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Lining up for a bailout

January 2, 2009

The auto industry’s Christmas present from the government — in the form of a $1 billion loan to General Motors and a $5 billion stake in GMAC — may have left other industries hoping that the giving season isn’t over yet.

The steel industry is pressing President-elect Barack Obama to boost the flagging demand for U.S.-made steel by instituting a “buy American” clause in his infrastructure stimulus package, the New York Times reported.

“As steel production goes — and it is now in collapse — so will go the national economy,” writes the New York Times, referencing the maxim once applied to The Big Three automakers.

But why stop at manufacturing industries? Rep. Frank Nicastro of Connecticut and some of his fellow legislators want to save two local papers, The Bristol Press and The Herald, which are hanging by a thread after their publisher said it cannot afford to keep them.

Which companies are really too big to fail? If you were writing the check, who would you bail out?

(Pictured above: Workers secure a steel beam at a construction site on 8th Avenue and 42nd Street in New York, April 21, 2008. REUTERS/Shannon Stapleton)


If you take government money, then you deserve government pay.

If a company believes it is too big to fail and deserves taxpayer bailout money, then the company is no different than a government agency. Therefore, executives and workers are government employees. All employees should receive total compensation in line with an equivalent government agency. Therefore, a CEO’s total compensation should be around $200k, roughly the equivalent of the Secretary of Defense. You cannot argue that running GM or Citibank is greater than the Department of Defense.

No risk, no rewards. You want to socialize your risk, then you do not deserve an outsized reward. Now this does not mean a $200k salary with a huge basket in stock options. This is total compensation – period.

Now, let’s see how many CEO and management executives get in line for a bailout.


If everyone seeks a Bail out, who has the capacity to Bail out the US Gov? Looks like Bail out has become the IN THING now.
And what with all those Cars that run on air / water that i’ve been watching only on Discovery channel and Discovery science? Why not let the FORDS and the GM’s fall and pave way for these new innovations which will help in many ways?
1. Save energy 2. Save the environment 3. Protect the future.
Think people think…

Posted by Paidipati | Report as abusive

…but Steve, we can’t confuse the upcoming infrastructure plan with the Depression’s. Plus the US didn’t recover until after WWII w/ initiatives like the interstate highway system. Every time the US prospers, it’s because of advances that increase efficiency: the interstate hwy system enabled transit of goods & travel (which gave the Federal gov’t grounds to directly challenge otherwise private & unreachable discrimination, & advance civil rights); the internet era enabled increased efficiency within business, broadband infrastructure and product development during the ’90s.
The upcoming ‘update’ infrastructure plan will actually decrease efficiency, as roads and bridges are closed, hindering commerce and commutes. And merely extending unemployment benefits, part of the plan, is far from decisive action as it doesn’t create anything new. Spending on “green” technology may increase efficiency, but must be coupled with standards & oversight that avoid the financial, economic & ecological debacle of the ethanol craze. Without, the plan just turns Congress into a pork store (and we’ve all seen the Sopranos…)
A decisive plan would entail a massive government effort to consolidate the scattered subprime assets to enable unfortunate but necessary foreclosure on delinquent real estate. Without it, those unsecuritized homes that are less delinquent and more salvageable are nonetheless forced to provide liquidity to lenders & banks. That plan would also create real white-collar, educated jobs and prepare our country for a service economy recovery.

Posted by Sam | Report as abusive

I lost 250,000 in the stock market in 2008. I want my bail out. NOW…………….

Posted by John Waddell | Report as abusive

I think the whole bail out idea is a bad thing, so is our elected officials spending our tax dollars as if it is a bottomless well. At this rate let it all crash, lets all hold on to our cash, and those of you who have been living on credit like you were a crack addict be forced to go cold turkey. No amount of money can fix this problem. The problem lies within our general value system that has been lost, changed, or otherwise modified by greed and excess. Yes our country was once the richest, strongest, most powerful nation in the world. So were the Romans, and where are they now? Their civilization fell for many of the same reasons that ours is failing now.

Posted by JP in Seattle | Report as abusive

Hi Leah

What alternative action do you propose? Why do you think your alternative would work better than what the Obama team is proposing?



The only people that should get money is the farmers! Everyone talks about how much they lost in 401k’s and stock market, and home values, however, there was never real value in any of these items after the rapid rise of prices starting in 2003. Prices had to come down to more reasonable and affordable levels, and need to settle down to pre-2003 prices. Prices on everything at thatt time was affordable for the average working person. Why is everyone so shocked at the “loss” of “virtual money” that we all know can be here today and gone tomorrow. Money in the stock market is always a gamble and should never be counted on as being a stable and reliable source of income now or in the future.

