The House last night passed a $15 billion loan bailout for the Big Three Automakers, 237-170. Detroit automakers must develop a plan for profitability by March 31, or the loans will be recalled. The bill's fate in the Senate is unclear. Louisiana Senator David Vitter, from the Senate floor, calls the proposal "ass backwards," and has promised a filibuster.LV Congressman Charlie Dent is among those who say No. Here's his reasoning.
“As the son of a 30 year Bethlehem Steel employee affected by the demise of that once mighty company, I can identify with the plight of the auto workers, their families, and the numerous small businesses involved in this difficult situation.
“Tonight, the U.S. House of Representatives passed the Auto Industry Financing and Restructuring Act (H.R. 7321). This bill provided $14 billion in loans to the nation’s three automakers, commonly referred to as the Big Three (Chrysler LLC, Ford Motor Company and General Motors). After careful deliberation, I opposed this legislation.
“In late November, executives from each of the three domestic automakers testified before the House Committee on Financial Services on the perilous condition of the American auto industry and its need for significant financial support from Congress to remain solvent. Following their unsatisfactory testimony, these executives were directed by Congressional leaders to return to Washington in December with precise plans on how they will use federal loans to restructure their companies in a manner that ensures long-term viability.
“After reviewing the proposals presented to Congress, I believe the Big Three’s restructuring proposals lack accountability. A responsible plan must accomplish two goals: protect taxpayers and help auto workers by making their employers more competitive. For Congress to consider providing $14 billion in taxpayer funded loans, it is imperative automakers assure the American people they can repay any loans they receive. Unfortunately, the plans submitted to Congress earlier this month are long on generalities and short on specifics, and failed to convince me the Big Three will be able to properly adjust their management, labor and legacy costs.
“In addition to the proposals offered by the automakers, the legislation considered in the House lacked any provisions to compel critically important restructuring in Detroit. I agreed with President-elect Barack Obama’s assertion that Congress must create ‘a bridge loan to somewhere as opposed to a bridge loan to nowhere.’ However, this legislation failed to implement the reforms that domestic automakers must embrace to ensure their long-term sustainability. Though the bill included appropriate limits on executive compensation, it lacked any substantial concessions from other affected parties – concessions that are absolutely necessary for the revitalization of the industry.
“In passing this legislation, Congress has established a process for reinvigorating Detroit that begins at the finish line rather than the starting gate. Prior to issuing any federal loans, firm benchmarks and a concise timeline for restructuring and repayment must be in place – agreed upon by the automakers and the auto workers. Promises by the Big Three and the United Auto Workers (UAW) union have been made to achieve savings, but rather than immediate implementation, many of these agreements will take months and even years to come to fruition. This is unacceptable. In lacking true reform, this legislation is a bridge loan to an even larger request for financial assistance a few months down the road. Money alone will not solve this problem.”
Libertarian party spokesperson Andrew Davis complains about the lack of "provisions in the bailout bill that require any type of change to management, union contracts or company structure before receiving taxpayer money. All taxpayers have is a promise that the same CEOs who put their companies in this mess will get it right the second time." On the other hand, Congressman Jackie Speier, who supported the bailout, claims "This is not just about the economy, it’s about national security."
Incidentally, the Big Three have asked Canada for another $6 billion, but their Parliament is out moose hunting until the end of January.
62 comments:
If this is a loan, I would like to see the terms for re-payment! This is our money or money that we will be responsible to cover with increased taxes in the event of default. A loan has terms for re-payment. I think that since we are responsible for this loan if it defaults, we should see the terms. It looks like a give away to me!
I'm no fan, but good for Charlie. Democrats are paralyzed on this issue by their union constituents.
Chapter 11 is the best outcome to protect taxpayers; unions - not so much.
Pale Rider and Anon 658 are both right. I am a fan of Charlie Dent, and I agree - this is a union play. I have yet to see the union actually give anything up here, all they've done is agree to defer a few things. They're also gunning hard for the "Employee Free Choice Act" which is an abomination to everyone except unions.
I hope the Senate votes it down, this plan won't work.
