Auto bailout is cheap

[Onceler]

Compared to what it would cost not to. The market tanked again today, partially on fears that no bailout was coming. If GM goes chapter 7, who knows where the bottom of the market really is.

Is America prepared to see unemployment spike to double digits? Are we ready for a DOW at 6,000? Does the ripple effect from this completely dwarf $25 billion?

People talk a little too cavalierly about how capitalism is "supposed to work" and that the Big 3 have to learn a lesson about how to run a good business. There is merit in those arguments, but they are all on a theoretical plane; the reality is much more harsh, for millions of Americans who have worked hard & done the right thing.

 

[uscitizen]

I have no confidence that the 25 billion would work. And anyway isn't that just for GM ? What about the others ?

 

[Onceler]

I have no confidence that the 25 billion would work. And anyway isn't that just for GM ? What about the others ?

There are no guarantees it would work, but it's worth $25 billion just to buy some time for this economy to at least start to rebound.

I thought it was for all 3, but I'm not positive.

 

[uscitizen]

Yeah after all that 700 billion was supposed to fix things....


close to 3 trillion so far and things still suck and are dropping.

 

[Onceler]

Yeah after all that 700 billion was supposed to fix things....

close to 3 trillion so far and things still suck and are dropping.

No one ever said the bank bailout was supposed to "fix things," especially in the course of a couple of months. It's only now being implemented, and it will free up loans for thousands of businesses.

The economy is headed for a deep recession; probably in one right now. The idea here is to shorten it and keep it from getting deeper.

 

[uscitizen]

No one ever said the bank bailout was supposed to "fix things," especially in the course of a couple of months. It's only now being implemented, and it will free up loans for thousands of businesses.

The economy is headed for a deep recession; probably in one right now. The idea here is to shorten it and keep it from getting deeper.

Heck they didn't. All I heard we if you don't do this RIGHT NOW.... The implication was very explicit and loud.

The US auto industry has proven they can't run their business properly a few times. Auto manufacturing will rebound in another form WHEN conditions permit people to buy more autos.
Propping up the industry in a period when people will not be buying cars makes little sense.
This is not like the Chrysler loan , different times.

Providing a product for which the demand has dropped thru the floor is not smart.

 

[Onceler]

Heck they didn't. All I heard we if you don't do this RIGHT NOW.... The implication was very explicit and loud.

USC, yes, they said RIGHT NOW, and I actually think that it could have lessened the impact if they had passed it a week earlier. But NO ONE said it would "fix things" immediately. No one.

All of this - the financial bailout, the auto bailout - is about making this recession less severe. No one ever said they could avoid a recession.

 

[Annie]

Why this is a bad idea:

http://volokh.com/archives/archive_2008_11_16-2008_11_22.shtml#1227141469

[Jim Lindgren, November 19, 2008 at 7:37pm] Trackbacks
A Simple Argument Against the Auto Bailout: A Bailout Would Destroy Jobs. I have hesitated writing about the GM bailout for two reasons. First, I like GM cars; I bought two of them in March, and every car I’ve ever bought was a GM car. Second, a professor with tenure should be somewhat circumspect in writing about the jobs of people who do not have the protections that we have.
But in watching CNBC debates on the Auto Bailout, I have been frustrated by the arguments of those who favor bailouts that government largesse will on balance lead to more employment, rather than less.

Those inclined against the bailout seem mostly to say, “When will the handouts end?”

Yet the best way to meet the “jobs argument” is with another jobs argument. Making bad, uneconomic investments in failing industries does not, on balance, preserve jobs; it tends to destroy more jobs – and more good jobs – than it saves.

If you give money to failing industries to save jobs, then you are probably taking even more jobs away from other industries who would hire or retain workers but for their higher expenses. In essence, throwing money down a hole may preserve jobs in the short term but should lose jobs in the medium and long term...

 

[Onceler]

"Even if two of the three Detroit automakers were to go out of business, most of their workers and the workers for their suppliers would be able to get some sort of job. That the jobs they would get would pay a lot less suggests just how much they are overpaid now"

What a pathetic argument. How about the fact that it suggests that in some of these towns, there is absolutely nothing but the auto industry, and that any other available jobs are menial & lower rung?

Those who argue against the bailout seem to think that the people employed by the big 3 exist in some sort of vacuum, and that the big 3 could lose a few million jobs in a short period without it having any affect on the rest of us. Big mistake.

 

[Cancel3]

The bailout of the banking industry was sold to us as a "right now" deal. And it probably was. The money needed to be freed up to prevent the failure of a lot of financial institutions.


