Tuesday, November 11, 2008

To Bail or Not to Bail?

THE PROBLEM

General Motors, the century-old American corporation is careening toward collapse. On Tuesday, shares slid to a 65-year low of $2.76. Shares have plummeted almost 90% since the beginning of the year.

Ford and Chrysler are spending cash at unsustainable rates. At stake, according to the Center for Automotive Research (supported by the auto industry), are at least three million jobs and lost taxes to local, state and federal governments totaling $156.4 billion over three years. Some fear the current recession tipping toward a depression.

What caused this problem? Industry insiders attribute it to the unavailability of credit and lackluster sales due to high gasoline prices. Others point to GM’s history of losing market share to foreign competition or perhaps the cost of premium retirement and health care benefits.

WHAT THE AUTOMAKERS ARE ASKING FOR

GM, Ford and Chrysler are requesting $50 billion in assistance in order to withstand the worst auto market in 17 years. That is on top of the $25 billion Congress already approved in September to help retool plants to manufacture vehicles with greater fuel-efficiency.

WHAT OBAMA AND THE DEMOCRATS SUPPORT

Democratic lawmakers have urged the Bush Administration to assist automakers using funds from the $700 billion dollar bailout package passed by Congress. Bush has so far refused and Treasury Secretary Henry Paulson believes he lacks authority to do so.

Due to the administration’s refusal, Speaker Nancy Pelosi has announced a special session for next week to support emergency assistance to the auto industry. Democrats are on the brink of proposing another stimulus package that includes aid to the automakers. President-elect Obama supports making assistance conditional on automakers agreeing to produce cleaner, more energy-efficient vehicles thus supporting his goals of reducing reliance on foreign oil and addressing climate change. At the very least, Obama has urged Bush officials to hasten the granting of $25 billion in federal loans previously approved by law.

COMPETING CONSTITUENTS

Two of Obama's key constituents - unions and environmentalists - are at odds.

Environmentalists insist that aid be conditional on the auto industry adopting higher fuel-efficiency standards and greater investment in new technology. Unions however oppose any restrictions. Democrats will be forced to reconcile these divergent views.

WHAT BUSH AND THE REPUBLICANS SUPPORT

Currently the White House has expressed openness to speeding up existing federal loans to automakers but is against additional funding via the $700 billion bailout package.

While Republicans traditionally support free-market principles, the recent bail out of the financial industry has called that belief into question for those who backed it. Whether Republicans and Bush draw the line at automakers is yet to be seen. Some conservative economists support stimulus spending of up to $300 billion, which may give Republicans cover in supporting additional aid.

On Monday, President-elect Barack Obama met with President George W. Bush to push for the bailout. Leaked sources reported that Bush would support aid to the automakers if Obama and congressional Democrats dropped their opposition to a free-trade agreement with Colombia and pending trade agreements with Panama and South Korea. However, Bush has denied that such a deal was proposed. In either case, it is unlikely that Democrats would agree to it.

Will Bush veto a new measure if enacted by Congress next week? At this point, it is not clear.

So what do you think? If you were in Congress would you:

1. Support speeding up access to the existing loans of $25 billion dollars?

Yes or No

2. Support an additional $50 billion on top of the existing $25 billion?

Yes or No

3. Agree to a free-trade agreement with Colombia in exchange for the President’s support of an additional $50 billion loan for automakers?

Yes or No

4. Make aid conditional on automakers agreeing to produce cleaner, more energy-efficient vehicles?

Yes or No

Scrol up and look to the right to cast your vote and click here to leave a comment.

1 comment:

  1. No to BAILOUT - What SHOULD have happened is when the BIG 3 went to Congress for $$$ - Congress should have said okay anyone with a CEO in their title who flew a private jet raise your hand - as soon as that happened the compaines should have been on the chopping blocks - the CEOs should have been forced to sell their jets and walk home in shame - I say what should have happened... (Correct me if I'm wrong)

    1. The big 3 should have been placed on the chopping block and their CEOs fired UNTIL they found their replacements
    2. No bonuses - if you have to BEG the government for money you should never be allowed to be a CEO of anything ever
    3. THE GOVERNMENT SOULD HAVE GIVE THE PEOPLE THE MONEY(like they did to the Fannie Made Up and Freddie Whack) TAXPAYER MONEY SHOULD NEVER GO INTO CORPORATE HANDS - IT SHOULD HAVE WENT AS A GIANT STIMULUMS PACKAGE TO TAXPAYER as a temp to help them with the crisis THEN THE ECONOMY would fix itself because people have money and the people who should have never qualified for those loans would at least have a chance to either try to go back for a fix rate or at least a cushion until they found new living arrangements - THAT's what should have happened
    4. Con. Barney Frank should be impeached for lying to the public and ALL of his assets should be open for all to see - if anything he should do jail time.

    Then the following would have happened
    - Little to no loss of jobs
    - People would have control of future
    - Capitalism would have fixed the market quicker and more productively

    That's what I THINK!
    If I'm wrong then Mass Debate me!
    -Christian

    ReplyDelete

What the haaaaaaaaayyyyy do ya think?