. The problem is that the entire industry is too complex and intertwined that a GM failure would lead to more failures. The same is true in reverse, though. A Toyota failure would lead to a GM failure. Same with Ford. So how are you going to mandate that the industry break up its supply chain and make it more complex, when that was one of the things that was killing dealers in service bays and manufacturers in assembly lines?
And frankly, no auto company is going to survive unless it’s big. That doesn’t mean GM doesn’t need to shed brands. But for GM to return to profitability, it needs to keep Chevy and Caddy together, and it needs to keep Buick attached bc of Buick’s success in China. You can have GMC, Pontiac, and Saturn (though I think making Saturn OPel might work). But beyond that, cutting would be counter-productive.
GMC is a replication of Chevy but what difference does it make if every third vehicle down the assembly line gets a different nameplate?
Point taken on the leadership at Ford, still I would want a thorough review and oversight as to the business practices that led to their need. Perhaps it is really all about the financial crisis and nothing inherently wrong at Ford, but at least lets insist that there is a review to prove that that is the case.
If this is true, then we will come back to this problem over and over again as there will never be a genuine risk of failure. Either that means we scrap the whole notion of free market competition and make the car companies the equivalent of government-regulated utilities, with the tax payers sharing in the productivity as well as shouldering the burden of the losses, or we continue down the path of private-profits/socialized-losses. Safe to say I am not fond of the latter.
I also wonder how much of the interconnected-ness to the supply chain is a function of the current regulatory environment. You simply can’t convince me that if each independent car company is restricted to no more that 10% of the total automotive market share that the failure of one company will take down all the suppliers.
However, I think what you’re also saying is the entire sector is in trouble. And that may well be a function of the current financial markets. I may be mistaken, but I think a good bit of GM’s trouble is tied in with their financial services exposure to the financial mess. If that’s true, then GM’s troubles are more about financing than cars.
Just to be clear, I really don’t want to see the Big 2.5 go down. The loss of those blue collar jobs will sink the middle class in a big bad way. But I think our current economic system with its overdependence on a few large companies is dangerously unstable and we really need to think about how to prevent future crises which are fundamentally a crisis of scale.
The problem with making rules like that is you’re competing against Asian companies that are treated very differently by their home market. So long as we expect Ford and GM to compete against Honda and Toyota, which have long had “risk” cushioned in key ways, you are then forcing them to make decisions taht otherwise wouldn’t make sense.
As to the suppliers, it’s a question of whether you want a vertical company (as Ford and GM used to be) or whether you want them to save costs by having suppliers compete on costs (which is what evolved in the 1990s and which is part of how they have caught up to the Japanese). Once you commit to using outside contractors, and so long as you don’t build in redundancy among suppliers for the same car lines (so that if one went under, you could keep the car lines working) you’re going to have that problem. All it takes is one widget to bring a car line down.
One thing that keeps coming up in my mind is just how is it that the Transplant manufacturers are financing their showrooms and customer buys.
Are they being funded by their parent corporations in the same fashion that the Big 2.5 domestic manufacturers did?
If so, how is it that the Transplant parents have unlimited liquid cash for financing?
If not, are the Transplants being funded by our very own US commercial banks?
If so, how is it that the US bailed out commercial banks can give out our bailout money to foreign auto manufacturers without a whimper from any in government?
Remember, the entire industry crashed last month, not jsut the US. Nissan actually crashed worse than GM. Which suggests they’re having credit issues, too. When I bought my Fit last year, I got better funding from my CU than from Honda,so it may not be as competitive–but then it hasn’t had to be.
Also, one thing that was a big issue yesterday is that Toyota is an industrial lender, and the Big 2.5 want to be. It’s a competitive advantage that Toyotahas–but I don’t know what it means (except that, presumably, TOyota can self-finance factories).
Since I’m a 25+ year Toyota owner, I might have to call my dealer and find out the skinny on their financing. Rates, credit score eligibility, etc.
I’m serious about my curiousity on just where their money is coming from.
As you say, it may be provided by Toyota itself as an industrial lender. Many of the top Japanese companies wear similar garb as multi-function commercial enties with banking being a common sideline.
And as interest rates in Japan have been close to zero for a number of years, it would make a lot of sense for Japanese manufacturers/lenders to place their money where it could earn more interest.
