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Bailouts, Recession - pick your poison

post #1 of 26
Thread Starter 
Don't read this thread and its links if you don't want to think about how bad things could get - not just in the U.S., but around the world, though the focus here is on the U.S.

!!!!!!!!!!!!!!!!!!!

OK. Found a VERY interesting table at CNN.money detailing the $7.2 Trillion already committed to bailouts and stimulus packages (!!!!!!!!!!!!!!!!!!!!) and the $2.6 Trillion already spent: Economy Rescue: Adding Up the Dollars

"The biggest slump in U.S. consumer spending since 1942 will extend the recession and push the jobless rate to the highest level in a quarter century, according to economists surveyed by Bloomberg News." Worsening spending slump paces "scary" US recession (at Bloomberg.com)

I knew there were a few others out there besides Gary talking about Dow 4,000, unemployment numbers in excess of 8.5%, and a recession that would last longer than into next year.... Apparently there are a few other. 8 really, really scary projections also at CNNMoney.com

The problem with all the money being thrown into the system is that there's just no "velocity" to money right now! The Fed can print all they want - but consumers are buckling down, businesses are cutting - and even if people want to invest in a business or a home, there's not many out there lending to get it done.

An actual stimulus package that puts people to work and requires lots of materials (roads and bridges) may really help - but that takes more than a year to filter through, and IMO what our government has been doing so far is primarily tossing money into a black hole (though where things would be now if they hadn't, I really can't imagine. I wasn't a fan of any of the bailouts, and am not a fan of the current $14 billion auto bailout. But given how bad things are WITH all of this money thrown at the problems.... all I can say is "wow" ).

...I can't help but feel that we are living through what's going to turn out to be another new page in history.

Laurie
post #2 of 26
It is really kind of scary to see layoff starting where I work. It just brings things that much closer to home. The company for which I work does business worldwide and is not just dependent on the US economy so it took a little longer for things to start hurting there, but we are even contemplating a two week Christmas shutdown. It makes me thankful that I have a good, solid marketable skill that I could use anywhere in the world. No matter how crappy things get, there will always be a demand for welders.
post #3 of 26
I live in Michigan and in some ways to me the auto bailout is simply rearranging the deck chairs on the Titanic. But without a survivable and successful domestic auto industry, more than Michigan is sunk. The ripple effects will be staggering, from Tier One parts suppliers to the mom and pop stores that depend on plant workers to non-related businesses like doctors, florists, etc.

And the Southern Republican senators who are fighting this are being short-sighted in many ways; they think their states - Ala and Tenn for two - would benefit from a decimated domestic auto business b/c they have big foreign auto plants and interests there. So where would the competition come from. The Japanese and German automakers would just raise their prices.

Yes, the auto companies made many misteps. Ford, for one, had already been working really hard on restructuring before this credit crisis hit.. and as a result is in the best but still tenuous position. And the UAW needs to change its ways...

But right now, any acrimony towards the auto cos and union needs to be set aside and take a bigger view.

For instance, if just GM were to dump health care for all of its retirees, some 700,000... where would those people go for coverage? Medicare... 700,000 - that's the population of a big city! And people who lose their jobs/coverage -- where are they going to go? It is easier to retrench and save existing jobs than it is to develop new ones. And as Laurie pointed out, that would take very precious time.

I'm sorry,but I am sick to my stomach about what is happening in our economy and in our country. My nightmare would be to be under or unemployed with property that is worthless... and paper money that is, too.

It could happen.
post #4 of 26
Quote:
Originally Posted by LDG View Post
The problem with all the money being thrown into the system is that there's just no "velocity" to money right now! Laurie
Interesting to hear someone else who knows of this metric. This isn't something the government posts data on, yet it's crucial to understanding what happens to the value of a fiat currency. When the banking system locked up and credit froze, velocity fell dramatically, and low velocity is deflationary. People hung on to their money; banks held on to their credit. What was need was a whiff of disinflation -- letting air out of the balloon; not pricking it with a pin. Balloons tend to pop and going whooshing away to some other place where they flutter down to the floor. Kind of like the economy, now.

