Friday, December 12, 2008


Today, it may get very ugly. And these days, ugly often begets ugly.

Senate Republicans have killed the $14 billion bridge loan. Don't get me wrong, GM and Chrysler are in the predicament of their own making. Escalades. Hummers. Not focusing on more efficient cars, etc...  They have bungled and squandered it all by ignoring the writing on the wall.

But so has the Bush administration. Bush and Paulson have mishandled this economic crisis from the get-go. So have the banks. We know that banks of all stripes and sizes have made monumental mistakes as well. Wall Street? Institutionalized mayhem and dysfunction. So many are to blame for this economic crisis.

So yes, the auto industry has their fair share of reckless self-sabotaging for which it must account. But much of the auto industry's crisis lately is directly related to the banking industry's credit crunch.  Clearly, it is much more difficult for people to get loans to buy cars. It's a systemic crisis to the point that we may be talking about the airline industry in a matter of weeks. The money supply, for infinite reasons, has dried up.

Some 2 million plus jobs rely on the auto industry. The best guess is that Democrats will make the bridge loan happen soon after 1.20.09 to protect those jobs. But can GM and Chrysler make it until then? Auto execs say they cannot.

Do we really want to find out?

Here's an interesting fact: on November 24th, Citigroup Inc. got a Sunday night cash infusion of $20 billion, with Uncle Sam's guaranty of $306 billion in toxic assets.  According to the Wall Street Journal, "That comes on top of the $25 billion infusion that Citigroup recently received as part of the broader U.S. banking-industry bailout."

No Citigroup CEO had to go drive to D.C. to meet with congress, raise their hand to get sworn in and get grilled, for even one minute. There were secretive negotiations over one weekend in late November, and they quietly came to an agreement late on a Sunday night. 

According to the Wall Street Journal, "The government didn't require Citigroup to make changes to its executive ranks or its board in return for government assistance."

Let's be clear: No change at the top for Citigroup. No board firings. No CEO hearings. No worries! Heres a $351 billion check!

One explanation of this double standard is that Congress fully understands that this is not merely an "auto-industry" problem. This is a banking problem, hence the ongoing no-questions-asked policy of dumping monumental amounts money into individual failing banks.

The Democrats' motivation here is to save jobs, not necessarily bail out a flawed and failing auto industry. But, until the next Congress takes power, they don't have enough votes to finalize this bridge loan. 

Republicans see this as an opportunity to weaken the auto unions, like the U.A.W., to make the auto industry more "competitive." They have killed the bridge loan because they insisted on lowering workers' wages. They will force the Democrats to act during the next session so they can politically snipe as an even smaller minority party.

To some extent, both are right. But is the GOP really ready to gamble with 2 million American jobs for a whopping $14 billion loan? 

Let's add a little perspective: $14 billion is .04% of the amount of money quietly allocated to a single bank, Citibank, which had already been given $25 billion.

Congress just needs to decide whether GM and Chrysler are better off dead or alive. Either way, Uncle Sam will be picking up the tab.

Will U.S. taxpayers be shareholders in GM? Or will we wind up paying more for unemployment benefits for 1-2 million more Americans out of work?

The GOP is rolling big dice.

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"What's Plan B?" -NYTimes Editorial

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