And I would bet that the Japanese manufacturers/lenders are not chartered here as “banks” since that would require them to adhere to US banking regulations and other things like not discriminating against their US commercial customers (GM, Ford, Chrysler come to mind) in comparision to their own captive commercial creatures.
Fair enough, but then isn’t this really a problem with poorly structured trade agreements? This sounds like Asian companies have an unfair advantage. jdmckay and I chatted a bit about this on a thread yesterday. I don’t think it is sufficient to try to address problems in isolation, the interconnections of trade policies, federal subsidies/incentives/regulations, healthcare, etc. make it very difficult to fix one thing at a time. I realize that in a crisis there is insufficient time to do a wholesale reorganization of our economic system, but it certainly seems like a good time to think about whether different structures might be more robust in the long run.
I agree with this, but the issue here is the bit about not building in redundancy among the suppliers. If there was a more redundant system, it would be more resilient to the failure of an individual supplier or car company. Perhaps that redundancy is what you mean by a vertical company. However, the way I see it, couldn’t a supply company provide different car parts to different car companies, i.e. diversify their customers, such that if demand vanished from one customer it wouldn’t take down the supplier with it? Conversely, couldn’t car companies get parts from multiple suppliers such that the failure of one supplier wouldn’t shut down the line?
I suspect the problem with supply has to do with keeping inventory so low, that even if a car company did rely on multiple suppliers, a line could go down if even one supplier didn’t fulfill their obligation. Still, is this the best way to do things? Might there be an optimum balance between excess inventory and insufficient inventory to buffer glitches in the system? Perhaps our current supply chain structure has gone too far in the insufficient inventory direction.
In physics there are two kinds of equilibria: stable and unstable. I wonder whether our current system is in unstable equilibrium. Things are fine if there are no perturbations, but if there is a perturbation then the system rapidly deviates from its equilibrium state and finds itself a new equilibrium, which may or may not be a desirable state.
Yes.
That, plus just the reality that industries evolve and newer entrants have certain advantages, particularly in our country where we don’t have real health care.
A lot of suppliers do do business across many companies–Johnson Control, the supplier represented at the Senate the other day, is a good example. But then they become a different kind of bottleneck, as they are the primary supplier (with maybe one competitor) for certain kinds of parts.
As to whether car companies can get parts from multiple companies–they do that too. But they can’t do that for individual lines, unless they want to pay development costs twice. Some of these parts are so customized, they can’t have two suppliers (that problem is sometimes fixed once the tools for the part have been built, though, but again it depends on the complexity of the part).
I agree that there is real disequilibrium here. Ironically, the Japanese have more equilibrium bc for some things they stick with their favorite Japanese firms. But there is a ton of cronyism in those firms, and I think that’s going to begin to introduce quality problems into Japanese lines.
Thanks EW. The point about multiple development costs is an excellent one. So I am curious, can you envision a more robust system where a company (car manufacturer or supplier) could fail without causing a big problem in our economy (including not completely writing off manufacturing as part of our economy)? What would such a system look like?
I would simply like to welcome Phred home. I missed her.
Aw shucks ; ) Thanks bmaz. I’ve missed causing trouble around here ; )
This is why AIG was bailed out, its interconnectedness with other financial institutions. The treasury secretary understood it’s failure would have a domino effect in our financial institutions; banking, shadow banking, insurance and reinsurance.
As best as I can recall, just prior to when the stock tanked on 9/11/8, the firm was settling a lawsuit by the Louisiana State Teachers Retirement fund in which the plaintiff was charging the former AIG chairmen with lining his pockets at the expense of the retirement fund. I wondered how much corporate malfeasance in the form of massive fraud fueled the meltdown.
That’s a non-illuminating statement, IMO.
AIG was bailed for same reason as F&F: too big to fail… institutional bonds worldwide in huge volume, all junk. AIG bailout prevents mass exodus, domestic and international, from WS. $USD default in that case almost inevitable.
On the otherhand, GM bailout preserves manufacturing, however tenuous… that’s not junk. And presuming some type of economic recovery sometime (???), GM’s viability longterm at least has some reasonable odds.
So AIG/GM bailout 2 separate deals in very important ways.
The 1st domino would be CDOs… eg. junk. The following ones would be result of AIG tapping many otherwise sound business to pay for the junk.
