Bailout Question

[BIGUN 1,053]

So, I've been thinking about this whole bank, automakers, California bailout thing and have a question (especially after hearing one automaker today say they may have to come back to Congress for more money 3rd quarter 2009).

Since Congress is bailing out and adding regulation to the banks; why not just add some additional funding to the banks and point the automakers to the banks for an increased line of credit?

Thoughts?

Nobody has time to listen; because they're desperately chasing the need of being heard.

[Gawain 0]

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So, I've been thinking about this whole bank, automakers, California bailout thing and have a question (especially after hearing one automaker today say they may have to come back to Congress for more money 3rd quarter 2009).

Since Congress is bailing out and adding regulation to the banks; why not just add some additional funding to the banks and point the automakers to the banks for an increased line of credit?

Thoughts?

The banks are already infused. They aren't lending. The only auto maker that's not completely in the sh*tter is Ford. When Mullaly became CEO a couple years ago, he leveraged Ford to the hilt, and has ready-lines of credit up to $30B. That's their nuclear option though, and it's not good if they use all of it.

It's as I posted earlier, the big three have mis-stepped on every opportunity for the past 20 years, and their "restructuring" plans are devoid of any new ideas. Sh*t, I'd rather deal with a bankruptcy judge in Chp 11 hearings than Congress any day...

So I try and I scream and I beg and I sigh
Just to prove I'm alive, and it's alright
'Cause tonight there's a way I'll make light of my treacherous life
Make light!

[billvon 2,396]

>why not just add some additional funding to the banks and point
>the automakers to the banks for an increased line of credit?

Lenders are pretty risk-averse right now (for good reason) so I suspect that you'd almost have to make it a condition of the bank's bailout to give GM a big loan. It would also make the bailout more complex (i.e. more rules and dependencies) and increase the odds of an even deeper recession (i.e. if the banks bail out GM and they still go under, they're in hot water.)

[airdvr 197]

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It's as I posted earlier, the big three have mis-stepped on every opportunity for the past 20 years, and their "restructuring" plans are devoid of any new ideas. Sh*t, I'd rather deal with a bankruptcy judge in Chp 11 hearings than Congress any day...

I agree to a point. They have stepped on their cranks a few times. But is it a coincidence that all 3 are in the same boat? Regulations, UAW, and competition from Japan and Europe have all played a similar part.

Remember when Honda and Toyota started building trucks in Alabama? The good Governor granted them a brazillian tax breaks to get them to locate there. Even the Asians knew trucks were a moneymaker. Now trucks and SUV's are the enemy. Give the same breaks to Detriot and see what happens.

I agree that CH11 is the better route. Just bite the bullet and go for it. Yes, it will hurt for a time but the world won't come to an end.

Please don't dent the planet.

Destinations by Roxanne

[miked10270 0]

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...why not just add some additional funding to the banks and point the automakers to the banks for an increased line of credit?

Thoughts?

It depends on how you see the US economy changing due to the recession. Governments making decisions on bank policy is effectively nationalisation and A LOT further towards Communism and central control than either the US or Europe is willing to go. As this recession cycles and stabilises, governments want their pre-existing Capitalism Vs. Socialism balance to remain. Hence their decision to subsidise industries direct.

Mike.

PS: Your "Destinations by Roxanne link" is a bit limited... I've been thinking about saving up for this cruise which stops here.

Mike.

Taking the piss out of the FrenchAmericans since before it was fashionable.

Prenait la pisse hors du FrançaisCanadiens méridionaux puisqu'avant lui à la mode.

[Andy9o8 0]

"Sh*t, I'd rather deal with a bankruptcy judge in Chp 11 hearings than Congress any day."

"I agree that CH11 is the better route. Just bite the bullet and go for it. Yes, it will hurt for a time but the world won't come to an end. "

Random thought: FWIW, it occurs to me that there is a tactic by which GM's creditors could, conceivably, try to force GM into formal bankruptcy proceedings, if any of those creditors chose to do so. You see, not all bankruptcies are voluntarily filed by the bankrupt debtor. It is not uncommon for an insolvent debtor's creditor to file what's known as an "involuntarily petition" against the debtor in Bankruptcy Court - it basically forces the debtor into formal bankruptcy proceedings. At that point, the Bankruptcy Court then must decide whether the debtor will be forced to remain in formal bankruptcy, and if so, the specifics of the debtor's bankruptcy plan. My point being, the automakers don't necessarily hold the only card in deciding whether or not they will (have to) go the bankruptcy route.

