Comments on: Auto Bailout Revisted; Thoughtbasket Gloats

By: thoughtbasket

thoughtbasket — Fri, 04 Sep 2009 15:12:51 +0000

We agree on one thing: the chances of these bailouts fixing GM and Chrysler are extremely low. Both companies have been poorly run for decades, and it’s hard to see how financial restructuring will fix their management problems.

By: Stephen VanNuys

Stephen VanNuys — Fri, 04 Sep 2009 14:28:53 +0000

>owning the company would yield nothing

Yep, and that’s the other argument conservatives have been making. Chrysler has been a bad company for a long, long time. This isn’t the first time they’ve needed government assistance to stay afloat. As painful as it would have been, we should have let them fail. It’s going to be a blackhole of federal dollars for a long-time.

I expect nothing less than to read articles about losses and bad management at GM and Chrsyler over the upcoming years, coupled with politically-motivated businesses decisions and wrangling b/w politicians, unions, etc. I fully expect disaster at both companies. The UK tried similar bailouts and government-ownership of their auto companies in the 1970′s and it was a disaster.

I was proud to be found owning a Ford at the time these two went to Washington for a bailout.

Still, I am not convinced by your leverage argument, that that somehow makes this right. This thing was done out of court and under intense hardball, government pressure. No normal business would have had the “leverage” of the US government, with its ability to tax the largest economy in world history. That seems unfair and atypical of normal bankruptcy proceedings. I still view this as a politically motivated move, to give goodies to the unions who backed the Dems.

Anyway – gotta run. Oh – sorry for the strong tone of my above post. Hope it didn’t come across strongly. I respect your viewpoint, I just really disagree.

By: thoughtbasket

thoughtbasket — Fri, 04 Sep 2009 13:31:37 +0000

The bondholders secured position allowed them to own the company if they didn’t get paid back. But they knew that owning the company would yield nothing. My point is that playing hardball with lenders is what happens all the time in bankruptcy. The unions had the leverage here; without them there were just some empty worthless factories.

By: Stephen VanNuys

Stephen VanNuys — Fri, 04 Sep 2009 00:39:33 +0000

Hmm – I agree with your analysis, that he used leverage. But have you proven that the “leverage” he used was within the bounds of relevant law? Shouldn’t the bondholders’ secure position have provided them a legal framework to have argued for something better than what was given to the unions? And yet that was not honored. Sure, Obama made a smart ploy if you assume anarchy. But that’s not what we have here- nor what we want. That you are advocating a circumstance that set precendent that the government can bully secured creditors in such a way to yield in order to give favors to political allies (unions) is appalling to me. Weren’t we all mad when the Bush administration seemed to show favortism to Halliburton? There’s a serious conflict of interest here. This is not the type of America we should be writing blog posts in defense of, in my view.