Replies to post #59878 on Politics and Money

[fuagf]

The truth about the auto bailout

Wednesday, Oct 24, 2012 02:30 AM +1100

At last night's debate, Mitt tried to airbrush his opposition to the auto bailout. But the facts won't let him

By Alex Seitz-Wald


Camera positions where news crews will be able to do their live
shots appear outside the site of the final presidential
debate at Lynn University.(Credit: AP)

One of the most contentious moments from last night’s foreign policy debate had nothing to do with a foreign country; it concerned the auto industry bailout (though Detroit does like to pretend ..

.. it’s another country). While, as we noted last night .. http://www.salon.com/2012/10/23/debate_fact_check_3/ , both Obama and Romney have skewed the facts a bit to fit their narrative, we thought it was worth taking a closer look at Romney’s position on the rescue.

First the common ground: Both Obama and Romney agree that the car companies needed to make deep cuts, shed costs, write down debts and fundamentally restructure themselves in the way that can be achieved only through bankruptcy. When Mitt Romney wrote his infamous November 2008 New York Times Op-Ed “Let Detroit Go Bankrupt .. http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=0 ,” this is what he meant — he did not mean let the companies go belly up, as Obama falsely suggested last night. And indeed, that’s what happened. Chrysler filed for Chapter 11 in April 2009, and GM followed in June.

But Obama and Romney diverge over the most critical question of the auto rescue: Whether or not to use taxpayer dollars or private financing to prop up the car companies. Obama supported using taxpayer dollars, Romney didn’t. “Detroit needs a turnaround, not a check .. http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=0 ,” he wrote in the Times Op-Ed. His line was of course in keeping with Republican ideology, which opposes government spending and government intervention in private industry.

The problem for Romney is that his idea of using private capital is a pipe dream. Remember, this was in late 2008 and early 2009 when the entire financial industry was going down in flames and no bank had the tens of billions of dollars needed to prop up the car companies, let alone the willingness to gamble it on what then seemed a very risky bet.

Steven Rattner, the former Wall Street executive who headed the administration’s rescue effort, wrote in a New York Times Op-Ed in February that Romney’s idea of using private financing was “utter fantasy .. http://www.nytimes.com/2012/02/24/opinion/delusions-about-the-detroit-bailout.html?_r=1 .” “If Mr. Romney disagrees, he should come forward with specific names of willing investors in place of empty rhetoric. I predict that he won’t be able to, because there aren’t any,” Rattner wrote. Romney has not since come forward with any names.

The bipartisan Congressional Oversight Panel, the official watchdog of the Troubled Asset Relief Program, which financed the bailout, agreed, writing in a report: “The circumstances in the global credit markets in November and December 2008 were unlike any the financial markets had seen in decades. U.S. domestic credit markets were frozen in the wake of the Lehman bankruptcy, and international sources of funding were extremely limited.”

Former GM Vice Chairman Bob Lutz told the Detroit Free Press in February that the taxpayer bailout was “necessary.” “The banks were even more broke than we were. Who had the money?”

Now, faced with the undisputed success of the bailout, Romney is trying to equivocate. He said last night that he didn’t oppose government help for the companies, pointing to the mention of federal guarantees in his Times Op-Ed. But this is disingenuous since, again, there were no private loans available for the government to guarantee. And earlier, he suggested that the government guarantee warranties, not loans, which would have done even almost nothing to help the car companies. “Without government financing — initiated by President George W. Bush in December 2008 — the two companies would not have been able to pursue Chapter 11 reorganization. Instead they would have been forced to cease production, close their doors and lay off virtually all workers once their coffers ran dry,” Rattner wrote.

In a 2011 interview .. http://piersmorgan.blogs.cnn.com/2011/06/07/web-extra-mitt-romney-talks-about-the-bailouts-and-ben-bernanke/?iref=allsearch .. with CNN’s Piers Morgan, Romney made his position clear: “What I said was, as the auto executives flew to Washington asking for money, don’t give them money … Don’t just write them checks. And unfortunately, what President Bush and President Obama did was write them checks.” He continued: “The bailouts were a mistake.”

Alex Seitz-Wald is Salon's political reporter. Email him at [e-mail], and follow him on Twitter @aseitzwald.

More Alex Seitz-Wald.

http://www.salon.com/2012/10/23/the_truth_about_the_auto_bailout/

[fuagf]

Chinese Manufacturing and the Auto Bailout

January 24, 2012, 4:05 pm 115 Comments



Jon Cohn, in correspondence, makes an important point with regard to the big Times report on Chinese manufacturing .. http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?_r=1&ref=general&src=me&pagewanted=all . Since he hasn’t posted about it, I will.

A lot of what that report is saying amounts to the fact that the classic logic of industrial clusters still applies very strongly — which is music to my professional ears, since that’s the sort of thing that was a central theme of my own research (pdf) .. http://www.nobelprize.org/nobel_prizes/economics/laureates/2008/krugman_lecture.pdf .. for many years. Manufacturing firms often stand or fall not just on their own merits, but because they do or don’t have a surrounding cluster of related firms that are suppliers or customers, provide a ready pool of suitable labor, and so on.

This, in turn, makes a case for policy to promote or preserve such clusters. Like all industrial policy arguments, this has to be applied carefully; something that could be a good idea in principle might be a very bad idea once you do the numbers, and these numbers are hard to do.

But can we think of a recent example in the United States where helping to preserve an industrial cluster was an important policy consideration? Indeed we can: the auto bailout. A key argument for the bailout was that if the major US firms were allowed to go bankrupt, a whole industrial ecology would be lost with them. And the auto bailout has been a huge success, not least because it did preserve that ecology.

Aren’t you glad that Obama didn’t listen to the other party on this issue?

http://krugman.blogs.nytimes.com/2012/01/24/chinese-manufacturing-and-the-auto-bailout/

[GEO928]

fuagf....your article in a superficial sense has a modicum of truth insofar as it purports we make judgements based upon our own perceptions and sense of values.....

ok, that's correct and news to no one.....

but, from there develops and spins an argument endearing to Obama....

without being nasty or snide, let me put it this way....if you really believe the statement below, it simply demonstrates that you have absolutley no idea of how capitalism and markets operate....and, because you have repeated expressed your support for anything marxist or "non-capitalist", I suspect you truly "don't get it"....

whoever wrote this below, was either motivated to justify obama's actions or, again, clearly has no knowledge of business....

I believe the answer to be a bit of both....and, that would also answer why this nation is in so much trouble with an incompetent at the 'ship's helm'....

the paragraph below is ludicrous:

At stake were not only the jobs of all of GM and Chrysler's employees, but the jobs of people who worked for hundreds of suppliers, from stereo manufacturers to steel and rubber producers. Estimates of the potential job losses topped one million. So he did what had to be done.