But this economy is going to get worse before it gets better. We are 2 or 3 years away from having a good economy again.

The steps taken now are to slow the slide downward and to make the depths it sinks to shallower.

Its the difference between the market sinking to 6,000 and the market dropping to 3,000. While 6,000 really sucks, it is better than 3,000.

 

[Cancel3]

"Even if two of the three Detroit automakers were to go out of business, most of their workers and the workers for their suppliers would be able to get some sort of job. That the jobs they would get would pay a lot less suggests just how much they are overpaid now"

What a pathetic argument. How about the fact that it suggests that in some of these towns, there is absolutely nothing but the auto industry, and that any other available jobs are menial & lower rung?

Those who argue against the bailout seem to think that the people employed by the big 3 exist in some sort of vacuum, and that the big 3 could lose a few million jobs in a short period without it having any affect on the rest of us. Big mistake.

If we do bailout the big three, there are still going to be a LOT of jobs lost. They are going to have to trim thei workforce by a third to get back on track.

The difference is whether its just 1/3 or all of them.

 

[Onceler]

If we do bailout the big three, there are still going to be a LOT of jobs lost. They are going to have to trim thei workforce by a third to get back on track.

The difference is whether its just 1/3 or all of them.

I heard about 20%, but I'm sure it could be up to a third.

Still, pretty mammoth difference between that & all of 'em. I don't think anyone knows what will really happen if a company like GM just folds. It's uncharted territory; frankly, it freaks me out a little...

 

[Cancel3]

I heard about 20%, but I'm sure it could be up to a third.

Still, pretty mammoth difference between that & all of 'em. I don't think anyone knows what will really happen if a company like GM just folds. It's uncharted territory; frankly, it freaks me out a little...

Since reading your post yesterday about using the bailout to delay the folding of such huge companies, I have been looking at that angle.

I think GM would barely survive a year or two that way, because the customers would see they are one step from bankrupcy.


But seeing those companies fold DURING the recession we have now, would be a huge disastor

 

[uscitizen]

Umm we are moving into a time of big economic disasters.

Is it cheaper and more effective to help the displaced workers or the corporations with very little market for their products ?

 

[Cancel3]

Umm we are moving into a time of big economic disasters.

Is it cheaper and more effective to help the displaced workers or the corporations with very little market for their products ?

I think the displaced workers are screwed if the big three go under. Retraining them for other careers is going to be tough if not impossible.

I think we would be looking at supporting them for at least 3 years.

 

[evince]

The bank bailouts are not being carried out in keeping with the stipulations congress put on them, Paulson is a fucking criminal. The Auto bailouts if done need to be done after the Jan 20th or we will get more of the same.

 

[Kamala Trump]

No one ever said the bank bailout was supposed to "fix things," especially in the course of a couple of months. It's only now being implemented, and it will free up loans for thousands of businesses.

The economy is headed for a deep recession; probably in one right now. The idea here is to shorten it and keep it from getting deeper.

Yes they did, you revisionist. It was supposed to restore liquidity to the lending market.

 

[Cancel 2016.2]

There are no guarantees it would work, but it's worth $25 billion just to buy some time for this economy to at least start to rebound.

I thought it was for all 3, but I'm not positive.

They are already being given $25 billion, they are asking for an additional $25 billion. You are correct that it is for all three.

IF the government does this, all executives of the big three should be replaced with NO golden parachutes or large compensation packages of any sort. The union leaders should also be replaced as they have also contributed to the problem. It is time for new leadership across the board.

The total market cap of all three right now is under $10b and we are giving them possibly 5 times that amount??? That is tough to swallow. Especially when the auto and union heads said yesterday that they "think" the $50 billion will help them survive until the end of next year. THAT is why they should all be fired.

 

[Cancel 2016.2]

The bank bailouts are not being carried out in keeping with the stipulations congress put on them, Paulson is a fucking criminal. The Auto bailouts if done need to be done after the Jan 20th or we will get more of the same.

You need to pay more attention, it is not just Paulson changing how the funds are going to be used for the financial sector... it is all of the idiots in DC in both parties pulling shit out of their asses and 'winging' it.

As for the auto industry... GM will not last until Jan. 20th.

 

[uscitizen]

I think the displaced workers are screwed if the big three go under. Retraining them for other careers is going to be tough if not impossible.

I think we would be looking at supporting them for at least 3 years.

But would have better long term effects and be cheaper than supporting an industry with little market for it's products for the same period of time ?