Obama looked pretty good on 60 Minutes Sunday evening. He looked like he had everything under control in his "no drama Obama" way.
But the world has changed again. With Citibank's layoff of 53,000 employees and the Republicans in Congress still fighting against the bailout, one wonders what unemployment will look like before this is "over," whatever that means.
I've been debating with myself for weeks over whether we ought to bail out the auto industry. I made a little pro-con list for myself today.
On one hand, the auto industry is a huge industry, symbolic of American engineering and technical leadership. American cars are part of everyone's gay mad youth (unless they are young today). On the other hand, the industry has been staggering and contracting under the weight of both its own profligacy and global competition for years.
On one hand, Detroit has a supply chain of about 3 million total jobs. On the other hand, not every job is lost in bankruptcy and those suppliers can continue to supply Honda, Toyota, and the others who are competing successfully.
On one hand, all these workers will go on welfare and public assistance, further taxing our entitlement programs. On the other hand, a bailout is just an entitlement program distributed differently.
On one hand, we can attach strings to the bailout that will force the companies to do business differently. On the other hand, the President of GM has already indicated he won't resign for a bailout and the current POTUS has already said he'd give them $25B with no strings to keep them in business.
You see where this is heading. I am heading to a conclusion that we ought to let these companies go bankrupt, and throw our energy into restructuring them forcibly while shielding them from creditors so they can continue to operate, which always happens in a Chapter 11 filing. They will get DIP (debtor-in-possession) filing, won't they? The board can then throw out the CEO if he isn't doing the job, can't it? And the company will come out stronger.
Look at Continental Airlines. It went bankrupt and came out much better for it. So have many other, less notable examples.
If we let them go bankrupt ( they might not all have to seek Chapter 11, but if you give out bailout money, you can be sure they will all ask for it, and their suppliers, too), jobs will be lost, but those jobs will be lost no matter what. Many of those jobs are "faux," created by unions and by bloat, the way big companies always grow when they have the money to do it.
I find all this hard to square with my social safety net predilections. But I've been watching layoffs in Arizona for two years now, and layoffs in Silicon Valley, and now in New York. We've seen Wall Street completely collapse and restructure.
Why should the auto industry be immune?
Update: After I wrote this, I was led by Paul Kedrosky to this video posted by GMblogs about the consequences of a bankruptcy.
Read More:
Should the Government Bail Out the Big U.S. Three Automakers? HuffPost Bloggers Weigh In
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Yes, I agree
" while shielding them from creditors"
Correct, their creditors don't need the money. They can wait.
" so they can continue to operate"
Of course. They can go on making cars and trucks and continue with their R&D to make green cars for the wellbeing of our PLANET.
"which always happens in a Chapter 11 filing. "
YES, everyone knows that Chapter 11's NEVER turn into Chapter 7's ...
"They will get DIP (debtor-in-possession) filing, won't they?"
Of course they will. We ALL know that the banks are trying to find borrowers ...
" The board can then throw out the CEO if he isn't doing the job, can't it? And the company will come out stronger."
I think a board can fire a CEO anytime they want ...
$25B between 3 Biggies -- pocket change for them. To 'bail' them, keeps huge union contracts with all retired expenses, etc.....live. If CEO's - Pres - Execs won't leave, they'll continue same old. $25B isn't enough to retool for 3. So it's survival of the fittest. Chapter 11 if it gets the head office tanked. They've been bonused up their a.s.s.holes forever so sue me for contract buyouts. Try getting blood out of a rock! $25B -- what happens when contracts run out -- union come up with job security, benefits -- good luck. Whoever coined words "job security' pulled one over everyone as there's no such thing. Those words to me mean the same as "closure" when someone dies. Think about it.
Chapter 11 -- airlines worked it through. These 3 should too. If we hand it over -- we'll be bi*ching like AIG -- bonuses, dividends, all same crap and they'll be back at the door "Wasn't enough". If they work that close to the edge, have inventory up the ying yang -- to add to inventory in the yards -- WHY??? I'm driving mine into the ground. Days of every 3 years --