[marks2065 0]

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"Sh*t, I'd rather deal with a bankruptcy judge in Chp 11 hearings than Congress any day."

"I agree that CH11 is the better route. Just bite the bullet and go for it. Yes, it will hurt for a time but the world won't come to an end. "

Random thought: FWIW, it occurs to me that there is a tactic by which GM's creditors could, conceivably, try to force GM into formal bankruptcy proceedings, if any of those creditors chose to do so. You see, not all bankruptcies are voluntarily filed by the bankrupt debtor. It is not uncommon for an insolvent debtor's creditor to file what's known as an "involuntarily petition" against the debtor in Bankruptcy Court - it basically forces the debtor into formal bankruptcy proceedings. At that point, the Bankruptcy Court then must decide whether the debtor will be forced to remain in formal bankruptcy, and if so, the specifics of the debtor's bankruptcy plan. My point being, the automakers don't necessarily hold the only card in deciding whether or not they will (have to) go the bankruptcy route.

why not get the oil companies to buy into and bail out the auto industry? they have the money and the backing to do it. the oil companies also have a large corporate infrastructure to handle the task. also with incorperating the auto R&D departments they could use that to start switching to alternative fuels which would give the oil companies something for the future when oil consumption is replaced with the alternative.

[Pendejo 0]

There was an article on Reuters (yesterday or the day before I think) in their opinion section that I found interesting. The writer was addressing my main concern with the bail out of the auto industry, sales. Personally, I am against the bail out in principle. I agree with some of the people who feel that a business should be allowed to fail or make it based on their own merit, not based on bail outs.

The problem is, the auto industry in the US is so large and far reaching into our economy that it is difficult for us to allow it to fail without causing major pain to ourselves. I agree that philosophically that should not matter, but the reality is, most people are not willing to endure that kind of pain on a personal level.

The writer of the article points out that even if the government comes in and bails out the industry, that will not really fix the main issue the auto manufacturing companies are faced with. Empty showrooms. Just because they come up to Washington and say “yep, we are now going to build more fuel efficient cars” that won’t fix the main issue they are facing today.

If you look at the numbers, the imports are doing better than the domestics, but to say they are still profitable is ludicrous at best. Even Toyota (who most claim to be the most successful of the imports today), had a decrease in sales by 34% last month.

Watching the people in the media and here on this site point fingers about who is to blame is like watching most of the politicians blame the other side for the economy being in the state its in today. Was it management? Yep. Was it unions? Yep. From top to bottom all of the people who are involved in the auto industry were involved. No one is “squeaky clean” when it comes to how they got to where they are. Unfortunately, all of them (and most of the rest of us) will be paying for their mistakes.

I think the real question is, what needs to happen to get people back into the auto showrooms in America. Note that I did not ask what is needed for them to buy American automobiles, but rather automobiles in general. Just saying “build better cars” or “build more fuel efficient cars” won’t fix their problems today. Those are great goals for the future, but today is where we are, and now is when they are faced with implosion.

I think that if nothing else, the next year will be both very trying and certainly an interesting time in our economy.

Pendejo

He who swoops the ditch and does not get out buys the BEER!!

[BIGUN 1,053]

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make it a condition of the bank's bailout to give GM a big loan. It would also make the bailout more complex (i.e. more rules and dependencies) and increase the odds of an even deeper recession (i.e. if the banks bail out GM and they still go under, they're in hot water.)

That's the only barrier I could not overcome in my thought process. Thanks.

Nobody has time to listen; because they're desperately chasing the need of being heard.

[Channman 2]

> Watching the people in the media and here on this site point fingers about who is to blame is like watching most of the politicians blame the other side for the economy being in the state its in today. Was it management? Yep. Was it unions? Yep. From top to bottom all of the people who are involved in the auto industry were involved. No one is “squeaky clean” when it comes to how they got to where they are. Unfortunately, all of them (and most of the rest of us) will be paying for their mistakes.

Thomas Jefferson had this to say, "I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them."

and this to say, "I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

I think it might be better in the long run for these companies to file Chapter 11, than simply prolong a failed business model.