Despite the strong deflation worldwide, it hasn't really affected prices yet, not retail prices anyway, though some retailers are putting on some pretty big price reductions on their Christmas sales. You can't cure low velocity by throwing freshly-printed money at it. "Pushing on a string" is what the economists say. Yet, that's how our Federal Reserve and Treasury choose to handle it, because in the short-term, there's little else they can do. The money's just going to pile up and when natural economic forces cause the deflation to relent, all that piled-up money is going to burst out like a damn busting and we might very well see inflation we haven't seen since Jimmy Carter.
post #5 of 26
Quote:
Originally Posted by AddieBee View Post
I live in Michigan and in some ways to me the auto bailout is simply rearranging the deck chairs on the Titanic. But without a survivable and successful domestic auto industry, more than Michigan is sunk. .
That is so true, we need the auto industry to survive. It's our last remaining large-scale heavy industry. And without heavy industry, where do our tanks and Humvees come from? China? I don't think so. We lose the auto industry, we lose our capability to defend ourselves, too.

I don't understand why SOMEBODY who has any input isn't thinking outside the box. If the government is willing to throw this much money at the problem, and the problem is mainly the way the companies have been run, why don't they take that money, LEND it to the employees, let the employees buy the company and run it? The companies could even be sold as pieces. Say, the Flint employees buy the Flint plants; the Lansing employees buy the Lansing plant; and so forth.

Or sell it to the dealers. If the government assumed the debt and retiree obligations, any two of just Wisconsin's largest auto dealers could together buy General Motors at their current market cap.

AND one more thing I haven't heard about: a lot of what these companies manufacture is made in CANADA and MEXICO. If these companies need to be save in their present form, why aren't Canada and Mexico stepping up to contribute their share of the bailout cost? Eh?

WHY aren't these people coming up with alternate solutions? They just want to throw more money down a flushing toilet. Why? Campaign contributions? You suppose that has anythiing to do with it?
post #6 of 26
Thread Starter 
You're both right!

Here's an idea SOMEONE should consider somewhere along the line.... Chrysler is in the worst position - let it go. Cut a deal for its employees, sell off the valuable brands (Jeep, Dodge Ram - probably a couple of others) - and help Ford and GM get healthy! There's obviously not enough room in the U.S. anymore for 3 auto firms.

Laurie
post #7 of 26
Quote:
Originally Posted by coaster View Post
That is so true, we need the auto industry to survive. It's our last remaining large-scale heavy industry. And without heavy industry, where do our tanks and Humvees come from? China? I don't think so. We lose the auto industry, we lose our capability to defend ourselves, too.

I don't understand why SOMEBODY who has any input isn't thinking outside the box. If the government is willing to throw this much money at the problem, and the problem is mainly the way the companies have been run, why don't they take that money, LEND it to the employees, let the employees buy the company and run it? The companies could even be sold as pieces. Say, the Flint employees buy the Flint plants; the Lansing employees buy the Lansing plant; and so forth.

Or sell it to the dealers. If the government assumed the debt and retiree obligations, any two of just Wisconsin's largest auto dealers could together buy General Motors at their current market cap.

AND one more thing I haven't heard about: a lot of what these companies manufacture is made in CANADA and MEXICO. If these companies need to be save in their present form, why aren't Canada and Mexico stepping up to contribute their share of the bailout cost? Eh?

WHY aren't these people coming up with alternate solutions? They just want to throw more money down a flushing toilet. Why? Campaign contributions? You suppose that has anythiing to do with it?
I don't know about Mexico, Tim, but my boyfriend, who is tracking these things very closely.. .even more than me.... says the govt of Canada is considering some form of help. It makes sense since all three of the automakers have a significant presence in that country. So we shall see.

Honestly, I know a lot of the dealers... having worked on that end of things at Ford and I wouldn't trust them to run these companies. For the most part- they are small potato businessmen and women w/o the vision needed to move these companies forward.

Actually, I think -- no... I know that the dealership base needs to shrink. There are issues with franchise laws, etc. and I think the auto companies would have to buy out a lot of these guys. And legal issues also work against having "company" stores. I don't remember all of the particulars, but I know when I was at Ford several years ago, it was being investigated.
post #8 of 26
Quote:
Originally Posted by LDG View Post
You're both right!

Here's an idea SOMEONE should consider somewhere along the line.... Chrysler is in the worst position - let it go. Cut a deal for its employees, sell off the valuable brands (Jeep, Dodge Ram - probably a couple of others) - and help Ford and GM get healthy! There's obviously not enough room in the U.S. anymore for 3 auto firms.

Laurie
Frankly, the general consensus is that Chrysler won't survive in its current form regardless of a bailout. And there had been plenty of talk in the press here, before the CEOs began talking about federal bailout dollars, of Cerberus trying to offload Chrysler to potential suitors, including GM. But of course, that won't happen now. It's more likely, as you said, that pieces of Chrysler will be sold off to other interests, such as foreign auto makers or other industrial concerns for the plants, facilities and capacity (too much out there now for autos). I see or had seen the possiblity of a Chinese auto mfg, like Chery Motors, coming in and buying, but things have slowed down drastically in that economy, too. It seems like there is no way out.