Whole lot of people think they should’ve ate it, ’cause when it’s all said & done most of TARP and other FED/Treasury “purchases” are of junk assets. Let ‘em die… “the market” knows all, right?
Even my boss doesn’t understand why it’s important to bail out at least Ford and GM – Chrysler is, AFAICT, a dead company walking – and he’s not stupid or uninformed. I couldn’t get it through: even the three million jobs and the suppliers-to-all-the-companies doesn’t make a dent.
If I were an executive of one of the auto cos. I would threaten a lawsuit prohibiting the expenditure of any additional TARP funds under the Equal Protection section of the constitution. That might get Paulson’s attention.
Heck, Joe Citizen could file that lawsuit now on behalf of the industry.
It adds to advertising costs, for one.
I have been doing research on the impact of the Ohio economy on Kentucky– should this deal get held up by McConnell. It’s not a pretty picture Mitch…
As for the concept of breaking up supply chain…I guess they want to double the price of a car…Gee that sounds like economic stimulus folks…
Hey Marcy,
Is the netroots trying to organize something to get some final impact as to making the bailout happen? We need to put pressure on the Republicans. I think further dialogue about what this will do to us from a national security point just might open eyes.
Republicans have been playing the fear card…but now, the threat is so real. Perhaps a “back-at-you” shot of reality might do the trick.
Think about it. During WWII the US auto industry retooled almost overnight for the war effort. Now, we will face a threat on our soil like we have never faced, should we tank the industry that supported our country during a historical crisis. I guess Corker and Shelby can live in infamy as the Senators that “tanked” the United States, and their states can own that historical moment.
We make cars…here in the US? Why didn’t someone tell me? *g*
Seriously, if one (or all) of the Repug Senators pull a filibuster on any Big 2.5 bailout next week, I’d take that as a forewarning of their plans to obstruct any and all Democratic legislation next year under the new Congress and Administration.
They’d rather burn down the digs than to live under a Democratic roof.
So place yer bets on whether the new Repugs will be the same old Repugs.
that’s gonna be what destroys the repuglitard party
and it’s the same thing that destroyed the confederate states of america, plain fucking stupidity
these stupid fucks just can’t cooperate with anybody who does not surrender to their whims
now America finds itself in the worst economic crisis in it’s history, and the repuglitards are incapable of working with any other political party, and the repuglitards now have a problem it the fact that America knows VERY WELL that the repuglitards are incapable of governing the country or themselves
the canabalistic suicide of the repuglitards is gonna be fun to watch
2010 is gonna be “ALL ABOUT THE HISSY FITS, STUPID”
an who ya gotta blow to get a trash talkin thread around here ???
can’t a “land Stealer” fan get some love ???
Not from the Bolts — ouch! You sure you want to stir up trash talk after a Thursday night 34-7 blowout? Are you frickin’ insane??? Ah wait, check that… ; )
There — trashy enough for ya?
Oops, my NFL bias is showing… I thought “land stealers” referred to Raiders (as in Oakland), rather than NCAA Okies. My bad. Sorry freepatriot, although I’ll do my best to trash you in some other manner. By the way, aren’t you some hippie Californian? How’d you get to be an Okie fan?
Heh heh, he’s close enough to Oakland that you can trash-talk the Raiders to him – it sticks.
I am amused by the advertisement right after the post. “Dreaming of a bigger penis”
The downright meaness of the Bush/Corker/Paulson/etc anti union faction(s) disgusts me. Nice post EW, thanks.
In contrast to America’s big 2 1/2 consider Japan:
Toyota (19 models + Lexus & lines)
Nissan (14 models + Infiniti & lines)
Honda (10 models + Acura & lines)
Isuzu
Mazda
Mitsubishi
Scion
Subaru
Suzuki
I tthink we need more car companies
I think Scion is part of Toyota, also, or at least spawned from them, like Elements are from Honda.
Suzuki is minor in autos, bigger in motorcycles. (Quality matters.)
Isuzu is minor. (Quality matters.)
Mitsubishi is minor any more. (Quality matters.)
If the big 2 1/2 were allowed to fail we could see ads like we saw a few years ago’
1 year old Yugo $200.
great overview ew.. thanks..
