It’s like their pouring water into a bucket with a hole in it, and then shoving the bucket up the ass of the taxpayer to hide the leak.
Sorry for the crude analogy but, man, between yesterday’s ramblings by Barney Frank about a homeowner bailout, and today’s revelation about Cerebus (the true beneficiaries in the Chrysler bailout), this is getting ridiculous. There is going to be a theme here: these costly bailouts only delay the inevitable.
1. The auto bailout. GM, Ford, and Chrysler essentially don’t make cars people want to buy and can’t compete with foreign car companies operating in America because their labor and health care costs are too high. They simply can’t compete, and giving them $15 billion really accomplishes nothing – it only delays the inevitable. Inevitably, what is needed is a total restructuring of these companies and their labor contracts. And wouldn’t you know it, we already have a process for such restructuring called, bankruptcy.
Let them dismantle and reorganize these companies and restructure their debt to make them more profitable – that is what bankruptcy is for. Both the airlines and the steel industry did it for similar reasons and we were all better off in the end. If there is a void, let the market fill that void with car companies that know how to make money (e.g., Toyota, Honda, and Nissan), and are already expanding many profitable operations in this country and creating jobs in the process.
2. The homeowner bailout. Yesterday, Barney Frank went babbling on and on about wanting another $15 billion for loan modifications to bailout homeowners who are in foreclosure. This is an approach already proven to only delay the inevitable foreclosure. More than half of delinquent borrowers who had their mortgages reworked earlier this year to avoid foreclosure were behind on their new loan payments after just six months. Why? Because, many of the people in the foreclosure process are in deep, deep trouble. They are not a modified loan away from financial happiness.
But rest assured, we’ll spend yet another $15 billion to delay the inevitable foreclosures. Barney Frank and his cronies will be able to say they tried and will get re-elected, again. Others will say it didn’t work because there wasn’t enough government intervention. One day my kids will wonder why they’re stuck paying off a couple trillion dollar deficit…And you know what they say about deficits:
Christmas is when kids tell Santa what they want, and adults pay for it. Deficits are when adults tell the government what they want, and their kids pay for it.
3.The big bank bailout. Also troubling (partly because it opened the door for everyone else to go to Capital Hill hat-in-hand), but by far the most justifiable of the bunch. Why? Because, as a practical matter, these huge banks are more like utilities than traditional companies – every single thing in our economy depends on financing and access to credit. It’s a “lesser of three evils” situation.
And get ready, because within a week of the inauguration there will be another $700+ billion package passed by Congress. Merry Christmas!