A comparison between Treasury Secretary Henry Paulson and Captain Bligh may be a bit of a stretch (Ahab is probably a more fitting analogy), but this bail out voyage is bound to be a similar journey of chaos and confusion. The time for mutiny may well be at hand.
Given Washington's penchant for corruption, particularly with the plentiful bounty offered from the increasingly shallow pockets of the American taxpayer, the misguided leadership of the current administration is plotting a course that will most likely steer the concept of unfettered capitalism directly onto the twin reefs of bankruptcy and oversight.
I can offer no excuses for the Bush White House, and Obama's administration seems to be stepping in line for more of the same — with extra helpings for the holiday season. In the face of overwhelming evidence showing the deep corruption and botched management behind the financial crisis, we decide to pile on even more.
Years of runaway deficit spending and an inability to lead decisively on any issue besides the war on terror have brought us to the brink — the proverbial edge of the map where the ocean ends and the unknown awaits those foolish enough to keep sailing into the void. A new world may indeed be on the horizon, but rather than a land of milk and honey, it will most likely be a land of bread and cheese lines.
People went to prison over the Enron debacle, but Democrats skated through Fannie and Freddie's demise unscathed. Pockets are lined, perks are granted and governmental power is grabbed hand over fist.
House Republicans initially fought against the $700 billion bailout, only to be panicked into compliance (or is that assimilation?) after another dip in the market and the media's veiled threat to place all of the blame for any future financial turbulence squarely upon their heads.
Many claim that the government has forced the banking industry to get on board with a program that most financial leaders consider unnecessary and somewhat dubious in regards to its unspecified goals.
American Bankers Association president Edward Yingling wrote a forceful letter to Secretary Paulson stating:
[Many] banks run the risk of being subjected to additional unknown government requirements or restrictions in the future — restrictions that could have the perverse effect of discouraging private investment in banks.
Almost 95% of banks in this country remain well-capitalized. Since that time, many banks have been contacted by regulators, and urged, sometimes forcefully, to participate in the Capital Purchase Program.
Secretary Paulson recently informed us that the bailout money will not be used to purchase bad debt as initially intended.
Expressing their concern in a joint letter to Mr. Paulson, U.S. Senators Tom Coburn, Richard Burr and David Vitter stated:
We are concerned that the program has been fundamentally changed from its original intent and worry that continued changes may erode the structures of accountability put in to protect taxpayers.
Congress never intended for the TARP (troubled asset relief program) to be a blank check that could be spent with unlimited discretion. To ensure proper boundaries are in place to protect the taxpayer, we hope and expect that congressional approval will be sought by the administration before further changes are made.
The corruption deepens as, according to a recent NY Times article, "Lobbyists Swarm the Treasury for Piece of Bailout Pie."
With no definitive plan or demonstrable success shown for the first bailout, the big three auto makers are next in line with their hands extended. Execs from each company arrived at the nation's capital via private jets (approximately $10,000 per trip) to beg with silver cups in hand for government band aids to place upon their collective cancer.
Rep. Gary L. Ackerman of New York said:
It’s almost like seeing a guy show up at the soup kitchen in high-hat and tuxedo. . . . I mean, couldn’t you all have downgraded to first class or jet-pooled or something to get here?
Michael Capuano of Massachusetts added:
My fear is that you’re going to take this money and continue the same stupid decisions you’ve made for 25 years.
To his credit, Chrysler Chairman Robert Nardelli has offered to accept a $1 annual salary if it would help his company secure their portion of the proposed $25 billion bail out for the auto industry.
Late in the hearing, Rep. Peter Roskam of Illinois asked if the other executives would be willing to work for $1 per year as a symbolic gesture which prompted the following replies:
Richard Wagoner of General Motors ($15.7 million in 2007):
“I don’t have a position on that today.”
Alan Mulally of Ford ($21.7 million in 2007):
“I understand the intent, but I think where we are is okay.”
I sympathize with the situation the auto workers are currently facing, but this whole approach just seems contrary to the concept of capitalism and the American way in general. As unpleasant as the alternative may be, it would seem a far better option to put these failing companies out of their misery as quickly as possible so we could begin the process of rebuilding a viable presence in today's competitive global marketplace.
When the big three are paying more than $73 per hour in labor costs compared to Toyota's $48, something more than a short-term influx of cash is required. Toyota produces "American" cars, built in this country by American workers, but they're not saddled with astronomical legacy costs and unreasonable union demands.
Recent studies show that GM loses an average of $1,271 on every vehicle rolling off the assembly line compared to Toyota's profit of $1,715 or Nissan's $2,135. With monthly losses approaching $5 billion, how is a $25 billion bandage going to stop the hemorrhaging?
According to an editorial by Mitt Romney,
If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed.
I'd have to agree. For whatever reason, Congress has postponed their decision and asked the big three executives to come back again to make a more convincing argument for our money. Democrats appear to be putting off a definitive decision until Mr. Obama's new administration is at the helm. They've not allowed the Republicans’ auto plan to even come up for a vote as White House press secretary Dana Perino stated on Thursday:
Unfortunately it looks like Sen. Reid just wants to pick up his ball and go home for the next two weeks — two months — for vacation.
These are uncertain times, particularly with the holiday season upon us and our economy desperate for the traditionally free-flowing Christmas cash. The world may be rejoicing in Obama's recent victory, but the market doesn't seem to share the enthusiasm as investors race to pocket what little profit may be available before the next administration comes into power. Holiday shoppers are predicted to spend about half of what they've doled out in previous years, and most financial wizards are prophesying that what we're seeing now is only the start of a long, slow process in which the market resets itself.
I wish Mr. Obama well — he certainly has his work cut out for him. While drastic action may be required, it must be the right action. Rash decisions and sweeping New Deal legislation will most likely send our economy spiraling down a whirlpool towards a fate known only to the Tidy-Bowl man of the 70s. Real courage and leadership in these times may well mean doing less rather than more — allowing the economy to reboot on its own. Triage for those that can be saved while others are made comfortable and allowed to die with dignity.