Posted by m bowman | Report as abusive

“Trickle-down” is Rovian for “Trickle-Up” — That is, as in fleecing the public— the money goes from our pockets into the pockets of the most depraved in “our” government and in the corporations that have bought those in “our” government.

“Free Trade” is actually “Union-Busting,” along with offshoring, inshoring, and anti-regulation officials in our “regulatory agencies,” and as such as protectionism that protects parasites.

Posted by Quintspect | Report as abusive

Take a good look at AIG, in the question of “bail-out” and the crook mentality that bought its way into office, AIG are crooks— they are big churners and scammers of the elderly, through those Living Trust Mills— This is how it works (Does this sound related to “Derivatives”? You bet!) — They write “annuities” so that even lawyers have to hire experts to figure out what these instruments are, they are so complex— And they sell these “annuities” to elderly, which allows them to churn fees out of the dividends, and also they tell elderly people that these are “insurance policies” — And here’s the most clever of all: The “annuities”
mature at a date so distant (maybe by the time the duped are 92), such that the desperately needed for nursing home care and elder care well beyond reach of the elderly

Posted by Quintspect | Report as abusive

Bail out is simply a way to shift uncollectable debt to taxpayer debt, which is collectable by the Gastapo IRS.
Debt created by corruption, greed, and by giving credit to the unproductive and shifting it to the taxpayer as explained above.

Posted by ted | Report as abusive

I’m sorry, I think we are getting way off base here. These “bailouts” are not about helping stupid rich people, but about saving all of us. Yeah, they are getting off “easy” too, but guys, are you willing to starve your families just to punish those who deserve it? Wouldn’t it make more sense to fix the problem first and THEN go after them? Seriouosly.

Posted by Laz | Report as abusive

If the gov’t is bailing out, meaning just giving money, to capitalist enterprises, that’s out. If bailout means loan – at rates the companies themselves charge us, the consumer – then that’s OK. For instance, however much GMAC would charge a customer who had iffy credit and was about to go broke, then that’s what GM has to pay. With repossession/liquidation as an option.

Some other conditions could/should be:
Bring the jobs “outsourced” to foreign countries back here.
Force the union into making it economically attractive to bring the jobs back to the US – probably meaning getting rid of the union.
Cease buying parts from other countries – when you advertise your product as being an “American Revolution” or whatever, it implies it is American-made. Make that so. Do these things step by step, not all at once, as it would be unreasonable for an “instant fix” = set targets and goals that must be agreed upon and adhered to. Variance from the agreement means give back the money – all of it – immediately.
Quit making junk. Why one wouldn’t do this anyway is beyond me, but if the car companies and anyone else wants the taxpayers cash, NO JUNK is a must.
No more “sell it cheap and make it up on service and repairs and phony-baloney financing tricks” as a business model. How about let’s try “make it really good, so it won’t need all the back end nonsense” for a change?
And, finally, make all the obscenely-paid executives compensation, and continued employment, almost entirely dependent on performance – just like everyone else. No more bonuses for leaders who drive the companies into bankruptcy. And fire the guys who thought up that idea in the first place – they need to be the first to go.

Posted by Russ | Report as abusive

Yay! Massive pork for the fat cats! Tell the public anything, they’ll believe it. What we desperately is a new private airport for all the private jets heading to DC to feast on the massive pork. Privatized profit, socialized loss. More warm yellow trickle-down for the little guy, yay!

Posted by Pork Loin | Report as abusive

No more mailouts,PERIOD. How about help for seniors who lost much of their savings because of this fiasco and the crooks at the top???? A new genertion of people who will live at or near poverty level has now been created. We will have to receive more government help to make it. Save any additional bail out money for that!!!

Posted by clela | Report as abusive

The concentration should be on jobs. But also on job training. Here in Kentucky there have been many people who lost their jobs because of their link to the auto industry,tools,transportation,manufactur e. For some people they have been at their jobs for years,worked their way up from teenagers to now middled aged and it is not going to be easy to find another job because of their age. I would like to see the feds reach out to companies and instill job training programs with tax incentives to give people a chance to learn and earn their way in life. With more jobs,more revenue and less unemployment payouts.

