Why are all three of our Detroit auto makers lobbying for loans to rescue them from economic collapse? Because Americans don’t want to buy their cars. We’ve said as much with our failure to purchase their goods. Our unwillingness despite, Congress will decide whether to use our $700 billion Wall Street rescue fund to keep these companies afloat.
What brought our economy to the recession that leans so hard upon this and other industries? After all the name-calling and spurious accusations quiet down, the finger points at irresponsible investing: Bernie Mac and Fannie Mae extended “high-risk” loans (loans that are likely to be defaulted) so that citizens could live in houses they couldn’t afford. When the citizens reaped the results of imprudent use of credit, so did the banks. Did we learn our lesson? ...At the bottom of the article, consider whether a $700 billion bailout for Detroit is responsible investing.
Are the Detroit auto makers a high-risk investment? They certainly have not demonstrated impeccable business sense. “The Detroit Three depended … on profits from gas-guzzling sport-utility vehicles,” says today’s Wall Street Journal. The Journal furthermore offers for evidence of the industry’s adherence to harmful work rules the job banks which hold workers on payroll when they are disemployed due to plant restructurings or are replaced by automation.
The financial straits of our auto industry manifests how very poor its business model is. What happens when we support their behavior but not that of Japanese auto makers Honda and Toyota (who have been adapting to the market and are not currently in crisis)? At worst, the effective businesses could go under, and we’re stuck with the ineffective businesses for the long term. At least, we’ve burned up billions of dollars to give an industry the chance to consume more raw materials, whose products we won’t buy. (It were better we paid the auto makers to take a vacation.)
“Jobs!” Did that make you jump? Well, it works on some people. When they hear that jobs will be lost, it’s a call to open the communal coffers of our tax revenues. While keeping factories open and building more factories does create jobs, it does not support workers. Wages do not come from the work that they do; wages are paid by the customers who choose to patronize a business. So what happens when the relief money is spent, and the US auto makers are still ineffective? Maybe floating them didn’t work last time because we didn’t use enough money…
But that's not a special interest group, it's for the economy. I mean, if it were for a special group you'd expect shoddy regulations, corruption by recipients, and prolonged debate over if others should be allowed. I mean I haven't seen any AIG executives running off to spas and on get-aways with the bailout cash... oh wait...
ReplyDeleteWhat is it that makes people think that they can fix the problem by throwing money at it? You don't put out a fire with gasoline, and you don't fix bad finance with bad financial strategy. Not to mention, that this is taxpayer money! Money we don't have!
I live in a budget, so should Washington. Perhaps I should start a petition for just such a law.
Thanks.