I also can't see a govt run auto industry. The govt can't even run itself! let alone heavy industry, about which the politicians and bureaucrats know little or nothing.
post #9 of 26
I'm not sure why Chrysler is even being included in the bailout, seeing as they're a privately-held company. And who knows whose money is behind Cerberus, anyway? They're not required to file that kind of information. We could be bailing out the Saudi royal family for all we know, or even the Chinese Communist Party. Both of those have significant private equity investments.

AddieBee - thanks for explaining that stuff about the dealers; I didn't know that. There is one dealer here in Wisconsin I know who isn't like that, but he's an exceptional person. If you put him in to run GM, I think he'd get that company straightened out.
post #10 of 26
Thread Starter 
Right now, no bailout.

Laurie
post #11 of 26
I just called my financial advisor and told him to convert all of my retirement holdings to cash. Just a couple of weeks ago, my advisor told me not to do that... warned me about timing the market. I'm not trying to time the market... I want to preserve what I had put away for myself. It's dropped 30 percent and would have been worse had I not been in a conservative blended fund.

Unfortunately, and I didn't know this about mutual funds, I have to wait for the "call" at the end of the day. I don't think it will be any better on Monday, tho'. So after I cried a little bit, I am resolved that it's better late than never.

We are in deep doo-doo here.

And yes, I agree about Cerberus. The fund has deep pockets, but has no qualms about taking US govt assistance. Why spend their $$$ when they can take taxpayer dollars? The investors don't want to throw good money after bad, but hey... they own the place, right?

I think the president will sign an order giving money to the auto makers... or something.. .by the end of the year. A farewell gift to an industry that he largely snubbed. But it is too little too late IMHO...
post #12 of 26
Again, they're adding in all sorts of things that having nothing to do with the auto industry. One inclusion: banning them from having corporate flight departments. That has nothing to do with the problems they have now, corporate aviation actually saves companies millions of dollars in executive downtime while sitting at airports. I would think someone making hundreds of dollars an hour needs to be back at the office working, not hanging out at the terminal for hours waiting on the next commercial flight.

The biggest issue I read about was the reemergence of Silo, which AIG used to its advantage.

http://www.nytimes.com/2008/12/11/bu...WDCYBQ4G7nVetA

Just what they need, MORE tax dodging.

I emailed both my Senators TWICE about this. Apparently the one I thought would be supportive isn't, I guess Mrs. Dole doesn't care what we think since she didn't get reelected. Sad that I have to count on wishy-washy Burr, but at least he's listening and not voting for the current "Ball of Crap 3.0" as some blogs are calling it.
post #13 of 26
Quote:
Originally Posted by neetanddave View Post
..... Apparently the one I thought would be supportive isn't, I guess Mrs. Dole doesn't care what we think since she didn't get reelected.....
I've been tremendously under-impressed with Elizabeth Dole for a long time, at least since she headed the DOT. The Peter Principle was proven to work.
post #14 of 26
Quote:
Originally Posted by neetanddave View Post
Again, they're adding in all sorts of things that having nothing to do with the auto industry. One inclusion: banning them from having corporate flight departments. That has nothing to do with the problems they have now, corporate aviation actually saves companies millions of dollars in executive downtime while sitting at airports. I would think someone making hundreds of dollars an hour needs to be back at the office working, not hanging out at the terminal for hours waiting on the next commercial flight.

The biggest issue I read about was the reemergence of Silo, which AIG used to its advantage.

http://www.nytimes.com/2008/12/11/bu...WDCYBQ4G7nVetA

Just what they need, MORE tax dodging.

I emailed both my Senators TWICE about this. Apparently the one I thought would be supportive isn't, I guess Mrs. Dole doesn't care what we think since she didn't get reelected. Sad that I have to count on wishy-washy Burr, but at least he's listening and not voting for the current "Ball of Crap 3.0" as some blogs are calling it.
Hey, Neet... are you and I agreeing on something? Now I KNOW the world is coming to an end!!!!!