Paulson and Bernanke are beholden to no one other then the private banking biz industry which they represent fairly well.. no one ought to be surprised when they refuse to attend a senate meeting.. these 2 come from the same group of individuals who pave the way for the huge mess that’s eating a huge financial hole in the usa economy.. they are not the solution for anything other then their friends on wall st.. this can’t be emphasized enough.. greenspan was the same, although probably a much better liar or facade for these same forces..
Skip national security…The Repugs have their dogs lined up on that argument, despite the fact the the dogs are wrong…
The biggest point made on the Hill was by the Johnson Controls president. Basically, you allow one of the Big 2.5 to tank, then US hybrid technology is tanked; increasing our oil dependence. Thus, weakening our national security.
This is just one last spasm of BushWorld Ideology.
In the “Lord of the Flies,” the marooned boys from the Shipwreck socialize into their new Island home. As the story unfolds, two of the boys begin to demonize one of the other boys, whom they dub “Piggy.”
Inexplicably and unexplainedly, “Piggy” becomes the target of everyone else’s pent-up anger and frustration – and poor “Piggy” gets ‘driven’ to a ritualistic killing.
For me, one of questions the book poses is, “Do We – humans – have a Need to Behave Irrationally?” Iow, are We doomed to Serially Demonize Our Mis-Fortunes onto Innocent Others?
It certainly looks that way!
How else do you explain Shelby and Corker? They’re Only All Too Willing to Demonize Poor Detroit “Piggy”!
And just as the boys set the Social Standard on the Island to Violence, here now are Shelby and Corker cheerleading to kill the Big Two and a Half.
The boys didn’t realize they had made themselves the Victims of their own Social Standard, and Shelby and Corker can’t see that killing Detroit is creating the Beast that will eat them, too.
Shelby and Corker are to the Auto Industry what Plaxico is to Guns – in the name of self-defense, they are capable of shooting themselves, too.
Let’s not go down that path again. This time – Let’s Stop the Madness! This time – Let’s commit to saving everyone on the Island, without Sacrificing Ourselves to Our Own Irrationality.
Save People – Save Jobs!
I am impressed with your ability to roll-up all the elements – players, perspectives, interests – into a summary that frames the conflict with a clarity that is unavailable from any other source.
That the Republicans have successfully demonized unions at this late hour, as we face a 100 year economic collapse, after eight years of Bush class warfare, is a victory for the dark side, for the financial elite, that we should recognize as truly amazing feet. It is a political victory that is as successful as it is contemptible because it resorted to lies and because it shifts the blame from the responsible parties to working men and women who joined a union to benefit from collective bargaining. We hold no animus for the executive who negotiates good compensation for good results. Organized labor is as American as apple pie. In fact, organized labor built the middle class whose values Republicans claim to share.
This game, pitting the interests of US manufacturers against foreign, in a win-lose competition by US Senators Shelby, Corker and lame-duck president George Bush is one of the games we should include in our weekend trash talk. As EW points out, education is fair game. Anyone who wants to dump on Shelby and Corker should feel free to do so. Bush and the Republicans are still ruling by divide and conquer, and by laying off blame on others, when its their failure to own.
Since Bush is basically a coward attempting to rewrite history, to show his perceived greatness, he would either sign a bridge loan package for the Big Three, or more likely sit on it until next year. Either way, the Repukes would cave under negative and relentless bad press. Of course the problem with bad press is the Dem’s are totally incompetent to use PR against their dimwitted opposites and the press to lazy to report the ramification to the economy. Doing so might get enough votes to override a veto anyway.
Obama could, in one of his fireside chats, state that in addition to his stimulus package, he was mandating the Government buy replacement electric and/or hybrid vehicles of US manufacture while issuing a Presidential directive to add the Buy America clause for all contracts. Nah!
PS sent 2nd para to:
http://change.gov/page/s/yourvision
test
Trash Talk is up for dirt thieves. And others.
Meanwhile, at current stock price, General Motors in its entirety could be bought–that’s 100% of the common stock bought–for 2.5 Billion bucks.
But rather than do that, congress would prefer to float 12 Billion, solely as a bridge loan that will get the company through a single economic quarter, leaving current management in place. In response, GM would cut certain lines, and almost certainly fire thousands or tens-of-thousands of existing jobs, and lower pay for those that remain.
