Corporate Welfare

And the Bailout Rescue Goes on

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The federal government is preparing to take tens of billions of dollars in ownership stakes in an array of companies outside the banking sector, dramatically widening the scope of the Treasury Department's rescue effort beyond the $250 billion set aside for traditional financial firms, government and industry officials said. […]

Since the announcement of the program to inject capital into banks, a number of industries, including automakers, insurers and specialty lenders for small businesses have approached the Treasury with hat in hand. Some have been turned away because they are not banks and thus not eligible for capital.

The new initiative would make it easier for the Treasury to aid a wider variety of firms if their troubles put the wider financial system at risk, government and industry officials said.

Whole Washington Post story here. A sampling of reason pieces on the bailout here.

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  1. So now everyone gets a bailout. I just threw up a little in my mouth.

  2. Boy, do I feel like an idiot for renting because I couldn’t afford to buy in Los Angeles and for living within my means.

  3. The floodgates are open, folks. You can forget about closing them now.

  4. Seems like there should be a name for government ownership of the means of production.

  5. Alright guys…mark it down…therer is about a 50% chance that Comex goign to default on the silver futures contract in the next year. They won’t be able to deliver to all the people tryign to buy silver as teh physical price has never exceeded the futures price by this much for this long. Shit is going to hit the fan. Bretton woods 2 is coming on November 15th and the media is focused on Palin’s wardrobe.

    http://www.google.com/trends?q=comex+default&ctab=0&geo=all&date=ytd

  6. Seems like there should be a name for government ownership of the means of production.

    “Futility”

    -jcr

  7. Amy,

    do I feel like an idiot for renting

    Only thing you did wrong was keep dollars. :-/

    I have a friend who sold his house about a year ago, and decided to rent, because his own analysis told him there was no way in hell the real estate prices could remain where they were.

    He’s expecting to buy an equivalent property in about another year for about 40% less than he got for his house.

    -jcr

  8. He’s expecting to buy an equivalent property in about another year for about 40% less than he got for his house.

    He won’t get such a good deal. Thanks to the bailout, the housing bubble will not burst, only deflate a little. I was, too, renting and saving up money for a good house deal, but the real estate in Atlanta didn’t take the hit I expected (and hoped for).

  9. If we (the government) just let General Motors and Ford go tits up, and put their displaced employees on the dole for forty grand a year, we’d be money ahead over the bailout.

    Not to mention the benefits of letting Hyundai buy the factories for pennies on the dollar, and putting people to work.

  10. Those a-holes may have shown up asking for money with hat in hand and should ALL have left with ass in hand.

  11. Thanks to the bailout, the housing bubble will not burst, only deflate a little.

    All the bailout can do is delay the collapse. The repricing will happen, no matter how many incompetent bankers get handouts.

    -jcr

  12. And thus we see the real start of fascism in the U.S.: When the corporations and the governments are fully aligned, we’re there.

  13. Wow, the Leftoids accusing every comment above this one of being hysterical have not appeard yet. Did they start drinking early or are they just napping?

  14. Thank you to everyone that said, “I’m against a bailout in principle, but we really need this to save the economy.”

    Fuck you very much.

  15. Good thing the Reason staff members did not endorse anybody who would go along with this crazy plan . . .

  16. P Brooks | November 7, 2008, 10:27am | #

    If we (the government) just let General Motors and Ford go tits up, and put their displaced employees on the dole for forty grand a year, we’d be money ahead over the bailout.

    See, GM and Ford probably aren’t going to go bankrupt any time soon. Chrysler, however, is. And, when Chrysler goes Chapter 7, there will be a huge amount of demand that will go unfilled. Toyota and Honda can’t fill it all, or even most of it. Tada! Sales increase significantly at GM and Ford, and they are saved-for the short term, at least.

  17. Of course, all of that supposes that the government doesn’t encourage a merger between GM and Chrysler, with the Feds taking a chunk of it. That merely creates American Leyland and is a guarantee that both GM and Chrysler will eventually disappear.

  18. Oh, nobody fear of the government ‘labor shortage’ that this would normally create. The new Administration already has well published plans for using volunteering all citizens age 5 to 25 to fill in 50 hrs. per year as their civic duty.

  19. Someone explain to me why the government is doing everything in its power to ensure that I will never, ever be able to afford to purchase a residence in my city? Oh that’s right, I guess I’m supposed to sign up and wait in line for “affordable housing”.

  20. Ford, if I recall this morning’s number correctly, is burning through 2.2 billion dollars a month. That’s some serious value destruction. The entire $25 bil of loan guarantees tucked into last years energy bill would be gone in a year if we gave it to Ford.

    Fuck those guys. Let ’em die. GM, too.

