The Double-Standardization Of Double Standards

The administration's plan for the now-defunct American auto industry giants General Motors (GM) and Chrysler LLC is to enter a "surgical" structured bankruptcy, whereby the bad, fattening "cream" is skimmed off, leaving only the good, leaner remnants behind. In the case of GM, the hope is that a standalone "good" company will remain (call it Skim GM), whereas for Chrysler, the "good" remains are encouraged to join with Italy's charitable Fiat SpA. (It is generally agreed that GM has received the better deal, and some have even written off Chrysler altogether as being destined for oblivion.)

So the Saturn, Hummer and others will go the way of the Oldsmobile, Wagoner/Wagoneer and the Dodo, while what proves more staple and profitable, like say a Cadillac, gets to stick around a little longer. It comes as no surprise that this plan for an Automobile Purgatory has duly raised the specter of double-standardization. As the Washington Post's Eugene Robinson, who's dubbed it "Detroit Dissonance", writes, "The president is telling Detroit to shape up or die while at the same time politely asking Wall Street, whose recklessness and greed caused this economic crisis, if it would be so kind as to accept another heaping helping of taxpayer funds."

Likewise, as David Sirota writes on this site, "There is clearly a double standard at work: Just a few days ago, Wall Street executives were hosted at the White House for a cheery photo op and reassurance that they will be getting hundreds of billions more in no-strings-attached bailout cash. Then this week, Obama demanded the firing of GM's CEO, and said he may withhold the mere $30 billion or so that the automakers are requesting."

Robinson and Sirota's call-outs are appropriate, and should be duly noted by policymakers (surely they are). But, in this double standard revelation, what is surprising is that anyone is actually surprised. Surely there is nothing new about double standards in business and finance, especially in the current crisis. In fact, there may even be a rising double standard for what constitutes a double standard.

The double-standardization in approaches to the current crisis of course began most notably with the failure of Lehman Brothers in September, under Paulson and Bush. The result of that administration putting its foot down was an economic cataclysm of sorts. Cries immediately arose from some, namely Lehman Brothers, that the Bush administration was guilty of using a double standard, given the government's precedent for largesse in the case of AIG and Bear Stearns.

As children learn early on in life when picking kickball teams, life isn't fair. While GM and Chrysler wail lamentably about the dissonance between Detroit and Wall Street's treatments, Ford Motor Co. now has its own complaints about the possibly advantageous treatment of GM. Honestly, who wouldn't want a "surgical" bankruptcy to cut out the "bad" and come out leaner, meaner and more competitive than ever? -- all after devouring billions in government bail out funds. For everyone who draws a short straw, there is someone somewhere else drawing an even shorter one.

As Gettelfinger and the United Auto Workers (UAW) cry 'double standard!' and 'we've given up enough!', non-union American autoworkers working for foreign firms elsewhere in the US point out that they have for decades been paid less and enjoyed less benefits than their UAW counterparts. So who's the victim of a double standard, the GM and Chrysler workers getting stiffed now or the Toyota workers who never had the same perks to lose in the first place? It's a clash of irreconcilable perceptions, which is no doubt an endless cycle.

One hopes and prays that Wall Street boneheads will eventually get their comeuppance, but it's beginning to seem like complaining of double standards in the business world is analogous to whining about the smell on a fishing boat. Even legitimate traditional banks have their own complaints of a double standard, directed towards non-bank entities like GE Capital who engage in banking practices without being subject to due regulation and oversight. Clearly these dilettante enterprises must be reined-in and accounted for under the same oversight umbrella as everyone else.

However, restructuring such a vast and complex system surely cannot be done in one fell swoop without catastrophic side effects. It presumably will require a piecemeal approach that will inherently result in unequal treatment for various entities -- much to the chagrin of whoever first draws the shorter straw. In an undertaking as massive as restructuring the entire financial system or American automaker business model, one must start somewhere. And whoever avoids initial scrutiny and regulation will be seen as enjoying the better end of an unjust double standard -- so the cries will grow shriller. The big question is, can systemic restructuring really happen without double standard treatment along the way?

This is a question I daresay I should leave to the experts. But those who feel victimized by double standard treatment now might do well to remember that time they didn't get picked by either team in kickball. Sure it's not fair, but given the current situation, there will probably be a lot more of said unfairness to come.

Comments

[billw8017]

Just as parents freely provide for kids despite that the children have needs while we say "there are no free lunches," the essential industries must provide for the government and society rather than the other way around. The alternative is like sending kids out to work, a possibility but not best.

[billw8017]

Ultimately, the value of the dollar is what it can buy that has real lifestyle effects. Trading in paper like stocks and bonds and funny stuff is a way to park the money and handy enough in the short run. It you cannot buy food, fuel, construction and toys, the money is worthless and the paper is a bad joke.