What good does buying all the common stock do? Then you just have a new owner that has the same need for financing that currently exist, and undoubtedly a group that has less of a clue on how to run a car company than the current management. This strikes me as ill advised. For all the caterwauling about “current management”, it is the current crew that has put the turnaround in motion for Ford, and is currently in the process of doing so at GM. Management is the historic problem for both Ford and GM; that is not necessarily the issue at all right now. The “management” wailing is an easy canard, but it is a false one at this moment.
bmaz,
I was referring to the cost of nationalization, well less than 3 Billion, as opposed to giving 12 Billion in “loan”, which would only last them (they say) through the next quarter–March, I believe. Yes, the credit issues would then be assumed by the Govt. But I believe I’d have more faith in a temporarily nationalized GM, with current leadership thrown out, and a thorough overhaul done, including a complete audit, than I would in simply throwing money at this corporation.
I understand what you meant, perhaps you are right, but that is not my belief. To the best of my reasoning, the government cannot run them any better, and I actually believe that current management, at least at GM (Ford is not germane at this point, and Chrysler just flat needs to be sold to someone (and not GM) is doing a decent job under the circumstances. The only reason GM is in this position is the cratering economy and credit market. They have really made a lot of the right moves over the past two or three years; at this point, the is no chance the government could do any better and the shock of that kind of transition would be brutal. Just extremely ill advised in my opinion. You may easily be right and me wrong, but that is how I see it.
Florida is favored by 10 – anyone think they won’t cover that?
Oklahoma is favored by 16.5. I don’t know what to think about that spread. Oklahoma is clearly peaking at the right time and they look pretty tough. That tight end (Gresham) they were throwing to last week looks like Paul Bunyan among the little people.
Missouri is coming off a loss to Kansas, a game they were expected to win.
I would like to see a close game, but I doubt that will happen. Sooners will dominate.
You guys should have heard the wailing in Austin last week. The Austin Statesman sports section was ‘all Waah, all the time’, all weekend. All they could talk about was the ‘45-35′ signs they kept waving all over the place.
of course, MissDiego had her little ‘39-33′ sign she could wave back at them…
Jeebus randigo–what’s up? bmaz (and his trash) has cooties?
He’s gonna get lonely over there. And then–who knows what’ll happen.
oops! didn’t know it was there! cut and pastE time!
very nice piece. only this doesn’t sound like conservative dogma to me. It sounds like open conflict of interest and thievery. since when does congress (much less the likes of mssrs shelby and corker) get to dictate which companies should merge with whom? I love it when rethugs become raving Stalinist statists when they see an opportunity to help their buddies pillage the treasury.
my view is that they should get the bridge done, without either union or M&A strings attached, out of any pool of money they want, then let the Obama admin work put a permanent solution in Jan/Feb, including a request from the president to reapportion any funds pillaged out of the DOE money from the TARP funding. Money is fungible, and we should leave it to the new WH and Congress to set things right.
d
Is there a chance that President-elect Obama can put pressure on slimy Corker and Shameless Shelby to go along with this or else?
The Else being that his administration could make things unpleasant for Toyota or Honda, Benz, etc. – something about tariffs or limiting import of foreign parts – since they all or mostly import their parts and just assemble here in US.
I confess to not have enough knowledge about all this – but if Obama decides to be a little ‘less non-partisan’ I bet he can make things not-so-nice for Corker and Shelby if he wants to.
Actually I think that Toyota et al do currently purchase a lot of their parts here in the US.
That’s part of what EW, Jane, and Ian have been pointing out. I.E., the interconnectedness and how Toyota and Honda and BMW and Mercedes would all be impacted if their US suppliers went under. At which point they would have to import parts supplies from Europe and Asia, losing their cost advantages with the added shipping costs.
Thank you for that info. I looked but could not find specific data on Parts Suppliers for Foreign-owed auto manufacturers. I did come across this about local suppliers that lost business from Toyota moving its plant out of Indiana. http://www.courierpress.com/ne…..suppliers/
My hometown is next to Georgetown, KY (home of the Toyota plant that builds Camrys) and there are large number of suppliers in KY and Ohio and Indiana that supply Toyota and Honda as well as GM and Ford and Chrysler.
Can I ask then if local people would scream at McConnell if they lost GM, Ford and Chrysler business? Or is Toyota and Honda enough for them?
Not living there now but besides the Toyota facility in Georgetown, there are a couple of Ford facilities in Louisville (at least one for trucks IIRC) and Bowling Green is home to GM’s Corvette factory (and I think they do some Cadillac work as well). Plus I don’t know if it is still there but Bowling Green also used to have a Holley Carburetor plant.