    Welfare on the individual level is cheaper than welfare on the corporate level.

  21. i think the two parties and corporations, especially big one are uberhaupt fully aligned already. I don’t remember the corporations ever having to go hat in hand, but the politicos were almost beside themselves to hurl money on them and according to other accounts, if the company still had any sense of propriety the govies insisted. Now, that is a deal that can’t be refused.

  22. Without having the read the language of the bailout legislation, can anyone tell me if this ” widening the scope” is even allowed under the legislation?
    I guess it appears so, but was the language in the legislation that broad and vague that it allowed the gov’t to buy virtually anything it wanted?

  23. The combined market capitalization of Ford and GM is about $7.25 bil. If we’re going to let the government “partner up” the auto makers, we should just buy the stock outright.

    We can let the DoD run them.

  24. I tried to argue with some lefty friends that the housing bubble was based in part on unsustainable purchases of housing in areas of low density (bad for the environment) and long commutes, and many of those houses were big places with big energy costs for heating and cooling. So, we shouldn’t bail anybody out, but rather let the market punish that ecologically unsustainable development pattern.

    They weren’t impressed.

  25. “but was the language in the legislation that broad and vague that it allowed the gov’t to buy virtually anything it wanted?”

    gmatts, yes, YES YES!…not only was it broad enough to allow them to
    buy AND Sell ANYTHING THEY WANTED
    TO or FROM ANYONE They wanted

    AND all without permission or oversight from ANYONE ….

    There is no recourse, no congress men is allowed to see any details about the transactions AND all transactions are immune from any lawlessness!

    It was 100% a license to steal any amount of money they wanted. $700 billion is only a limit on assets held at any particular time…through buying and selling there ARE NO limits!

    THis is why we opposed it…this is why IT HAD TO BE A LIE THAT they were watchibng out for us…NO sane honest person would ask for this power. Merely asking for that power was a act of tyranny.

  26. GM was burning through cash at about the same rate as Ford, last quarter. Let’s pound more money down the rathole.

  27. What is very interesting about the defense of bailing out the auto manufacturers is the claim if they fail it will mean job losses. That is true over the short term of course, but not true over the long term. A lot of that argument I think assumes that for some reason the U.S. economy needs auto manufacturing as one of its core products, but I don’t see any reason why that should be the case.

  28. I used to laugh at those “Angry Renter” banner ads…

  29. Detroit supposedly gets a lot of its profits from selling replacement parts when their cars break down. I certainly don’t want to challenge this business model; I would like to see American workers continue to make things that consumers can buy when their American cars break down. However, I’d rather see those workers plying their trade in Toyota and Honda plants. They’d still be making things that consumers can buy when their American cars break down.

  30. Obama is a criminal for helpign push it through…he is already guilty of Treason. He is owned by the same criminals who own bush…that is why we know with 100% certainty that he will not repeal any patriot act…any domestic spying laws….the tyranny is all going forward 100% as planned. except now they have a more popular leader. He now has left cover along with the elite purchased media cover.

    How else do you explain 99-1 population against the bailout and 100% unity amongst GE/Westinghouse owned media….all 100% in favor of the bailout? remember the eary unifromity leading up to Iraq?

  31. Oh that’s right, I guess I’m supposed to sign up and wait in line for “affordable housing”.

    Do not worry, citizen! You be assigned good place to live, very nice. Was once large closet in bourgeois house. Sharing with only three other families, you like them.

  32. sure you’ll have to make some sacrifices Joel, but you are so spoiled and selfish to demand 2000 sf for a family of four…once you learn to sacrifice for the planet you will be transformed into a new better human who doesn’t seek petty status symbols…and more importantly we will all be more equal except those of us who are intellectual enough to be the lords.

    we need unity now, not diviseness so I’m asking you to give a little for once.

  33. Don’t worry people, we have had this contained for almost a year now.

  34. OH-OH-OH!
    I want some!

  35. From the local rag –
    GM loses $2.5 billion in 3rd quarter, burns $6.9 billion of cash reserves
    and
    Auto execs plead case for financial aid

    Pelosi said the meeting focused on how to save jobs, protect taxpayers and “use cutting-edge technology to transform blue-collar jobs to green-collar jobs for generations to come.” [emphasis added]

    “It is essential that we preserve our manufacturing and technology base in this country,” she said.

    “They are not seeking cash just to spend it,” said U.S. Rep. John Dingell, D-Mich. “They are seeking money to invest in the future of jobs and opportunity for American workers and industry.”

    U.S. Rep. Sander Levin, D-Mich., said the meeting was “a very positive discussion,” and that the industry was realistic about the strings that would come with government help.

