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Debates Forum

Debates Forum

  1. 16 Feb '12 14:46
    As a Michigan resident, I have mixed feelings about the bailout of the auto industry. On one hand, we really need the jobs and a part of me is glad our state is seeing a little light at the end of the tunnel. On the other hand, if they were worth saving why were banks unwilling to loan them the money they needed to recover?

    http://news.yahoo.com/mitt-romney-flip-flopping-auto-industry-bailout-190227045.html

    According to this article the GM stock price will have to double before the tax payers get their money back. Romney's positioning aside, Is there good reason for being against the bailout of the auto industry?
  2. Subscriber Sleepyguy
    Reepy Rastardly Guy
    16 Feb '12 15:14
    Originally posted by Metal Brain
    Is there good reason for being against the bailout of the auto industry?
    Dr. Paul can 'splain it to you...

    http://www.youtube.com/watch?v=UvFZH_adksc
  3. 16 Feb '12 15:41
    Originally posted by Metal Brain

    On the other hand, if they were worth saving why were banks unwilling to loan them the money they needed to recover?
    Simple, the banks have different objectives than the government has. If the banks loan money to the auto-industry, it's because they want the loans to be repaid with interest. For that to happen, the auto-industry needs to make a profit, obviously banks aren't seeing that happening in the short to middle run. If the government bails out the auto-industry, they'd be very happy for the money to come back, however, if the auto-industry only breaks even and isn't able to pay back the loans, then that's still a win for the government, in the form of the averted unemployment.

    A second reason is the risk. Banks have deep pockets, but those of the government are deeper still. If the loans to the auto-industry aren't repaid, some banks would be in serious trouble. This could dissuade them from loaning money even if they think that car companies can make a profit. The government on the other hand can take the hit of losing that money.
  4. 16 Feb '12 15:44
    Originally posted by Metal Brain
    As a Michigan resident, I have mixed feelings about the bailout of the auto industry. On one hand, we really need the jobs and a part of me is glad our state is seeing a little light at the end of the tunnel. On the other hand, if they were worth saving why were banks unwilling to loan them the money they needed to recover?

    http://news.yahoo.com/mitt- ...[text shortened]... y's positioning aside, Is there good reason for being against the bailout of the auto industry?
    On the other hand, if they were worth saving why were banks unwilling to loan them the money they needed to recover?

    Doesn't this assume that banks are rational?
  5. 16 Feb '12 17:57
    Originally posted by KazetNagorra
    [b]On the other hand, if they were worth saving why were banks unwilling to loan them the money they needed to recover?

    Doesn't this assume that banks are rational?[/b]
    You are blaming the banks?
    Ford didn't need a bailout.
  6. 16 Feb '12 18:13
    Originally posted by Barts
    Simple, the banks have different objectives than the government has. If the banks loan money to the auto-industry, it's because they want the loans to be repaid with interest. For that to happen, the auto-industry needs to make a profit, obviously banks aren't seeing that happening in the short to middle run. If the government bails out the auto-industry, they ...[text shortened]... can make a profit. The government on the other hand can take the hit of losing that money.
    I see the logic in what you are saying. GM has been doing well, but what if GM stock takes a slide downward? Maybe Toyota could have bought out GM and manufactured vehicles here in Michigan. Why bailout a loser instead of rewarding the winners? It seems a little contrary to common sense.

    http://news.yahoo.com/gm-records-highest-profit-ever-7-6-billion-123523501.html
  7. 16 Feb '12 18:27
    Originally posted by Metal Brain
    You are blaming the banks?
    Ford didn't need a bailout.
    I'm not "blaming" anyone, I am challenging your notion that the only reason banks wouldn't want to lend money to a company is because it's a bad company.
  8. 09 Mar '12 15:13
    GM bought shares in French automaker PSA Peugeo Citroen

    http://news.yahoo.com/american-auto-bailout-france-100824412--abc-news.html
  9. 09 Mar '12 15:43
    Originally posted by Metal Brain
    As a Michigan resident, I have mixed feelings about the bailout of the auto industry. On one hand, we really need the jobs and a part of me is glad our state is seeing a little light at the end of the tunnel. On the other hand, if they were worth saving why were banks unwilling to loan them the money they needed to recover?

    http://news.yahoo.com/mitt- ...[text shortened]... y's positioning aside, Is there good reason for being against the bailout of the auto industry?
    Bailouts are justified by projecting what "would happen" without them. We'll never know. The normal bankruptcy process, could take much longer but be much fairer. The argument was that in the meantime, the business would have died. I somehow doubt that dire prediction.

