This is Alpha, the first-born, when he was 2YO.
This is Beta, the second-born, when he was about 2YO.
This is Gamma, the third-born, when he was about 18MO.
Not a Bailout
Dec
10
2008
Most of the news items about the Big 3 automakers in Washington asking for money refer to it as the “bailout” for Detroit auto companies. It is not a bailout. They are asking for a loan. A bailout is what the financial companies got: billions of dollars with no questions asked, no strings attached, and repayment is optional.
The current Congress worries me a bit. They are looking forward to setting up a new committee or appointee to oversee the running of the car companies. In other words, they are going to use this situation to expand government. They are going to take advantage of the financial crisis to add rules and power to Washington because they wouldn’t be able to get away with it in a normal economy.
The Big 3 car companies want a loan. They are going to repay the loan. They have a pretty good history of repaying the loans from the federal government. And the government has made a decent amount of money on previous loans to the car companies. What happens once these loans are repaid? Is Washington going to disband the new car committee or car czar? Something tells me that this expansion of power will not go away as easily as it came.
<rant>
The senators and representatives seem to be fond of telling the car companies that their business plans are not sustainable and they need Congress to tell them how to run their companies. I would like someone to tell Congress that Medicare and Social Security are not sustainable and they need someone else to tell them how to run the government. Congress wants changes at the top of the car companies. Why don’t we also get changes at the top of Congress, particularly in the finance and banking committees that were supposed to be overseeing Fannie Mae and Freddie Mac? They were warned of their floundering finances, but did nothing to fix it. Why are those the people who are now, all of a sudden, responsible and knowledgeable enough to run car companies?
If the government wants to tell a public company how to run itself, it should follow the existing market methods. If the company is asking the government for money, there are three main options: gift, purchase, or loan.
- If the government wants to just give money away as a gift, then there are no conditions.
- If the government wants to help a company financially but wants a say in the matter, it should buy shares of the company. The more shares you buy, the more votes you get. It works well this way for everyone else.
- The third option is for the government to loan the money to the company. The company pays the government back, and there is no need for the government to force any changes in the company. If the company is being run poorly, then they will have incentive to change things so they can free up some cash to make the loan obligations. If the company can’t make it and goes bankrupt, then I am sure the government would arrange things with the bankruptcy judge so that they are the first to be paid. Even if they don’t get paid, how is this any different from the government’s grand plans to buy bad mortgage debt from the mortgage bankers? Washington was going to buy mortgages that were known to be bad, meaning they expected many of them would not be repaid. The car companies should at least be better than that.
</rant>
There are free-market solutions that the government can use to help the companies. Of course, a truly free market would not have the government get involved. And many people are arguing that government involvement was the root cause of this whole mess, so a truly free market would not have had the same problems that apparently only the government can solve. I vote for less government. Loan the money if you must, but don’t grab for power in the process.
“The rich rules over the poor, And the borrower {becomes} the lender’s slave.”
– Proverbs 22:7
This little article thingy was written by Some Guy sometime around 11:05 pm and has been carefully placed in the Finance category.
December 11th, 2008 at 11:21 am
I’m thinking I might buy the position of Car Czar – oh, wait, that would have to be someone from Illinois. Nevermind. I’m so clueless I could be governor of Michigan!