12/10/2008

One morning, I shot a Chevrolet in my pajamas…

Government does not solve problems; it subsidizes them. – Ronald Reagan

The White House said today that "The legislation crafted in recent days aimed at helping the ailing U.S. automakers is an effective and responsible approach". 

I strongly disagree. It was hard enough to get policymakers to finally utter the word "recession." The Treasury just issued 4 week T-Bills at ZERO percent interest, for the first time in history. In the secondary markets, T-Bills were trading at a premium (meaning negative yields). You want to talk about deflation? People are so fearful that they’re willing to let the US Treasury hold their money and earn no interest at all.  The next challenge may be to get them to say "nationalization"  -- because that’s exactly what’s happening, baby!

That's pretty much what the government takeover of big chunks of the economy amounts to, in my opinion. Welcome to the USSRofA, Comrade!

Actions taken by the Democratic-led Congress and the outgoing administration — moves generally supported by President-elect Barack Obama — already have reversed decades of deregulation and privatization that Presidents Ronald Reagan, George W. Bush and George H.W. Bush all championed. It seems that when times get tough, the U.S. Government needs to step in and be the "lender of last resort". I say, “bullshit!”

Washington has taken a direct stake in  or orchestrated the takeover of banks, seized control of mortgage finance giants Fannie Mae and Freddie Mac, taken a controlling stake in insurer American International Group and now is poised in the final weeks of Bush's term to throw a multi-billion dollar lifeline to the troubled Big Three automakers. We can print money until our faces turn blue. But where is the solution to the problem? Do you see a solution? NOT! Credit markets are still frozen, Pal. And people are out on the fyookin’ street because they cannot pay their mortgages. And that’s after our Government has literally pissed away billions of your and my hard-earned tax dollars in an insanely misguided effort to “fix it”.

Congressional Democratic leaders and the White House just negotiated a bill to provide $14 billion in emergency short-term loans for Detroit and create a "car czar" to be named by Bush to dole out the loans and oversee restructuring.  Republicans may very well  ditch it, and I really hope they're successful. The Government simply does not have a very good track record of intervention in the business sector during hard times.

The problem is, this is simply throwing money at a sinking ship in an effort to "rearrange the deck chairs on the Titanic" without addressing the real baggage of bad decisions on long-term union contract agreements and other financial obligations that will still completely prevent US automakers from ever being competitive in global markets. 

The unions crippled the car industry because they were greedy and  didn’t think ahead. It’s not just the fault of the unions – the carmakers made reallyreallydumb decisions about what to produce and sell too.

I bet you that with the current deal, within just three months, GM will be back in D.C. asking for an additional 15 Billion of your and my hard earned money! Six months later, an additional 15 billion! What am I talking, GREEK? Come on, can we  THINK for a change?

"The government has no business managing car companies, even if temporarily", says Sen. Richard Shelby, R-Ala. "It's very un-Republican". And boy, is he right.

Nearly two years after Bush suggested that Detroit produce "a product that's relevant" -- rather than looking for a possible Washington bailout, the President now supports the emergency loans — after getting a concession from Democrats that the money would come from an existing program to help the industry retool its plants to make greener cars.

Longer-term proposals being developed by Obama and congressional leaders call for an equity stake for the government and a chance to dictate business decisions for years to come. This is totally wrong! The only way to fix the mess is to enable the automakers to restructure under Chapter 11 Bankruptcy, which will give them a chance to ask the Judge to nullify all the bad contracts and utterly stupid decisions they agreed to over the last 30+ years, and have a chance to really come out with a fresh start and have a viable industry.

I repeat: the pouring of taxpayer dollars into this Black Hole WILL NOT FIX THE UNDERLYING PROBLEM!

During World War II, the government seized railroads, coal mines, Midwest trucking operators and, briefly, retailer Montgomery Ward.

The federal government partially nationalized the nation's troubled railroads in the 1970s. Today, it still owns and runs Amtrak. What a DISASTER! You want more of this?

The government nationalized more than a thousand failed savings and loan institutions in the late 1980s and the early 1990s, modeling the effort on a government-run corporation that made loans and bought stock in distressed banks during the 1930s.

The Government has a very bad track record of intervening in failing industries. Don’t we get it? Can’t we THINK? It's time to stop the bullshit and let the automakers take bankruptcy. That’s what they need. It won’t be painless, to be sure. But it could work. It could be a lot less expensive to retrain and re-employ the displaced workers than to throw hard-earned taxpayer money down the sewer.  My two cents.