Posted by nora | Report as abusive

The bail out money should be inject back into the government – a better government with “Checks and Balances” system in order “to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity…”

Posted by mythnreality | Report as abusive

Good comments by all. Americans are not favoring bailouts and obviosuly are not convinced that the bailout for the financial sector was appropriate and scrutinized. I think we threw money (financed by the Chinese) to bad. The Dems sold everyone on home ownership they coulnd’t afford and the Christian extremist snuck into the GOB and messed up the wiring. We all voted and paid the consequences. We also have the world’s smallest trade department and no longer have anything worthwhile to export. The only thing left is to make sacrifices (relocate, change expectations, re-train, re-brand) and rebuild this country’s infrastructure. We can use that idle and worldclass steelmaking capacity between Indiana and the downriver area of Detroit for making Rail! We should be laying rail for mass transit and commerical transit across the whole country. Why? Rail increases the need for “smart fleet cars”…Rail increases domestic and international tourism…Rail reduces the need many vehicles during the work week….Rail enables idle civil engineering resources to revamp the nations infrastructure. We need to build our way out and evolve as we go through the process. When we are behind an initiative…we make history.

Posted by CW | Report as abusive

Chief execs of these companies never asked advice of American people during outsourcing, off shoring, layoff American labor, lowering wages, establishing their golden parachutes and removing promised pensions and benefits to workers who spent life at their factory at the first place, and therefore they shouldn’t ask any taxpayer money to save face.

Posted by noway | Report as abusive

Mr. Pointer, whom or what you are, no one cares. This country, has been destroyed by highly educated fools. A chicken farmer with a little common sense could have done a much better job, for the past eight years. I do not have the handicap, that you have. Thank goodness I do have some common sense.

Posted by Norman | Report as abusive

I actually see a glimmer of hope. You see, taxes and the act of collecting taxes are a huge friction on the economy. If this tax cut works, we could eliminate this antiquated process, and let the government raise monies via inflation instead. Think about every productive person in the country getting a week of extra, productive, time without doing tax returns.

I say let Pelosi and Obama spend like crazy now, because then they’ll get the blame for the additional inflation they cause in 6 years, when the government’s bonds have to be re-financed (just like a mortgage). I’m not Democrat or Republican. I’m in favor of the Constitution. What a concept.

Actually, each project that the government takes on needs to have an ROI analysis done by independent 3rd parties. If the project increases the velocity of money enough to have a net positive return, then do it.


If we let half the country go bankrupt, the only answer is totalitarianism, or else people starve and we can’t get toilet seats for our bombers. Maybe everybody who’s good for it should get the government loan they need at a market rate, of printed money (we can do that because we’re in deflation). OK, so who’s good for it? Shall we let our esteemed politicians decide? I think it’s the righteous answer, I’m just not clear on how to make it work. Typical real-world problem. People and products are real. How do we realign our games with reality without losing the principles we love?

Posted by Pete Cann | Report as abusive

This is going to start looking a lot like the line in the welfare office!

Posted by Heather | Report as abusive

Without a First Class Tax Paying Base , We Cannot Afford A First Class Infrastructure . Republicans never had a clue ! There thinking is all for me none for you ! Sad that a vote for republicans is a vote for your slavery ! We must change the regulation that legalized the speculation of revenue ! ( 1983 ) Deregulation of the Fed.

Posted by Glenn Carpenter | Report as abusive

I remember the old way gov’t use to fix things (by old I mean hundreds of years ago and by remember I mean read in text books) and that was to lower taxes. Can you imagine how quick every economic problem would be fixed if we got rid of the income tax? But doing that would mean we’d have to get rid of a lot of government power, won’t ever happen.

Revolution will soon be necessary, just be sure to pick the right side.

Posted by Michael | Report as abusive

Just to expand on what I touched on above. I do not think the Big Auto Makers have max’ed out the efficiencies of the internal combustion engine. rticle-1049151/The-sports-car-Venice-tan k.html

Posted by B.Free | Report as abusive

What’s the bet in a year or 2 the Big 3 automakers who have now joined the ‘corporate dole queue’ are either begging for more help or racing each other to get the first affordable plug-in electric vehicles on the road.
Out of these 3, 1 will fail, 1 will hang on to the past for as long as they can and eventually die of exhaustion, and the 3rd will embrace the future and new technology and go on to prosper. We should start a betting book on who the succesful auto maker will be. How about that?

Posted by Brad | Report as abusive

General Motors is heavely invested in manufacture and sale of cars in Russia, but they wouldn’t take any of our “bailout dollars” over to Russia to enhance that effort, now would they?

Posted by ron | Report as abusive

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