    “All of the money so far voted by us has had warrants or preferred stock or equity provisions,” the lawmaker from Royal Oak said. “The Big Three understand there would be similar provisions on any loans to them.” [emphasis added]

    If you think Ford, GM and Chrysler can hemorrhage money building cars, wait until Pelosi and Levin get involved.

  36. J sub D,

    Well, we can take comfort in the fact that none of these efforts will preserve these manufacturers over the long run (barring some dramatic changes in how our economy works). What is odd to me is what seems to be part of the reasoning here: that only by saving these three companies will the employees of these companies be able to find work.

  37. GM will be tits up by January.

    That’s from their press release. I paraphrased of course.

    They’re going to get bailed in the next month or I’m Santa Claus.

  38. Toxic,

    If they went bankrupt then whatever is usable would be bought up and will continue as an operation. The rest would be liquidated. Good old creative destruction.

  39. That reminds me. If the automakers do go down, that leaves Michigan with all the pension liability, certainly the politicos can not leave all the pension-promised baby boomers hanging. And since most states have no capacity to handle that liability it will of course become a federalized thing, one way or the other.

  40. Perhaps all the displaced employees of the car companies (when it happens) could open a business doing “community service” for those folks that are busy working. Then I would get my community service done, out of the way and pay those that did the “work”. Everyone wins !!!

  41. As a resident of Michigan, it’s pretty clear a lot of those folks won’t find jobs, at least right away, and probably not at comparable pay levels. Right now we already have 10% unemployment. It’s not encouraging to hear that our new president-elect Obamination has appointed our current governor Jennifer Granholm, who has singularly failed in any attempts to attract any new industries to Michigan or keep existing ones from leaving, to be his economic advisor!

    I’m not recommending that they bail out the automakers; personally I think it might be the chance to finally break the union and get some real cooperation between them (from my understanding of history this happened to Toyota after WWII and is part of what lead them to develop the corporate culture that is so successful and imitated today).

    At the same time I’m not unsympathetic to the current situation, since part of the deplorable circumstance is the government’s fault: 1) The housing bubble ruining credit; 2) pro-union laws that make it un-economical for the big three to build anything at a profit but large expensive trucks and SUVs; 3) CAFE requirements that require them to sell smaller cars at a loss to compensate for the big ones they have to sell to make money, and 4) the ‘two fleet’ requirements for imported and domestically produced vehicles to both meet CAFE which would prevent the big three from importing smaller cars from overseas to avoid losing money on them (also BTW a requirement backed by the union).

  42. I do not like the fact that Gov Jennifer Granholm is on Obama’s economic transition team, unless he’s looking for examples of what not to do.

  43. I don’t think the government will bail out the automakers, but they will pick up the pension funds. Not sure how they will pay for it.

  44. Bingo,

    Well, whatever they do it won’t save the U.S. auto industry as it exists today; it will merely prolong the agony.

  45. I recently received my yearly pension payout or bonus, this is in addition to my monthly payment. Guess what, I lost it all at my bank! They charged me almost $700.00 for bank charges I incurred as I could not keep up the payments on my automatic withdrawls! Needless to say, I am not receiving any “bailout”.

  46. So now everyone gets a bailout. I just threw up a little in my mouth.

    Not exactly. The grander the scale on which you’ve screwed up, the more likely you are to be bailed out. How’s that for a perverse incentive.

  47. All of you talking about creative destruction, GM and Ford being replaced by other auto makers, the (productive) jobs continuing on or at least coming back, are all missing the point.

    The jobs that will disappear if Ford and GM go tits up are union jobs. The ones that replace them may or may not be. As a Patriotic American, it is your duty to ensure that union membership is not threatened.

  48. Those union jobs will be preserved, but the UAW will be superceded by AFSCME.

  49. I continue to be amazed at the stupidity of our leaders. We no longer are a country built on the gold standard. We are a country on a real estate standard and yet our leaders refuse to bail out main street home owners. Do the math, if there are 130,000,000 heads of household in this country who own homes with mortgages seems to me we could bail out the entire group by simply using part of the 700 Billion to pay off these mortgages. I realize this is a simplistic approach but reason it through.

    A person with no mortgage to pay for will use that income to rebuild the economy through purchases of many consumer goods. New cars would be purchased. durable goods would be purchased, vacations would be taken, jobs would be created, credit cards could be paid off thus putting money back into the banking system. All of that happens for whatever the cost is to pay off the mortgages. Simplistically if it averaged out that this would require a grand total of even $1 million for each household we would bail out the entire system, avert recession and stimulate the economy for a maximum of $130,000,000. Perhaps Nancy Pelosi and her merry band of Democrats along with President Bush and Paulson should consider this.

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