It is essential not only for our national security (buying weapons abroad means buying the second best choices), but for our economic vitality and commerce that the United States has manufacturing and agriculture.

[bighat]

Wall Street maybe moving. New York seems to want to raise taxes on everything and create new taxes as well. I can picture a bidding war from all the states wanting the New York Stock exchange moved to their state

[indy100]

There is a double standard, and always has been. The difference is now we're seeing the double standard applied to large corporations, not just the smaller ones. Those in power have always attemtpted to maintain their power and their advantage, even at the expense of the population or the country at large.

Americans have become complacent and apathetic. We used to protest in order to bring needed change to society, such as the right for women to vote, civil rights, end to Vietnam; we no longer so. Europeans routinely protest and make their voices heard. It's time for us to take to the streets (like they are doing in London) and make our voices be heard.

[PAMPAS]

You might want to ask why a president, in conspicuous violation on international laws to which his country is a signatory, would be flitting about as a free man while "lesser" dieties are subjected to hanging and other ignominious disposal.

After a certain point, does it really matter how one conducts oneself when behavior has reached unacceptable limits? I know there are those who are loath to entertain the idea that possibly GWB is on a parity with SH, but we judge people by what they do. Torture is torture, no matter who does it.

Likewise, if a businessman knows that he is creating financial instruments which could easily cascade into default and which he has shielded from public scrutiny, he too is subject to the same standard to which a Ponzi schemer is subject. The market works on rational decision making, and once the covenant between business and the investing public is broken by failure to disclose information, the outer rings of Hell should be reserved for those who breach the covenant.

[ATH]

This muddles the fact of what the double-standard means: that, just as one would expect from the Cabinet appointments, president Barack Obama is completely owned by the financial sector and doesn't really give a damn about the little people.
Do people realize what will happen if GM cuts its pensions and health coverage to millions of people, like my mother? Well, it will destroy my mother. She will not be able to afford her medications, at 78 years old! Obama, in his extreme double standard, is pulling the rug out from beneath my mother and millions of others due to the massive amount of jobs, pensions, etc. to which GM is tied. This will have a huge effect on people and the economy, but it will just affect We the Poor while the Investment Bankers of Wallstreet & the FED continue to rob the people blind. So far, between the Treasury and the FED, we've poured 12 trillion dollars into these investment banks and AIG! GM was asking for a measely 30 billion to get it through the recession. Don't foget many Americans wanted those SUVs and huge trucks not long ago. Barack Obama has chosen sides, and, unfortunately--because I voted for him, too--he's not on our team. He represents Wallstreet; and the FED is actually beyond his control. This is nothing less than a coup by the oligarchs, just as the FED Act was in 1913. 20 years later, we were bankrupt! This is part 2.

[ScooterTwo]

We OUGHT to be saying goodbye to these ultra-rich, isolated banking executives who have either made or allowed their people to make the decisions that have bankrupted the global economy. We ought to limit them to say, 100 times the earnings of their lowest paid workers and limit the perks. WHY do they think they have the exclusive capability to run their firms, after all, most have only proven capable of running their firms into the ground. How many at the top deserve to keep their jobs and WHY is that so. I know they would have little compassion if one of their low-paid workers made such decisions. But the reality is that their high paid consorts have made these decisions and -- well, we cannot hold them accountable can we? -- Personally, I think we can and we should.

When Frank Lorenzo resigned as Chairman of Continental Airlines, the stock price DOUBLED that day. Maybe what we need to do to improve investor confidence is ask ALL these Wall Street people to simply take their stolen monies and "retire" or at least go away. There MUST be a lot of more poorly paid people who would gladly take the status and who would operate these same firms at least as effectively and for a lot less taxpayer money funding their salaries.

Enough!

[Doubledoot]

I can't defend GM : They are the most mismanaged of all the companies and have the most potential : sad ! They should have gotten their house in order long before this ! I think they would welcome bankruptcy to get those pensions off their backs ! It's not really going to hurt GM : but it will devastate the workers and retiree's . The middle class ! Without the UAW and the AFL -CIO there would be no middle class ! Obama is about to sanction the devestation of millions of American retirees ! Thanks for the help !