So yeah, a lot of McConnell’s constituents would be hurt if Ford and GM took the hit. And Toyota and Honda would not be picking up near all the slack.
Gettelfinger the other day said about 30% of labor for foriegn makers (including imports already assembled like Fit and Prius) and 70% domestic.
Also, a large number of suppliers do design in the US and outsource production to Mexico or overseas.
I was thinking mainly of the vaunted “JIT” (just in time) supply chain which would be disrupted sorely if all the US suppliers went down.
I’m one of those who don’t think a bailout will solve much. I would like to see Congress and Obama substantively address
the root problems instead of throwing wads of money around.
Vast inequalities exist in our country. We need to restore power to the middle and lower class, and make it a lot harder for corporations to shaft the little guy. We need laws that make it easier to form unions.
Um, how is killing 20% of the economy and busting the UAW going to accomplish that? You cannot restore power to the middle class by driving a stake in their heart.
I don’t understand how any of you think this will matter if massive econ problems here not addressed. And they are not being addressed. For most, they remain an unknown.
There is nothing being done, much less talked about, that’s going to prevent USD defaults… perhaps as soon as 6 months.
AFAIC Marcy’s point’s about Corker & McConnel true, and I’d be curious if they’re getting palms greased as she suggests. And I agree looks like their purpose, whether primary or ulterior, is to break unions.
Dems, on the other had, are virtually silent… seemingly oblivious to dire in-your-face reality US econ on brink of oblivion. They are saying nothing to large problems… nothing. Zero. Zilch.
It’s like repubs and dems each chewing the umbilical chord down from different ends all the while both claiming they’re trying to preserve the food supply.
Nor can you do it by throwing ‘em the last bone in the refrigerator while the electricity’s about ready to be turned off. It’s almost like one of those critical thinking exercises… eg. choose whether to divert train off the tracks or let it run over defenseless baby.
Sheesh… no wonder we’re broke. I’m beginning to think we deserve exactly what we’ve got.
What do you think the Ds should be doing?
For starters, understand things. There’s very few who are master’s of subjects their respective committees are entrusted with.
But BO is the guy… he’s “change”, he’s “hope”. For better or worse, guidance needs to come from him. His margin of victory in election was economic meltdown, pure and simple. Economy’s wheels coming off in huge way, voters who mostly don’t know why chose BO, many of ‘em repubs in last few cycles.
So, as Patrick Monihan used to say: you can’t solve a problem until you measure it. I haven’t seen any measuring devices around Wa. anywhere, only hands out and recriminations.
So I’d construct a timeline, complete w/consequence, explaining exactly how we got here. Tell people. Maybe start with ‘98 and Gramm’s bill… then go forward. Be explicit. K-Street… explain it. Explain how repubs were entirely top-down machine w/every thing they said, everything they did, regurgitated transcriptions from the top. They didn’t think, they didn’t consider simple well understood and proven principles of anything, they just took marching orders and ran.
Congress & W’s WH was a bourse… nothing more. They did what highest paying donors asked for. When I stopped documenting around mid-’06, I had 230+ documented incidents of…
– industry rep/lobbyist leaves said corp. position to assume policy making position in WH and/or congress w/jurisdiction over some segment of activity relevant to their biz.
– said rep wrote law as desires of his biz wanted.
– said rep received full resources of WH to usher said bill through congress, most often unreported and deliberately kept out of site.
– upon passage of legislation, said rep resigns and returns to his biz to reap rewards.
This was K-Street, again… a “free market” exchange whereby highest bidder got full force of fed government to do it’s handiwork for pennies on the $$.
Free markets were fixed markets. They got not just tax breaks, but tax incentives and subsidies for going over seas while retaining full force of US Gov behind their enterprises.
For each of these, there are ensuing evidenciary results… virtually all of ‘em plotting a clear line to current quagmire. It was corrupt to the core.
The housing market isn’t coming back w/out real change, and that’s years away. That’s gone. We’ve sold majority of our economy down the river to W’s guys, and that’s gone too. No fix in site.
There’s only small remaining fragments of economy to catch that drop… people making enough to pay last years housing prices. This economy does not produce even close what it would take to catch things.
