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A Bailout for Detroit?

October 20th, 2008

Last month, Detroit’s automakers pleaded for handouts from Papa Government. Ford, General Motors, and Chrysler essentially engaged themselves in plain collusion, begging for their own version of a bailout. Really – how is this anything other than plain collusion? It is rent-seeking at its finest.

If the collective wisdom of millions of investors and investment funds has written off the General, and the about-to-be-thrice-bankrupt Chrysler, what moron would consider those companies a good investment idea?

Well, in addition to the morons at General Motors (GM wants to buy Chrysler), you might not be surprised to learn that the financial geniuses in Government, who preside over a $10 Trillion Deficit, want to invest more of your earnings in companies that are failing. House Speaker, Nancy Pelosi (D-CA) views loan guarantees to Detroit automakers as a good thing, specifically she says, “We consider this a major investment in innovation.”

Recall: all investments are subject to market risk. past performance is no guarantor of future results and other fine-printed gobbledygook that appears on every investment portfolio’s prospectus. Every single person who invested in General Motors, or AIG, or Lehman, or any other businesses took a risk. They took a risk that they might lose everything, in hopes of earning some profit. And now, it’s time to pay the piper his due.

Some people argue that, if we’re going to bail out Wall Street banks because they’re Too Big To Fail then we should also bail out General Motors, Ford, Chrysler, etc. Nobody seriously entertains the idea that the government shouldn’t be bailing out any businesses. Ever.

This is not an investment, it’s corporate welfare. It was corporate welfare to bailout Wall Street, and it’s corporate welfare to bailout Detroit.

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  • Papa G says on: October 21, 2008 at 8:48 pm

     

    David,

    Good comments on corporate welfare. Just like I am appaled at the notion of government with trillions of dollars in debt wanting to bail out a non competitive entity. While I worked at Ford Motor and now receive a retirement I saw first hand some of the decosion making at the helm of the corporation. Couldn’t believe that the employees of the company witnessed corporate greed over long term security of the company. By corporate greed, I mean short term profits equal good returns for the stock holders which equals great big fat bonuses for upper management teams at Ford Motor. Will say I made a good living and was able to put Sean and Brad through college, it always amazed me though that management had the tools and the foresight to see the drastic changes on the horizon and neglected to implement any solutions. As you can see I hold the Big 3 management teams as the problems for the rust belt states and in particular, here in Michigan. Now they want a bailout…they made the mistakes and they want our money. So does Wall Street . If the Wall Street bailouts work out OK, will the government put some of the profits in the hands of the citizens of the United States….proably not ! If the bailots of the Big 3 proves to be successful..will the government put the profits in our accounts. Again…probably not !! Will the Big 3 give you a company discount on the car of choice…maybe. I already get a Ford discount and can get you one whenever you want it. The Government needs to stay out of the bailout business. Make the business leaders accountable and if they fall off course…then have them removed.

  • Brad G says on: November 7, 2008 at 1:45 pm

     

    Don’t get my dad started on where Ford had to buy their supplies from either. I can’t remember exactly but its either the State of Michigan or the UAW that has a law which makes Ford buy its supplies from minority owned businesses. My dad told me stories about how those businesses were more expensive (probably because they knew Ford HAD to buy from them) than their non-minority owned competitors, much slower, and horrible customer service. I wonder if things like this helped the demise of Ford. Probably so.

no third solution

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