Sunday, February 26, 2012

Inquirer Hack: That Auto Bailout Worked Out Great, Huh?

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On the front page of the Inquirer's editorial page today, Mark Zandi gushes that the auto bailout saved the US car companies and was a huge success:

The government bailout of the U.S. auto industry was a success.

Without financial help from Uncle Sam, General Motors and Chrysler likely would not exist today. The American auto industry would be a shadow of its former self. And the U.S. economic recovery would be even more drawn out and frustrating than it has been.

Saving the automakers was distasteful, but necessary.

Without help those two companies would no longer exist? That's a bold statement and one that has absolutely no basis behind it. Aside from the fact that both GM and Chrysler manufactured cars that none wanted to buy, how can Mr. Zandi make such a blanket statement as this? Chrysler would have been sold off, that's a given and probably should have been. But GM would have gone into bankruptcy, reorganized--most-likely by renegotiating onerous union obligations--and come out leaner and meaner, the way many great American companies have.

For the record, they were not "saved", they were propped up and made to look profitable--a Potemkin village if you will. They paid back the loans with more government money in a ruse that was eagerly reported as "repayment" by the compliant media.

Rehashing this bit of history is timely on the eve of the Republican primary in Michigan, where the economy has long been tethered to the auto industry. The potential GOP nominees have all spoken out against the bailout, which the Obama administration helped engineer. Yet it is worth remembering that when the bailout was being debated three years ago, in the teeth of the Great Recession, it had bipartisan support. And it was the Bush administration that provided the first substantial chunk of financial aid to the industry.

See how Zandi used that line about Bush to make it look like it was Bush's plan? He knows that Americans are still disgusted with the Obama-engineered bailout and lie Obama, still blaming Bush. Furthermore, I don't believe it was Bush that gave shareholder's the finger and showered money on the United Auto Workers in what could only be described as pandering to Big Labor for political gain using our tax money.

Mr. Zandi may consider 205 Democrat votes with 32 GOP votes bipartisan but I don't. 150 Republicans and 20 Democrats voted against, can that be considered bipartisan against? This was purely an Obama and Democrat bill and they own so quit trying to push it off as a joint effort, it's beneath you Mr. Zandi.

He continues:

Detroit's need for government assistance was partly its own fault. For years, the automakers had been using deep price discounts and cheap financing to support sales, instead of making the tough choices necessary for them to stay viable in the long run.

But the industry's predicament was not entirely of its own making. The broader U.S. economy was in free fall, demand for cars was weak, and the banking system's near-collapse made car loans scarce.

In a glaring omission, Zandi does not even mention the insane union contracts hanging around the necks of these two companies. Both GM and Chrysler (and Ford) bear the weight of contracts negotiated using strong-arm tactics. Japanese companies negotiated excellent contracts with US unions where workers make a fair wage with good benefits but do not impede the growth and sustainability of the companies. I don't recall Nissan, Toyota nor Subaru screaming about bankruptcy at the time Chrysler and GM were. The UAW is the primary reason that the car companies were failing and Zandi doesn't even mention them. I think the term I'm searching for to describe this type of writing is hackery.

Bailing out the automakers had some downsides. While taxpayers will get most of their money back, the government will likely sell its remaining GM stock before taxpayers are made completely whole.

The bankruptcy process was painful all around, but the government cushioned the financial blow to the unions at the expense of the automakers' bondholders, partly for political reasons. True, many bondholders were speculators looking to make quick profits, but changing the rules during the game isn't good policy. One reason U.S. households and businesses can borrow cheaply is that creditors feel confident that loan terms won't be changed. The way creditors were treated during the auto bailout arguably weakened that sense of safety.

Aha, we've spotted the word union but note how Zandi equivocates. The emphasis is mine take notice how he describes the bailout as cushioning the blow for unions at the expense of bondholders but those bondholders were just scumbag bottom feeders looking for a quick buck. This is knot just hackery but hackery on a par with Paul Krugman. Real people lost money because the Obama administration bailed out the UAW and gave them a nice gift of ownership. But those people were probably Republicans so it serves them right.

As for repayment of the loans, see how Zandi softens it. When you're talking about a $14-billion dollar loss on an $82-billion dollar investment, how can that be judged a success? I'm sure if Mr. Zandi lost 17% on every deal he brokered at Moody's Analytics his bosses or shareholders wouldn't think he was all that successful. But Zandi is a shill for Obama and the unions and it was only government money anyway that us taxpayers should just shut up about. The fact that they used government money to pay off the loans in a sleight of hand is conveniently forgotten by Zandi.

As a side note, most Sundays the Inquirer has a pro-con front page on the Op/Ed section. You know the format, a Dem on one side of the issue and a Republican on the other. They didn't do that this week because the Inquirer only wants one side to be commented on. To have a conservative rip the auto bailout apart just would not have been acceptable to the Inqy editorial board.


Anonymous said...

If the bailout was necessary, was the $230+/- million given to the UAW necessary? A good percentage of that will probably come back to the DNC via "donations" from the UAW. Obama also claims that the bond holders were "evil" hedge funds. What a distortion. A lot of the bonds were owed by other union pension funds thru hedge funds. I guess they we not important to Obama since the white house felt they (union members) had no place else to go

Scott said...

You did read what I wrote, right bro?