Observations from the Cheap Seats
Bailout Bonanza and the Big 3
The numbers are staggering. An estimated $7.4 trillion has been spent by Congress and the Fed to bail out the various financial entities, insurers and industries. The $700 billion bailout package, over which there was much publicized angst, is but a bucket of sand in the Sahara, when compared against the actual costs associated with this financial crisis. And, the most disturbing part is that the amounts spent are likely to increase in the weeks and months ahead.
In regards to the above, America needs to wake-up. This financial crisis is so incredibly daunting it is difficult to make Americans understand, but we better start. We are talking about an amount equivalent to half the value of all that was produced in the United States last year being extended by either cash payments or loans to the various affected financial interests. We are talking about an amount equivalent to $24,000.00 for every man, woman and child in the United States being extended by either cash payments or loans. We are talking about amounts being borrowed from the Fed, which are simply staggering. In a normal week, banks will typically borrow $48 million from the Fed — last week, banks borrowed $91.5 billion.
And, as part of our collective epiphany, might I suggest that we start demanding accountability? How did we get here? Two starting points are the Community Reinvestment Act of 1977 and the complete avoidance of calls for greater regulation of Fannie Mae and Freddie Mac in the course of the last five years. Only when we fully understand what happened, how it happened and who miserably failed the American people will we create a path for recovery. As it stands, we have the same people who created this mess in charge of fixing it — that can not stand.
Switching topics — let me go out on a limb and suggest a radical plan that would make a WOW case for government bailout money — GM, Ford and Chrysler merge, known from this point forward as the new American Motor Company. Each existing company would retain a separate identity as a division within the new company. Significant conditional and collateralized bailout money to facilitate operations during a six month planning period would be made, with the expectation that at the end of the six months, the three companies would have a plan for merger which would consolidate operations, maximize various economies of scale, have union and shareholder support, and would present a debt workout plan that is self-sustaining and ultimately successful. Spin-offs of all pension and health/welfare funds would be completed — so as to remain distinct from the merged entity and separately administered by the unions. If properly done, anti-trust issues can be addressed within the consolidation plan; or, if absolutely necessary to make it work, Congress passes a rare exemption, but then the circumstances are rare.