Bailouts

I was digging around the archives looking for a post I thought I'd created, but it must have just been an email I sent to the die hard fans on my mailing list.  It was my proposal for the banking industry bailout and it went something like this: 

If you want my money, these are the rules: (for PUBLICLY OWNED/TRADED COMPANIES)

1.  Salaries of all "c-level" employees (CEO, CFO, CIO...) are not to exceed 20 times the average salary of your full-time employees, or, if you prefer, not to exceed 30 times your lowest paid employee including part-timers.

2.  C-level benefits packages must be available to all full-time employees at similar proportions of their incomes.  

3.  No other form of compensation (options, parachutes, trusts) may be provided to C employees that are not also available to and resonably attainable by all other full time employees.  

4.  You can return to your ridiculous pay structures as soon as you've paid back all principal and interest.  

If you don't like these terms, don't take the money.  Four rules.  Simple as that.

Remember,  it's you bastards who got rich while the rest of us lost our homes and our jobs over the last seven years.  Don't wait too long for us to come to your rescue.

These rules were part of my proposal for publicly-owned and traded companies, but especially for those financial companies who sit at the top of the funnel, up through which all of America's money passes.  

To that I'd like to add that it's time the people on top of that funnel, where the entire nation's wealth is concentrated should be subject to THE MOST scrutiny and REGULATION of any other industry in America.  That's ALL of OUR money up there.  They skim the most of it off and keep it for themselves as it is, and that's fine as long as their practices are sound.  You don't have to be a financial genius to know that naked short selling isn't sound and shouldn't even be legal.  WTF!?

But what pissed me off the most about the whole deal was that these are the same people who call welfare, adequate public education funding and universal healthcare "socialism" but when the money goes the other direction it's "vital to our economic stability."

These bailouts are welfare.  Plain and simple.  The only difference is that the tax money is going straight to the top... as if even the welfare must now trickle down to save us.  Our money just wasn't getting funneled up fast enough -  Bush's plan to sell out middle Amercia to Big Corporate wasn't working fast enough, so now we'll print more money than we have, hand it directly over to those at the top of the chain and put the bill on the middle Americans who actually manage to keep their jobs... and their kids and grandkids.  The dollar goes down, the debt goes up and the guys who got us into this mess walk away with fat wallets, as usual.  That's the only "economy" we're saving.  The pressure and the deadline (fear tactics) for the billions we handed over to the banks came straight out of the "we must invade Iraq" playbook.  And though raising taxes is a horrible idea, every man, woman and child in America is now strapped with an additional 3-grand to pay back at some point... but it's not a tax, so that's cool.  We don't want to raise taxes 'cuz it would kill the economy!

So now we're contemplating bailing out the auto industry as well.  There are certainly a lot of perspectives from which to approach this.  As an Ohioan, whose household income has been comprised in parts varying from 2/3 to 1/2 from the auto industry over the years, it's a tough line to walk.  The funny thing is, the employers providing that income have been either German or Japanese since the early 90's.  Those German and Japanese employers' biggest customers have been Ford, GM, and Chrysler, but they've also made parts for Honda, Toyota, Nissan and a few others here and there.  My wife and my brother both currently work for German companies whose primary customers are the Big Three.  Fortunately for both of them (and me) their companies also supply the OTHER American auto industry, so while their business has slowed with the economy, their fates don't rest solely with the Big Three.

Having lived in the shadow of the Honda Engine plant in Anna, OH, I'm amazed at how many large companies and mom and pop shops spring up to support that operation.  What's so amazing is how so many jobs can be ignored by so large a segment of America.  Whenever I hear someone tell a Honda driver to "buy American" I wonder what they're talking about.  I don't know if it's true anymore, but the Ohio-built Honda Accord was for a number of years the MOST American of any car "made in America."  Show me a car company that has invested more in Ohio jobs in the last 20 years than Honda?  Show me a plant newer than the Marysville assembly or Anna engine plants.  My point is, the auto industry in America, and especially in Ohio, isn't dead, there are just a few new names.

