Centrist Pundits

GM declared bankruptcy today.  We’ve all pretty much known this was coming since way back when.  In some ways, it seems crazy that we pumped so much money in to GM since it seemed very much inevitable that they were going to file for bankruptcy protection.  We talked a good game about protecting jobs but perhaps the tens of billions of dollars could have been better spent training those who lost their jobs how to do something other than work for a company that drove itself in to the ground.  Or perhaps not.

But as I was talking about with a friend this morning, there’s still one major difference to me between the auto company bailouts and the financial sector bailouts.  I understand what an auto manufacturer does, and I understand how what they do affects other businesses.  I may not know how to assemble a car from pieces of a car, but I grok the concept of it.  And I know if they stop building cars, then people who make car parts lose their jobs going backward on the industry chain, and people who sell and repair cars lose theirs, going forward on the chain.

I, to this day, don’t understand what the consequences would have been of letting AIG and the like fail.  Oh, I know what I was told, that it would be of dire consequences and many would lose their jobs and their savings, but I don’t “get” what the financial industry does the same way I get what the auto industry does.  I don’t know what AIG does.  I don’t know what the people who “sell” to AIG do – or if such people even exist – nor do I get what happens the other direction on that chain, the people who “buy” such products, if they exist.  And it is not just AIG, it is that entire sector of industry.

So when we give 20 billion to GM, I can wrap my head around what they are trying to do.  I may think it is a mistake or I may not, but I get it.  I really don’t with the financial industry.  That’s probably a failing on my part, but I think it is a fairly common failing on the part of many Americans.  But perhaps if what those companies could do could be easily explained, America would be more able to evaluate what our Government is doing in regard to those companies.

Of course, perhaps that is no incentive to those companies, nor to our Government, to make what they do more understandable.  After all, it is harder to frighten an educated public in to giving you billions with vague, unsubstantiated statements.

JC Economy auto industry, bailout, bankruptcy, finance

Stuart Varney has an op-ed piece in yesterday’s Wall Street Journal where he states that banks that received TARP money are not being permitted to pay it back.

According to Varney, the motive behind this is simple: if the banks pay back the money, they won’t be subject to White House control. And he believes that the White House wants control of the banks so that they can control not just the supply of money, but how it’s used.

His piece is long on theory and short on specifics. Even if it’s true, I can’t be sure that the motives are the same as he claims. But I do think that if the Treasury is refusing to let banks pay back the TARP loans, then the American people deserve to be told why.

If a bank is too shaky to give the money back, then I believe that the government should have to prove that in court. Otherwise, it doesn’t really matter what it is — all that matters is what it looks like.

Greg Economy, National Politics bailout, banks, finance, mortgage, obama, TARP

So, pretty much everybody who is alive is aware of the outrage coming from… well, pretty much everybody about the huge bonuses being paid out to AIG executives after being bailed out with our money.

There’s likely to be some serious political fallout. The most likely victim will be Connecticut’s Senator Chris D0dd, who put language into the stimulus bill that permitted these bonuses. Dodd has said that he did that at the request of the Obama administration. That may be, but next year when he runs for reelection, he’ll likely not be able to get past the fact that for the past 20 years, he’s been the top receipient of campaign contributions from AIG’s PAC.

But the most absurd thing is the attempt to rectify this by taxing the recipients of the bonus at rates that could only be described universally as confiscatory. Democrats are totally behind this… Republicans seem to be split.

The fact of the matter is that crafting tax policy to target a handful of individuals to cover up the government’s mistake is just plain wrong.

Now, don’t misunderstand me. AIG shouldn’t have given out these bonuses. It was a bad idea, although many of these were contractual obligations. But the fact is that the government let this happen. Some say the Democrats let this happen right under their nose. I don’t think that’s a fair characterization. It makes them seem like they were bamboozled, when the evidence is pretty clear that they were complicit partners in this.

I think that the GOP will, at the very least, pick up a Senate seat in CT because of this.

Greg Congress, Economy, National Politics, Political Parties AIG, bailout, bonus, Congress, finance, stimulus, taxes

With failing insurance giant AIG clamoring for more of our money, we keep hearing the same thing: that they’re “too big to fail.” We hear the same thing about the Big 3 automakers.

If these companies are too big to fail, aren’t they also too big to exist? Anti-trust laws are on the books to protect the marketplace from a successful company that gets too big. Shouldn’t it also protect the economy from a failing company that is too big?

Even as late as last year, GM and Ford were in merger talks. Doesn’t that make a bad situation worse? And this isn’t a problem aimed at any particular political party. These companies didn’t get to the size they are at now over the last few years. It took decades of growth and mergers to get to the point where they are “too big to fail.”

Greg Economy, National Politics AIG, anti-trust, auto makers, bailout, finance