I didn't think the bridge loan package was a good one, but it appeared that was all the auto companies were gonna get. And yet, there was pork and last-minute shenanigans in this bill, too. Like pay raises for federal judges. What does THAT have to do with the auto biz? So maybe it is better if Treasury and/or the White House come up with something
post #15 of 26
http://www.businessandmedia.org/arti...211131911.aspx

Quote:
GOP Senator Warns of 'Riots' if Automakers Are Bailed Out
Sen. Jim DeMint says unfair union influence and the bailout culture will anger many Americans.
He is a little late, it has angered Americans.
post #16 of 26
Thread Starter 
Quote:
Originally Posted by AddieBee View Post
...For instance, if just GM were to dump health care for all of its retirees, some 700,000... where would those people go for coverage? ....
Just wanted to quickly address this one. There are 40 million or so people in the U.S. without health coverage. There are plenty of people that do work that are not provided with health coverage. Yes, I guess they'd have to turn to Medicare.

Laurie
post #17 of 26
Quote:
Originally Posted by ckblv View Post
http://www.businessandmedia.org/arti...211131911.aspx



He is a little late, it has angered Americans.
Another senator who is so intent on sticking it to the unions that he's not getting the bigger picture. We're already hearing about parts suppliers either bankrupt, or on the verge of bankruptcy on this side of the Big Pond, where the situation isn't nearly as acute as in Detroit.

Keep in mind that most suppliers' employees aren't UAW members.
Auto Suppliers Share Anxiety Over a Bailout

Quote:
In years past, suppliers have often been able to assist a troubled automaker by extending payment periods to get through tough times.
But by Mr. De Koker’s estimation, hundreds of suppliers no longer have that flexibility. They cannot borrow money in a frozen credit market, and they cannot buy raw materials without first being paid for parts they already shipped.
The Big Three, along with their foreign competitors, are what most people think make up the entire auto industry. But the car manufacturers are just the top of the pyramid.
While G.M., Ford and Chrysler employ 239,000 people in the United States, the country’s 3,000 or so auto suppliers have more than 600,000 workers.....Suppliers make most of the 15,000 parts that go into a single car. More than 70 percent of a car’s value — from the seats to the chassis, from the electronics to the bumpers — are sold to the automakers by suppliers.
post #18 of 26
I'm in favor of doing what it takes to keep the auto industry going, but I'm NOT in favor of bailing out the "Big Three", of just handing money to them to keep operating as they are. There ARE other solutions, but why aren't they looking for them?

But.......what REALLY gets me is how riled up the American public is over $14 billion that the government wants to give the auto industry, (and that's only a "down payment" -- what it's going to take is a lot more) and how quiet and complacent they are about the nearly $1.5 TRILLION that the government has taken on is possible obligations to keep the financial industry going.

What's wrong people? Where's your sense of proportion? If you're this outraged at the auto industry for wanting $14 billion, shouldn't you be 107 times as outraged at the financial industry?

Sometimes I think this is a nation of idiots.......

Or maybe it's such a big number that it's incomprehensible.
post #19 of 26
Quote:
Originally Posted by LDG View Post
Just wanted to quickly address this one. There are 40 million or so people in the U.S. without health coverage. There are plenty of people that do work that are not provided with health coverage. Yes, I guess they'd have to turn to Medicare.

Laurie
Yes, that is where I was going... kind of a rhetorical statement on my part. Medicare for those who are the right age... and Medicaid for the indigent... I don't know what the means test levels are for that. The working poor (and now middle class is being eroded) are basically SOL.
post #20 of 26
The problem I have with ALL of these bailouts is that we're still IN a recession, and it's going to get worse. Whether or not these bailouts happen. All the bailouts do is reward those who made bad business decisions, basically rewarding them for being idiots.

Those of us who attempted to be responsible, as regular citizens, are getting hosed. I heard that they are going to mandate lowering the mortgage interest rate on 30 year fixed loans to 4% in January. Now, I don't believe in playing the refi game, and I got a mortgage that was within my means, but at 2.35% below what I'm paying now (which was still a darn good rate!) and having been diagnosed with MS (meaning it's very possible, even likely that my income is going to drop significantly if/when I have to go on disability) I would like to participate in that. But I also "heard" (take that as you will) that the refi's would only be available to those who are behind on their payments. OK, so seriously because I've been responsible I essentially get punished while people who weren't responsible and forward thinking get rewarded????

