Thursday, November 20, 2008

Washing their hands while the automakers circle the drain

Can you see what's happening here? Everyone agrees that the American automakers are utter failures, and don't really deserve to exist anymore. They been mismanaged for decades, with the ultimate focus on short-term profits at the expense of the long-term business model. As such, there's simply no way for them to come back from this without major bankruptcy reorganization. Given that everyone knows this, here's what I think is happening with the automaker bailout. Every politician in Washington D.C. is hoping against hope that they go bankrupt sometime between right now and when Obama is inaugurated.

It's a win-win....everyone gets to avoid the blame. After all, there can only be blame- hundreds of thousands of job losses, cities around the country will be hit hard. However, if the automakers get bailed out, Congress will become increasingly unpopular, especially once the first $25 billion proves to be insufficient. And it will be insufficient... GM says they're burning $5 billion a month. So by asking Congress for $25 billion, of which GM is asking only $10-12 billion, that only buys them another 2 months.

If they don't get bailed out, the blame gets transferred to a lame-duck Congress, which won't really stick to the incoming members. Plus, the rhetoric can blame it all on Bush-era policies and Obama still gets a fresh start. It's about the best outcome that can be hoped for at this point- a point not lost on those in Congress and the lame-duck Bush Administration:

For now, however, with the federal emergency loan plan stalled in the Senate, lawmakers in both parties are engaged in a high-stakes game of chicken, positioning themselves to blame each other for the failure.

Senate Majority Leader Harry Reid, D-Nev., scrapped plans Wednesday for a vote on a bill to carve $25 billion in new auto industry loans out of the $700 billion Wall Street rescue fund.

It's really up to Bush's team to act, he said.

"I don't believe we need the legislation," Reid said. Treasury Secretary Henry Paulson can tap the financial industry bailout money to help auto companies, Reid said, but "he just doesn't want to do it."

Not our responsibility, countered the White House.

"If Congress leaves for a two-month vacation without having addressed this important issue ... then the Congress will bear responsibility for anything that happens in the next couple of months during their long vacation," said Dana Perino, the White House press secretary.

She said there was "no appetite" in the administration for using the financial industry bailout money to help auto companies.

It's great when elected leaders step up to the plate and make the really hard decisions, isn't it?

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