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| Paulson opposes gov't bailout for auto industry | |
| 2008-11-19 | |
| U.S. Treasury Secretary Henry Paulson voiced opposition Tuesday to using part of the government's $700 billion financial rescue program to bail out the ailing auto industry. But General Motors Corp. Chairman Rick Wagoner warned that the U.S. economy will suffer a "catastrophic collapse" if domestic automakers fail, and appealed anew for federal assistance.
Automaker executives, supported by congressional Democrats, say they need another $25 billion in emergency loans, in addition to the $25 billion already approved to specifically help the industry make more fuel-efficient cars. Wagoner, testifying before the Senate Banking Committee, said in the event of an industry failure, 3 million jobs will be lost within the first year and government tax receipts will be $156 billion less over three years. "Such a level of economic devastation would far exceed the government support that our industry needs," he said. "This is about much more than just Detroit. It's about saving the U.S. economy from a catastrophic collapse." Paulson said "there are other ways" to help the auto industry. Specifically, he urged Congress to modify the first $25 billion package to provide short-term financial relief to the industry. But he also said, "I think it would be not a good thing -- it would be something to be avoided having one of the auto companies fail, particularly during this period of time." Paulson defended the government's decision to back away from its original plan to buy up troubled bank assets with the $700 billion rescue plan, formally called the Troubled Assets Relief Program or TARP. "There is no playbook for responding to turmoil we have never faced," he said. "We adjusted our strategy to reflect the facts of a severe market crisis." "The purpose of the financial rescue legislation was to stabilize our financial system and to strengthen it. It is not a panacea for all our economic difficulties," Paulson added. Federal Reserve Chairman Ben Bernanke told the same House panel that the Treasury Department's capital infusion into banks will be important to restore confidence and bring credit markets back to normalcy. The central bank chief also said the government's efforts to stabilize the financial industry with TARP are beginning to produce favorable results. "These actions...appeared to stabilize the situation and to improve investor confidence in financial firms," he said. "There are some signs that credit markets, while still quite strained, are improving." "Overall, credit conditions are still far from normal, with risk spreads remaining very elevated and banks reporting that they continued to tighten lending standards through October," Bernanke said. "It is imperative that all banking organizations and their regulators work together to ensure that the needs of creditworthy borrowers are met in a manner consistent with safety and soundness," he said. | |
| Posted by:Fred |
| #26 Well, if they saw AIG keep throwing money at luxury retreats for their top execs who got them into the mess they are in, no wonder the UAW is acting like pigs at the trough and the chairmen traveled by private jets to beg for cash. (After all, they aren't asking for that much compared to them...) Detroit executives have the same kind of thing. This is really an apples and oranges comparison? AIG rank-and-file are paid the market rate, whereas Detroit rank-and-file are paid the union rate. AIG is losing money because it made some bad bets. Detroit is losing money because union wages are too high. |
| Posted by: Zhang Fei 2008-11-19 22:52 |
| #25 ed: Study Examines Short-Term Economic Impact of Worst-Case Scenarios for Contraction of Detroit Three Predicts nearly 3 million jobs lost if the Big 3 go completely under. Detroit won't go under in a bankruptcy proceeding any more than Delta Airlines or Continental Airlines went under. What will go under is management, UAW contracts, and 20-years-and-out lifetime pension and zero-cost health insurance plans. Detroit has competitive products. Their problem doesn't have anything to do with products - it's got to do with cost. Their costs are just too high, mainly because of the union contracts. |
| Posted by: Zhang Fei 2008-11-19 22:49 |
| #24 hmmmmm..... I find your humor unamusing. No Amps for you! |
| Posted by: Ready Kilowatt 2008-11-19 22:25 |
| #23 The resistance will eat up the Volt. Huh? Watt? |
| Posted by: SteveS 2008-11-19 21:51 |
| #22 $73.20/hr to put doors hinges on at GM. |
| Posted by: 3dc 2008-11-19 20:31 |
| #21 Skipping the whole auto-thingy... Paulson should STFU! He walked out an proclaimed that "THE SKY IS FALLING AND ONLY I CAN FIX IT!" Greatest crime in the world's history. He needs to visit Madame DeFarge's little operation. |
| Posted by: 3dc 2008-11-19 20:30 |
| #20 Screw the UAW and screw the current management that wouldn't force them to alter their contracts. This thing has to get flushed in order to start over (Chrysler should just stay dead). GM and Ford need to return as much smaller companies, with fewer brands so they can focus on building excellent cars at a competitive cost. Oh, and screw the UAW. Did I already say that? |
| Posted by: remoteman 2008-11-19 17:21 |
| #19 Honestly, the market cap for GM is about $2 billion this week. Fine. Kelo them for $2B. Sale what you can. Shut the rest down. No packages for the execs who managed it into the ground. Save $23B. |
| Posted by: Procopius2k 2008-11-19 17:17 |
| #18 Well, if they saw AIG keep throwing money at luxury retreats for their top execs who got them into the mess they are in, no wonder the UAW is acting like pigs at the trough and the chairmen traveled by private jets to beg for cash. (After all, they aren't asking for that much compared to them...) |
| Posted by: Cornsilk Blondie 2008-11-19 16:55 |