[diverborg 0]

My $.02, let them file chapter 11 bankruptcy first, then consider giving them money. We could give them $50 billion right now and that is going to do nothing but prolong the intevitable. That will cover them for about one quarter's worth of losses. (thats just a guess, I know quarterly losses are in the billions though)

The union needs to be broken if they ever want to get out of the trouble they're in. That company will never be able to produce a product that is priced competitively and still profit with the wages it pays for basic labor. If the execs don't think their pay should be cut too, then they are in for a surprise. If I was in govt, the execs would have to agree to salary/benefits limits for X number of years set by the govt before they got a dime.

I don't like the govt dabbling in businesses, but if they want to come crying for the govt tit, then well...

[marks2065 0]

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My $.02, let them file chapter 11 bankruptcy first, then consider giving them money. We could give them $50 billion right now and that is going to do nothing but prolong the intevitable. That will cover them for about one quarter's worth of losses. (thats just a guess, I know quarterly losses are in the billions though)

The union needs to be broken if they ever want to get out of the trouble they're in. That company will never be able to produce a product that is priced competitively and still profit with the wages it pays for basic labor. If the execs don't think their pay should be cut too, then they are in for a surprise. If I was in govt, the execs would have a to agree to salary/benefits limits for X number of years set by the govt before they got a dime.

to bad you aren't helping make the choice. the last thing on the congress' mind these days seems to be the pay and bonuses for the exec's. why would any exec get a bonus for a failing company? why would they get a raise? why would limiting this area not be a top priority for any company getting even $1 of bailout money?

[diverborg 0]

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to bad you aren't helping make the choice. the last thing on the congress' mind these days seems to be the pay and bonuses for the exec's. why would any exec get a bonus for a failing company? why would they get a raise? why would limiting this area not be a top priority for any company getting even $1 of bailout money?

There may be a flaw in my thinking there, but it seems to make sense as far as I can tell. Take note, that I'm very opposed to government setting salary limits for anyone as well as ridiculous windfall profit taxes, BUT all that goes out the window when a corporation comes asking for the government to bail them out. If you want money, then we say where it goes and thats not in your pockets.

AIG setting aside $6 billion of their bailout money for bonuses, is absolutely criminal in my mind. Its an injustice to every taxpayer in this country.

[BIGUN 1,053]

Well, it would appear the Big 3 have been sent packing (imagine the humility of being tossed out by Barney Franks' wrath).
To the top execs of the Big 3... it's no wonder you guys are in doo doo; you go to Washington with hat in hand at the equivalent level of the guy on the corner with a sign, "Anything will help," but don't even have a substantive plan to present. Your best plan was "We need you to loan us money and we need to make changes?!?!?!?"

I mean; for God's sake there's a perfect boilerplate plan out there you could have stolen from the Lee Iaccoca play book. The man petitioned Congress in 1979 requesting a loan, went to DC with a plan, stuck to the plan and paid the loan back in 1983 and not only resurrected Chrysler, but paid the interest on the note.

You three guys at the top need to resign and leave your golden parachutes on the table when you leave.
That is all.

IMO.. no matter what the ramifications (i.e., the 2002 technology bubble bust); the Big 3 need to file Chapter 11.

Nobody has time to listen; because they're desperately chasing the need of being heard.

[diverborg 0]

Good for Barney! Seems like the guy might lave a lick of common sense after all.

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IMO.. no matter what the ramifications (i.e., the 2002 technology bubble bust); the Big 3 need to file Chapter 11.

Absolutely!!

[kallend 1,623]

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IMO.. no matter what the ramifications (i.e., the 2002 technology bubble bust); the Big 3 need to file Chapter 11.

Should the same have applied to the banks and other financial sector corporations that created the crisis in ther first place? Ford, GM and Chrysler are not responsible for the tanking of the economy.

...

The only sure way to survive a canopy collision is not to have one.

[BIGUN 1,053]

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Should the same have applied to the banks and other financial sector corporations that created the crisis in ther first place? Ford, GM and Chrysler are not responsible for the tanking of the economy.

But they are responsible for not coming to the table with a plan.
Now, let them Chapter 11 where they will be given a plan.

Nobody has time to listen; because they're desperately chasing the need of being heard.

[billvon 2,396]

> Ford, GM and Chrysler are not responsible for the tanking of the economy.

Agreed. Nor is Congress. Car companies are only responsible for their own companies, and their attendant successes or failures.