Our professional graduates in techonologies that matter… dropped off the charts. Our brainpower has dwindled. And a whole lot of the rest have gone stagnant ’cause their work was move overseas… Wallmart greeter guys/gals don’t exactly keep up w/tech curve.
It’s all encompassing, it’s total…
So that’s Part I, explain the problem. Explain the causes… people, places & things. Give abundant irrefutable evidence, and there’s plenty.
Part II: Get our best and brightest, explain the dillema in no uncertain terms, and get ‘em all to work detailing what’s most wanted and needed. There’s so much.
We need to educate are people. And we need to give ‘em some kind of critical thinking skills w/information infrastructure sufficient to prevent mass bamboozle of Bush crime spree from happening again.
As I say week after week here and other places I drop my hat… I’d start with
a) Energy & grid
b) Education… how can we get people skilled as fast as possible.
c) Water… we’ve got plenty, but we’re using it all up. We need huge, best tech solutions in planning, conserving/waste prevention, delivery infrastructure.
d) Communications: we’re way behind rest of developed world. We need to get our knowledge base available to people who can use it, and make it accessable. From transportation to water to financing… locality after locality across the country reinvents the wheel w/little or no lessons well learned passed on.
e) Food. US food sucks… how we produce it, what we put in it, what it is and what the labels describe. It sucks.
Tear the whole econ structure apart, look at all the pieces under microscope, throw the broken ones out and make new ones we don’t have… then get to work. Eliminate wall street from decision making: they’ve taking collective investment of US and bankrupted the world. Still inconceivable to me they aren’t under mass indictments, let alone getting their pockets replenished.
So that’s my desire, vision in a nutshell… very general.
So far… dems, BO… really just kind’a looks like the Titanic is going down and their rearranging deck chairs. That BO just announced he’s joining next round of TARP pleadings, w/out saying much else… I dun’o, not very encouraging.
And as I’ve said over and over, this knowledge vacuum occupying historical record of how we got here… repubs already starting to fill it w/same ‘ole poop. W’s victory tour bull shit just latest example… knowledge vacuum allows this crap to sell, people buy it.
I saw a poster’s sig on another blog I read, captured my BO sentiments based on what I’ve seen:
That’s a non-illuminating statement, in my opinion.
Well, one thing a bailout would most likely accomplish is stopping GM and probably Ford from being forced into bankruptcy which would allow them to break their current union contracts AND unions. which seems to be the deal that Shelby and Corker are trying to force.
So if you believe that having strong unions is a good thing, then working to equitably structure a valid bailout/bridge loans for GM and Ford should be fairly high on the list of To Dos.
Things that make me go hmmmmmm
http://pppad.blogspot.com/2007…..exaco.html
I’m only nitpicking because it’s highlighted:
The villagers are only now catching up to Jane and I in noticing that two anti-labor senators have been the chief opponents of any assistance to America’s domestic auto industry.
It should be Jane and me.
I love the grammar police. *g*
nitpicking welcome
Thanks.
Stumbled across a quote:
How ’bout that.
…
And (at least to me) better know quip from Ike…
Notice he said… soon.
I found those in this IRA article:
Bank Stress Index Up in Q3; Will the Final Solution for CDS Start in EU?
… full of whole lot of econ stuff relevant to this ongoing GM debate. In particular, seems bunch of GM’s bonds got wrapped up in CDS’s and distributed around Europe (through, it seems, no fault of their own).
drip, drip, drip…
Thanks for the excellent link. I’m curious, what do you think would happen to GM and the rest of the US economy, if we put a moratorium on CDS payments? What parts of the economy would be hurt by that besides the banks? In fact, how badly hurt would the banks be? On the one hand, they couldn’t call in payments, but they wouldn’t be bankrupted by having to make payments either. So how would a moratorium play out more broadly in the economy?
Thanks, good link. I didn’t know you were Oxdown, glad to know.
I agree w/most everything you say there, and applaud your choice of items to highlight in order to make the point: black bank market, CDO/S and massive proliferation of this toxic paper is destroying world markets, and US is more vulnerable than most.
Re: what you said about AIG: the one thing I never hear mentioned… they made all these paper $b’s insuring these things w/no collateral. They’re promised to pay it back… what are they up to know, $350b+? My question: what kind of crap are they going to sell that will bring returns necessary to repay this kind of loot?