That, in a nutshell, is how I see the bailouts. Those who made sound business decisions are essentially being punished by the economy regardless, but those at the top who made idiotic decisions are being rewarded with these "loans" or bailouts. That's not right, and it's not the government's job to do that with taxpayer dollars. And it's not the government's business to buy into private industry, regardless of the fact that the democrats seem to think they know better than the businessmen how to run the businesses. Look at the deficit. Look at the fact that the Congressional Cafe looses money yearly. And we want those people to be in charge of these industries???? I don't. They can't run the government and they can't run private industry either.
post #21 of 26
Quote:
Originally Posted by valanhb View Post
.... All the bailouts do is reward those who made bad business decisions, basically rewarding them for being idiots.

Those of us who attempted to be responsible, as regular citizens, are getting hosed. .... OK, so seriously because I've been responsible I essentially get punished while people who weren't responsible and forward thinking get rewarded????.....
You are SOOOOOO right there!! And yet, if all these people lose their homes, lose their jobs, and all these businesses go under, WE suffer right along with them because of the damage that does to the economy. It's a no-win situation.
post #22 of 26
Quote:
Originally Posted by coaster View Post
You are SOOOOOO right there!! And yet, if all these people lose their homes, lose their jobs, and all these businesses go under, WE suffer right along with them because of the damage that does to the economy. It's a no-win situation.
I'm so disgusted about the bank bailout, too. I thought the main purpose of the bailout was to get them to grant credits? Are they doing it? NO!
post #23 of 26
Quote:
Originally Posted by valanhb View Post
The problem I have with ALL of these bailouts is that we're still IN a recession, and it's going to get worse. Whether or not these bailouts happen. All the bailouts do is reward those who made bad business decisions, basically rewarding them for being idiots.

Those of us who attempted to be responsible, as regular citizens, are getting hosed. I heard that they are going to mandate lowering the mortgage interest rate on 30 year fixed loans to 4% in January. Now, I don't believe in playing the refi game, and I got a mortgage that was within my means, but at 2.35% below what I'm paying now (which was still a darn good rate!) and having been diagnosed with MS (meaning it's very possible, even likely that my income is going to drop significantly if/when I have to go on disability) I would like to participate in that. But I also "heard" (take that as you will) that the refi's would only be available to those who are behind on their payments. OK, so seriously because I've been responsible I essentially get punished while people who weren't responsible and forward thinking get rewarded????

That, in a nutshell, is how I see the bailouts. Those who made sound business decisions are essentially being punished by the economy regardless, but those at the top who made idiotic decisions are being rewarded with these "loans" or bailouts. That's not right, and it's not the government's job to do that with taxpayer dollars. And it's not the government's business to buy into private industry, regardless of the fact that the democrats seem to think they know better than the businessmen how to run the businesses. Look at the deficit. Look at the fact that the Congressional Cafe looses money yearly. And we want those people to be in charge of these industries???? I don't. They can't run the government and they can't run private industry either.

I agree with you sooooo much. All that will do is motivate people to do the WRONG thing and get behind in their mortgage payments to get a 4% fixed rate. That is bull. What is wrong with this freaking country, that is rewards irresponsibility and penalized responsibility and how long are we responsible people going to take this?
post #24 of 26
Isn't it refreshing when we all agree?

Now, if the CIA and the FBI and Homeland Security weren't watching, I'd suggest we all get together and march on Washington and beat some sense into those buggers in those marble palaces on the Potomac.
post #25 of 26
Quote:
Originally Posted by coaster View Post
What's wrong people? Where's your sense of proportion? If you're this outraged at the auto industry for wanting $14 billion, shouldn't you be 107 times as outraged at the financial industry?
Tim I was thinking about this earlier, and I think you aren't giving the people enough credit. Most people were opposed to the bank bailouts too, but were promised that it would open up the credit markets and we would go into a recession if it wasn't passed, as well as giving a "maximum" amount that would be spent. Well, the credit still isn't flowing, we've been in a recession for a year and it ain't getting better, and the "max" has been tripled with zero effect OR oversight. So what did that accomplish? Nothing, except a much bigger deficit and taxpayer load. So why should we believe them now? Why shouldn't we make our voices heard much more strongly and loudly that we oppose these bailouts without the stipulations on the givers and recipients?

I don't think it's a matter of not being able to see what happened with the bank bailouts, it a matter of learning from the mistakes that have already been made.
post #26 of 26
I emailed essentially the same comment to Bill Sebastian and so it'll be interesting to see if he reads it on the air Monday morning and whether he has any comments.

Yes, the majority of the people opposed the bank bailouts and were duped into accepting them, as I was also. But I'm referring to now -- why is the public outrage so disproportionate now? And couldn't some of the provisions of the financial bailout be revoked? That money isn't all spent.
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