Tuesday, December 30, 2008

Bailouts

It would be beneficial if the reporting would properly define the money Washington is spending. The money given to the automakers is a bailout; the money given to the financial institutions is not.
The mortgages made according to Freddie Mac and Fannie Mae rules and purchased by them are guaranteed by the US Treasury. The federal government had an obligation to make the banks whole for any of those mortgages. Of course, they could have repurchased all of those mortgages for less than half of the additional “bailout” money. The difference went to pet projects of our bipartisan scoundrels in Congress.
Money given to autoworkers is a true bailout. Giving non-competitive companies large amounts of money, with no reason to suspect that money will resolve there operating problems, is a truly absurd. What will make the Big Three any more viable when that money runs out? The problem is their non-competitive labor contract. No amount of money will make then viable when their labor costs to build the same car – if they could build the same quality car – are over $4000 per car higher.