I have more links on those GM CDS’s that goes into considerably more detail. Don’t have ‘em here though… if Marcy hasn’t closed this thread, I’ll put ‘em up when I get home Monday.
Oops… that should have been in response to masaccio @ 69.
WRT to your questions Phred: can’t answer… I don’t know. There’s been lots of speculation on a lot of good econ/money discussions about this by people who know finance much, much better than I. Only conclusions I’ve seen from best of ‘em is… they don’t know.
Personally, I wouldn’t let that deter from killing those fuckers.
Thanks for the reply. I was just curious, I can’t quite picture how the moratorium would pan out.
Phred, I’ve been thinking about this. You might take a look at my diary, which gives some idea of the complexity of the problem. Several commenters on earlier posts have suggested that the solution is to declare CDSs unenforceable, and that may be the case.
There are two classes of CDS holders, those seeking protection against losses on securities they own, and those who are merely gambling, that is, they don’t own the underlying securities, or anything related to them. We need to worry about the former class. It includes at least some banks, which bought CDSs to protect against losses on loans made to their customers, and it includes the GM pension plan, which bought the swaps to hedge against the bonds they bought to rebalance their portfolio.
I think the big losers if we closed out the non-hedging CDSs are hedge funds. That would hurt a lot of big investors, which include the very rich, but also a lot of university and pension investors. On balance, I’d be ready to crush these classes of holders, but I doubt the current administration would even consider it.
Ah thanks massacio! And speaking of too many tabs open… I finally went back again to your diary to follow up on the thread, so I appear to be asking my moratorium question in too many places ; )
You raise a good point in distinguishing between (what are they called “regular”?) CDSs that are based on real underlying assets v. naked CDSs that are flat out gambling. My understanding (which is limited) of a lot of this market is that these were private deals made between two parties. In general when I think of hedge funds I think of well-heeled private investors trying to get better-heeled.
However, the fact is that most of us are investors now via work related benefits. Do you have any idea the level of exposure various pension funds and 401k assets might have? I would have thought they would be required to stay in more transparent transactions, but perhaps that is wishful thinking on my part. If the retirement savings of ordinary Americans are in the soup in a big way, then simply writing off naked CDS bets would have serious consequences for too many people to go that route…
Sorry, Phred, you already saw the diary, my mistake, too many tabs open.
I put up a diary on the GM credit default swaps here. Apparently a bankruptcy of GM or Ford will trigger the credit default swaps, but the bailout won’t.
Hey guys, quick, before FDL changes the top story – please DIGG this post, and my comment? I’m sure you agree :D.
Call me naive but besides the enormous suffering a real depression will cause there are two real risks: 1) Fascism, 2) A workers uprising resulting in socialism. I’m betting that I am not the only one thinking this and that the rethugs are doubling down on fascism. The can’t be so short sighted that they think the can destroy the US auto industry without triggering a depression so what would they hope to get out of destroying the economy?
Democratic socialism would be an improvement over the oligarchy that runs things today in the U.S.. Works in the U.K., France, Denmark, Sweden, Norway, Finland, W. Germany, Italy, Spain………
They would hope to hang the resulting depression around Obama’s neck like an albatross and return to power in
2012.
New Ian up at the Mothership “Screw Investors. Help Homeowners…”
And totally OT – Shinseki to head Vets Affairs
I’m pretty sure the first thing we should do is raise taxes on the rich to significant levels, including a tax on wealth. This will make it possible for the rest of us to stomach the wrenching changes that are coming. It’s too much to ask us to eat the trillions of losses without punitive impact on the people who got us into the problem: the rich and their slavish agents.
And lord knows I do so need to. Let me make haste and away …
Ay, they’re even more politicked up than I’d thought, I see.
Ever since the Chrysler-GMAC purchase my assessment of Cerberus was that any investment value that might be realized from their strategies was purely gravy; note for instance that those two nearly simultaneous moves gave them a crowbar that could be used against both companies at the same time.
Sen Levin and Sen Shelby will be on Fox News Sunday tomorrow to debate the auto industry loan. Do you think Levin will ask Shelby about campaign donations from Toyota? Nah, me neither. I think I;d rather have Frank doing the talking on this one.
Obama is on MTP. If its MTP it’s mail-it-Tom Brokaw… or does David Gregory start this week?