In refusing GM and The Info Blog Chrysler’s requests for more bailout money, Washington has drawn a line in the sand by communicating that bailout money is not without conditions and that Americans expect it to be used wisely. This is a straightforward reaction to the AIG debacle and signals a movement to a position that should have been held all along.
The average American would be held to all kinds of standards if they applied for a business loan and would never be given one if they showed such a total lack of regard for the needs of their market and poor planning and business sense. Many companies that have received money had plenty of opportunities to adapt and revise policies and expectations. Instead, they chose not to, instead of burying their heads in the sand and doing more of the same while expecting everything else to change around them and bring them out of financial difficulty.
If the definition of insanity is doing the same thing and expecting different results, then the boards of these companies are certifiable. In the situation of the automakers, blame must also be placed on the unions. While I understand and empathize with the union leadership that hard-fought gains will not easily be replaced later once they are given up to get through this crisis, the union leadership’s short-sightedness is astounding. Salary guarantees and benefits packages only apply to those that have jobs, and if these companies are forced to declare bankruptcy or go down the drain, then a large percentage of their employees lose their jobs.
Doesn’t a little bit of sacrifice from all outweigh the huge sacrifice of some? Won’t a huge round of layoffs in Detroit further erode the property values of those still employed, decreasing their net worth anyway? Either way, they are losing money- wouldn’t it be better to invest in the company’s health they work for?
While I think that the course Washington is taking with GM and Chrysler is the wise one for both the short- and long-term, I have to question its fairness and over-reactionary nature. Both companies are asking for a total of $21.6 billion after having already received $17.4 billion. That would raise the total given to them to $39 billion.
That is a lot of money, but compare that to the $170 billion given to AIG alone- a sum more than 5 times what 2(!) companies have asked for; 2 companies that are part of the lifeblood and identity of this country. Are AIG 5 times more valuable and necessary to the health of this nation than GM and Chrysler? Unless you can show me otherwise.
I am highly skeptical. Does AIG truly have a greater global presence than GM and Chrysler combined? Again, I wonder. I have to ask if they are paying the cost for AIG’s misuse of bailout funds and taxpayer angst over the bonus disaster. In a country that claims to value equality and promises a fair deal, what does that say?
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It is a difficult line to draw- where and when do you start being tough and enforcing standards, but also consider circumstances fairly in terms of past decisions. There are many people whose economic futures rest on where Washington draws this line, as well as the economic future of a core American industry and the state of Michigan. This situation will serve as the guide by which Washington handles any future requests for bailout money, so the judgment showed in considering the requests MUST be sound and rational.
It cannot be based on a knee-jerk reaction to the frustration of those who have no apparent stake in the outcome yet who will pay for the lack of foresight for years to come. Instead, America must get over its anger over AIG and look at the long-term benefits of how its money is being spent. This is a time of investment in this country’s future- sound judgment should rule the day, not a lynch mob mentality. If the people won’t think with a clear head, it is up to Washington to do it.
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