| #17 You serious Pappy? And after the UAW prez says no concessions to save the Big 3. Let's see how cocky he is after Chapter 11 and the firing of 1/2 the workforce. |
| Posted by: ed 2008-11-19 14:48 |
| #16 The US taxpayer has already holding the bag for $25B the Feds committed to the Big 3 for retooling It ended up in the UAW-administered pension plan instead. |
| Posted by: Pappy 2008-11-19 14:06 |
| #15 It doesn't matter how much money is pumped into the Big 3 until compensation becomes more in line with their competitors. Unless workers and management take a 1/3 pay and benefits cut, they will continue to bleed to death. I think that even after life support is terminated and they are floating into the big white light, many of them will resist any cuts. Study Examines Short-Term Economic Impact of Worst-Case Scenarios for Contraction of Detroit Three Predicts nearly 3 million jobs lost if the Big 3 go completely under. |
| Posted by: ed 2008-11-19 12:43 |
| #14 The UAW won't even negotiate. Let them die and let someone else buy up the assets if that's what it takes. My tax money should not go towards making American cars less competetive and to create a safety hammock for union Workers playing hardball. |
| Posted by: rjschwarz 2008-11-19 12:17 |
| #13 Maybe we could use this occasion to wring some concessions out the union. Tell 'em they have to give up a certain percentage of their pension but they get to keep their jobs. The percentage would be determined by whatever it takes to bring the cost of a car down to where it's actually competitive. Make 'em agree to something like that or else take a hike. But no matter what you think of American cars or the unions, their current predicament has been exacerbated by the mortgage meltdown which was NOT the fault of the auto makers or the union. The reason they suddenly can't sell cars is that nobody can get a car loan and the reason for that is a little creep named Bawney Fwanks and some of his cohorts in Congress. Foreign cars aren't selling well either right now. Everybody's hurting. Make Bawney go to a UAW convention and explain to them how all of this came to be. I'd love to see the news coverage of that event. Then have Henry Paulson explain to them why, after he's given half a trillion dollars to his banker buddies, nobody can get a loan yet. |
| Posted by: Ebbang Uluque6305 2008-11-19 12:09 |
| #12 Welcome to the new Democratic economic program: All pigs are equal, but some pigs are more equal than others. |
| Posted by: DoDo 2008-11-19 11:12 |
| #11 Why don't they just pay the UAW to NOT make cars. They already do. It's called the Job Bank. |
| Posted by: Nimble Spemble 2008-11-19 10:36 |
| #10 Good God CM, don't give them any ideas. . . |
| Posted by: GORT 2008-11-19 10:35 |
| #9 Why don't they just pay the UAW to NOT make cars. It'll cost about the same. The DemocRATS will appease their constituency and we'll have fewer crappy cars. |
| Posted by: Carbon Monoxide 2008-11-19 09:48 |
| #8 The US taxpayer has already holding the bag for $25B the Feds committed to the Big 3 for retooling. The new fight is for another $25B loan for operations. |
| Posted by: ed 2008-11-19 08:36 |
| #7 Let them go into bankruptcy. If our silly legislative branch INSISTS on getting involved - BUY them, it's cheaper. Then pass a law dissolving the UAW contracts. Hire competant management and then take them public in a couple of years for a profit. I still favor backruptcy. |
| Posted by: Hellfish 2008-11-19 08:23 |
| #6 i agree with scooter. if you bail out every private buisness that is failing wouldn't that be kinda of nationalizing them as in socialism. And once they get it this year you just wait they will up production and they will get it every year. |
| Posted by: chris 2008-11-19 08:12 |
| #5 Not that they deserve any, but the auto industry will see little sympathy from Hank Paulson. He made his dough through investment dealing with China set up by the other Henry and KAI. In my opinion, even without an auto bailout, by adding another $1 or $2 trillion dollars to the National Debt, Paulson is just ensuring that interest rates will go up, real estate will crash, unemployment will soar, and foreign central banks will abandon the dollar. The Web: “American International Group, Inc. (AIG), The Blackstone Group L. P. and Kissinger Associates Inc. announced the establishment of a new venture to provide financial advisory services to corporations seeking high-level independent strategic advice. […] The venture will operate globally and will take advantage of the existing relationships between the partners: - AIG has an ownership interest in Blackstone and is an investor in several of Blackstone's private equity funds; - AIG and Blackstone have a joint venture, specializing in restructuring and M&A advisory services in selected Asian countries; - Henry Kissinger chairs both AIG's International Advisory Board and the advisory boards of several AIG-sponsored Infrastructure Funds. |
| Posted by: Besoeker 2008-11-19 07:10 |
| #4 I say don't give 'em a cent. Let them succeed or fail on their own, as the market dictates. It's called "capitalism", and it's one of the things that makes America great. |
| Posted by: Scooter McGruder 2008-11-19 03:37 |
| #3 If they are going to decide to give the auto industry 50 billion, I say let one of them sink (prolly Chrysler) and give their employees (if they have any in the US anymore) a nice unemployment package that includes some schooling. After that. Let's give the others a handful of billion to restructure (after they close up shop and send the union packing) and buy some good engineers from the competition. |
| Posted by: Mike N. 2008-11-19 02:15 |
| #2 The resistance will eat up the Volt. |
| Posted by: Alaska Paul 2008-11-19 00:53 |
| #1 So if GM goes belly up, whatever will happen to all the money good folks put down on the 2010 Volt? are they SOL or just get in line for whatever pennies on the dollar they can eke out of the carcass?? |
| Posted by: USN, Ret. 2008-11-19 00:41 |