There are plenty of viable automotive manufacturers employing thousands of Americans across the U.S.   They don't need bailed out and sales of some of their models have even increased.  Their business model is slightly different than the Big Threes' models. They anticipate and build to the market (what a novel idea to let the market dictate) rather than just building cars that won't be bought to satisfy ill-advised union contracts accepted when times were good. They pay decent wages in a clean, safe environment, and best of all, they pay taxes.  Their employees pay taxes, and they and their employees are likely to survive this recession. That union part is a whole other post, but the business model is a key part of my plan for the auto industry bailout... so now that I've told that story, I can tell this one:

I will add only one modification to my bank bailout rules for the auto industry and it is this:  auto industry execs need not apply.

Don't patronize me with your $1 annual salary offers.  And don't bother telling me you'll now do what Jimmy Carter warned you about in 1977.  We probably shouldn't have done it for the banks either, but two wrongs won't make it right.

Ford says they can weather this storm, having finally acted on Carter's pleas about 28 years later.  Yep, they started building a more fuel efficient product line about three years ago.  They can meet payroll and suffer through until about 2011 according to them, so they don't need it.

Chrysler already had their chance.  I don't know what their prospects are and I've given up trying to understand how much of it belongs to Mercedes, so someone will have to enlighten me on that, but they're out anyway.

The best thing that could happen to GM is to declare bankruptcy and start over.  I'm not sure what effect that will have on the entire U.S. economy, but it's a long time coming.  This is a company who had a production electric car on the market more than ten years ago.  Do you know how many of those they could have sold had they continued to work on that and have, say 100,000 of them perfected and ready to go last spring when gas prices topped $4 a gallon?  Gas will cost that much again, and how much closer to having that old idea ready to go will GM be? They put their money into Hummers, full-size trucks and SUVs not because that's what they predicted the market would bear next year or five years from now, but because that's what was profitable right here and right now.  Now that moment has passed and they find themselves in a bit of a pickle.  Well, you get what you pay for... and what we've paid for all this time.  Don't ask us for more.

My advice to GM is to stick to the small government manifesto that they preached to congress 30 years ago:  let the market run its course.  (actually, they said what's good for GM is good for the nation, but the point was "leave us alone")  So we should heed that point now.  If your business plan accounts for that market, you'll be just fine.  If not, the market will correct itself and you and in the long run we'll all be better for it.  Maybe they should ask their buddies in Big Oil for some extra cash.

I'm sure it will cause quite a ripple if the big G really fails and I'm not sure how comfortably my household will survive it, but like the evil drill sergeant always said during PT, "you can pay me now or you can pay me later."  Might as well pay him now cuz it sure looks like we're all screwed anyway.  Why prolong it?

It doesn't make much sense to offer loans to a company we know can't pay us back when we can buy a majority stake in that company for about 10% of what they seek in loans.  I was an English major, but that's not tough math.  I have to agree in part with Michael Moore - Detroit born and raised, former UAW employee - when he says the best plan for GM would be for the gov't to take it over, convert its facilities to start retrofitting America for mass transit, and when it turns a profit, pay ourselves back and sell it off the highest bidder.  (I know, I know, his arguments are usually just the left version of Rush Limbaugh's... oversimplified, etc. but hey, why not start up a New Deal kind of CCC - Obama's been talking about it anyway.  As soon as we're done in Iraq, we've got a couple a billion a week to pour into it!)

I've heard the argument that cities like LA, who needs it most, were built before true, efficient mass transit was a real concern and that it just won't work there, but I have only one thing to say to that: Rome.  It may not have been built in a day, but it was around a long time before the first commuter train ever appeared.  There's no reason we can't line every major commuter path in American with light rail, skyrocketing the economy and reducing our dependence on so much oil all in the same public works/GM project.  How many frickin jobs will that create?

All right, it's way past my bed time and I've covered more than enough topics for one post.

Laters

Luth