[Doubledoot]

My concern is with the rank and file auto worker and the administrations 'double speak'. The Obama administration has come out strong in support of unions. Wants to pass a bill favorable to unionism (EFCA) but in the same breath is about to crush the UAW. The perks and benefits that the non union auto worker (here and abroad) enjoy would not be there if it hadn't been for the UAW winning consessions from GM and Ford etc. Now the white house wants to hang them (us) out to dry ! How about all those pensions and health benefits ? What will happen to them if GM is forced into bankruptcy. The right wing call for GM to conform to the Japanese work/ pay/ benefit standards is absurd. Union busting at it's most insidious. laws should be passed to raise the non union standards up to the Union standards. Level playing field ! This isn't the first time Obama has employed double speak. Many of the issues and policies are being defended from both sides of his mouth. Contradictions : Apparently all this talk about strengthening the middle class is just BS ! Proping up the banks at the expense of the blue collar workers of America is not helping one bit ! Eliminating high paying jobs w/ good benefits is not helping ! The auto industry is like the last vestiage of that example. Obama is showing an ugly tendency to cut his nose off to spite his face

[bighat]

Congress and govt are not a brain trust. They want to be re-elected. Oh they grandstand put in a little pork. The older I get I wonder if there are any differences between dems and repubs except for speeches. Will new laws and regulations actually matter or will the money people find the loopholes and the regular guy just pay a little more for the extra red tape. Ever wonder if the loopholes are put there on purpose because of lobbyists and campaign contributions or our are lawmakers just not smart enough to see what the lobbyists have written for them.

Never would I have guessed the democrats would use wall streeters to fix wall street and bail them out instead of letting the bondholders and shareholders lose. Is there more to the story. Toxic assets. Who owns them: Foreign countries, the extremely wealthy. Whoever they are certainly exerting their influence over the nation cash

[Dredd]

Yeah ... like pardoning Stevens but not Siegelman ... one a republican and one a democrat:

http://blogdredd.blogspot.com/2009/04/everybodys-got-holder-heart.html

[magen]

Which industry has contributed more money to more politicians---Vehicle production or Banking???

Banking.

There's why we have the double standard.

Simple.

America---the best Government money can buy.

[KillTheMessenger]

Vehicle production has contributed enough. Thanks to their efforts the US paid $500 billion for oil imports in 2008. That's real money, not just accounting trickery like what we are doing with our banks right now.

[Malkin71]

I have to argue against one of the statements in this article --

" As Gettelfinger and the United Auto Workers (UAW) cry 'double standard!' and 'we've given up enough!', non-union American autoworkers working for foreign firms elsewhere in the US point out that they have for decades been paid less and enjoyed less benefits than their UAW counterparts. So who's the victim of a double standard, the GM and Chrysler workers getting stiffed now or the Toyota workers who never had the same perks to lose in the first place? "

The foreign auto workers are not really asking that question, are they?

People who are almost scabs are asking why they aren't getting as good a salary or benefits as the union workers they are undermining?

[KillTheMessenger]

Toyota's workers in Japan have pretty good perks. German auto workers have far more powerful unions than the UAW. And, frankly, if I were employed in the industry today, I would rather be working for Toyota than GM or Chrysler.

:-)

[AngryOhioan]

Contrary to what some have posted, bankruptcy does not make a banks assets disappear. A bank does not take on new liabilities by declaring bankruptcy. It shed liabilities which is the whole point of bankruptcy.

[KillTheMessenger]

I am beginning to understand why they think so little of Ohio...

:-)

[AngryOhioan]

Third attempt at posting

"I keep laughing all day today about people who do not understand the difference between a bank and a manufacturer of automobiles of the size of GM."

I think people understand the difference. Banks give more money to the politicians. They don't actually produce anything. And they claim to believe in free markets until they want a taxpayer bailout.

"A bank can reduce its losses at any time almost at will but it incurs an enormous liability when it disappears: someone has to replace all the money on its saving accounts."

If banks could reduce there losses at will we would not be in this crisis. When bank goes into bankruptcy its deposits do not disappear. It does not take on new liability, it shed liability which is the whole point of bankruptcy.

[KillTheMessenger]

"When bank goes into bankruptcy its deposits do not disappear."

No? Well, in the real world (and not the kiddie model of a bank as a large heap of money in a safe) banks do not keep savings but immediately give them out as loans or invest them in the markets. That means your savings account is basically a number in a data base and an IOU from the bank. As soon as the bank is insolvent that IOU disappears and the database entry becomes meaningless. Therefor, when the bank disappears, so do most of the deposits. Since customers know that, the run on the bank phenomenon materializes where everyone is trying to be at the counter first to cash out whatever little physical money is in the safe. To counteract that we have invented the FDIC which is really nothing else than all participating banks insuring against the rare and small failure of a single bank. Obviously since the banks are insuring themselves, the FDIC mechanism does not protect against the failure of the whole banking system. And that's where the government comes in as the one and only hyper-bank that can not fail and will not fail. It can always give you an even larger IOU.

[KillTheMessenger]

"They don't actually produce anything."

Well, actually, they do. They produce the money that you keep spending with both arms.

"If banks could reduce there losses at will we would not be in this crisis."

Let me be more precise. A bank can reduce its future losses at will by not lending. That does not mean it does not suffer from its past losses. A manufacturer of physical good, on the other hand, can neither reduce its past losses nor does it have full control over its future losses. One can not simply stop or hibernate a production facility and stay in business. If it's too large for market demand, it will be inefficient, no matter what management does.