    What are some other possible alternative outcomes?

    1. The normal bankruptcy process is accelerated, but kept in its usual form, secured creditors first.

    2. A white knight appears and takes GM over, another car manufacturer, Warren Buffet, George Soros or other global billionaire.

    3. The giant breaks up into multiple smaller enterprises, who operate more efficiently, and divest themselves of the crippling debt of bad management and overpriced labor.

    There are probably many other free market possibilities, which will never be discussed. Only two discussed were government bailout, politically favoring friends of Obama, or the enterprise totally disintegrates and no longer exists. The second, although presented to support the first is highly unlikely to have ever happened.
  10. 09 Mar '12 15:44
    Originally posted by Barts
    Simple, the banks have different objectives than the government has. If the banks loan money to the auto-industry, it's because they want the loans to be repaid with interest. For that to happen, the auto-industry needs to make a profit, obviously banks aren't seeing that happening in the short to middle run. If the government bails out the auto-industry, they ...[text shortened]... can make a profit. The government on the other hand can take the hit of losing that money.
    The so called "deep pockets" of government are our pockets, the people's pockets.
  11. 09 Mar '12 15:52
    Originally posted by KazetNagorra
    I'm not "blaming" anyone, I am challenging your notion that the only reason banks wouldn't want to lend money to a company is because it's a bad company.
    The timing was critical. Ford borrowed and restructured a year and a half ahead, when banks weren't in crisis themselves.

    The outlook, and underwriting was considerably less critical, at that time.

    Still, the reason they didn't want to give GM billions of dollars was that it was a "bad company". What constitutes a bad company or a bad credit risk changes with time or place.

    The fact that Ford saw their need to restructure probably means they were a better and more forward looking company than GM at that time.

    The moral question is why Ford or their workers don't benefit from that superiority of foresight.
  12. 09 Mar '12 16:28
    There are two important factors.
    1. When the government sponsors an industry, some of the money gets back to the government in the form of taxes.
    2. Subsidising industry (of any kind) (basically protectionism) is a means of confronting foreign competition. If you subsidise your agricultural industry, then why not your auto industry?

    It of course makes you hypocrites when you go around telling other people about free trade, but that's nothing new. Most countries want everyone else to practice free trade while they are protectionist. Of course its usually the little guy that ends up suffering.
  13. 09 Mar '12 16:56
    Originally posted by twhitehead
    There are two important factors.
    1. When the government sponsors an industry, some of the money gets back to the government in the form of taxes.
    2. Subsidising industry (of any kind) (basically protectionism) is a means of confronting foreign competition. If you subsidise your agricultural industry, then why not your auto industry?

    It of course make ...[text shortened]... rade while they are protectionist. Of course its usually the little guy that ends up suffering.
    Protectionism isn't always protective, in fact is mostly destructive ultimately of the ones protected.

    Protectionism was a big factor in the American civil war, and of many European wars.
  14. Standard member finnegan
    GENS UNA SUMUS
    09 Mar '12 20:55
    Originally posted by normbenign
    Protectionism isn't always protective, in fact is mostly destructive ultimately of the ones protected.

    Protectionism was a big factor in the American civil war, and of many European wars.
    OMG Is there a risk that the USA might have a war?
  15. 10 Mar '12 00:29
    As you may have seen last week, former President Clinton indicated that the President's bailout of the auto industry was the best and most significant decision the President has made.

    Bill Clinton says auto bailout was Obama's most important move

    WASHINGTON — Former President Bill Clinton says the auto industry bailout was the single most important decision by President Barack Obama — even bigger than pushing his health care overhaul through Congress.

    Clinton made the remark Thursday to more than 1,000 members of the United Auto Workers at an annual conference in Washington.

    The former president also criticizes Republican presidential hopeful Mitt Romney, who has said the government should not have used taxpayer money to rescue General Motors and Chrysler.

    Clinton says Romney’s father would be “turning over in his grave.” The elder Romney was chief executive at American Motors and a former governor of Michigan.

    Obama himself vigorously defended the bailout when he addressed the autoworkers two days ago.


    http://www.nypost.com/p/news/national/bill_clinton_says_auto_bailout_was_aJ93HH0BQ0tiap4cHScH4L