The Banker
I can't believe these idiotic posts. These people need to start reading more and stop listening to their god Rush Limbaugh. The union has given an incredible amount of concessions. If this isn't passed and they go into bankruptcy it will cost the country billions anyway with no chance of getting it back. Dent is a phony.He voted with his party the vast majority of the time until the year before the election now he's back to being Mr. Republican again. I hope all the car dealerships and suppliers in the Valley appreciate his vote..
charlie wasn't so vocal against the 700 billion that went to the wall street losers, was he?
blame the unions, the workers, who have already given up benefits and salary over the past years, it's really the stupidity of the companies not producing cars people want and need, and the oil companies and opeckers who manipulate the price of gas and make us forget that we should be focused on energy independence, which requires sacrifice and innovation and goverment investment in its people and infrastructure.
15 billion to the big three, save millions of jobs, or 700 billion to a few wall street executives to maintain their lifestyle? which bothers you more?
"The union has given an incredible amount of concessions"
Bullshit.
The UAW is a big part of the reason the Big Three are about to become the Big Zero. Like the USW, it's Bethlehem Steel redux.
Anon 10:06, if they've given concessions, then name them and please be specific. Also, deferrals don't count, they're not concessions.
The Banker
Bernie,
No concessions. Wow. You have said some increedibly dumb things in the past but this is just plain ignorant. Very, very sad. Your enduring love for Charlie has blinded your incredibly narrow vision even more. Poor boy..
Anon 1031,
Why should I name the concessions. It's been all over the news for the past two weeks. Read my boy, read!!!
Anon 10:10, a few things:
Dent voted against the $700bn bailout the 1st time, and significant changes were made (i.e., increasing FDIC coverage) because of his involvement.
I'm not blaming the union - there were two signatures on the contract. As they (management and union) got into this mess together, they need to get out of it together.
Finally, this bailout doesn't save anything - it only defers the problem a few months. What we don't need to do is spend $18bn when there's no plan.
The Banker
Anon 10:34, I would wager that I've read more than you have, from more sources to gain a balanced perspective, and what I've read doesn't have a "UAW" stamp on the bottom.
There have been no material concessions made. The union needs to be part of the solution here.
The Banker
"Why should I name the concessions.(sic)"--Anon 10:34am
Because you are the one who stated: "The union has given an incredible amount of concessions." If you are claiming this as fact, then you need to have evidence for it to be considered factual. That's the way it works.
Anon 1036,
If you haven't read or heard about all the concessions you haven't read anythiong but limbaugh's blog. I watched the hearings. They were very explicit about the concessions and all of that was reported in the papers and online. You just have to stop reading all of that right wing drivel..
I agree with Bernie on the Bethlehem Steel redux - I hope it doesn't come to that for Detroit. If you let chapter 11 happen you are not not talking recession but depression and talking a decade to dig out of the hole instead of maybe two or three years. I don't have an answer. My gut says Chapter 11 but my heart and body needs a job.
$700 billion dollars got sucked down the wall street bathtub drain with a mighty swoosh and few complaints - (reminds me of a story about my grandfather and his dumping the illegal hooch down the tub with the cops knocking on the front door in 1932) - now the drip, drip, drip of Detroit's leaky faucet is keeping alert citizens awake at night. LOL.
A lot of Anon-s posting here. This lame duck session of Congress is a joke - probably no better than the upcoming farse. All in all, everybody, management, Congress, unions and even Anon-s are going to have to make major concessions and sacrifices in the months and years ahead if this country is to not merely survive but prosper again.
Enough of name calling and blame. Let's start on a new fresh clean page startng January, 2008.
The best of the worst is yet to come! We are all in this together.
This is sad... Citibank gets $300 Billion and they can still own the naming rights to the Mets new baseball palace. The Big three ask for 5% of the total given to Citibank and they get put through the ringer.
Charlie has hurt the Lehigh Valley with this vote and has turned his back on blue collar workers again. He has forgotten where he came from. He has lost my vote forever.
we have all been to this movie before, the decline of the steel industry here in our own backyard.
but it is not the union wages that are the problem, but the legacy costs. the consuming public simply cannot sustain the cola's, healthcare for life, etc. embedded in the price of detroit's cars.
also, mgt. has not done its fair share of maintaining up to date technology in their plants, just like what happened at the steel mills.
there is enough blame to go around, but the most important fact to keep in mind is that the jig is essentially up. the detroit branch of the auto industry can no longer be sustained, bailouts or not. what is needed ...and i hate this overused phrase ...is a paradigm shift to re-structure the industry.
Anon 10:53, let's make this easy - name just 2. I won't ask you to name "all of them" (even though Pete's Sake makes a good point) - just 2. The fact that you won't in my mind means you can't.
And remember, deferrals don't count. A concession is giving something up, not deferring it.
The Banker
Anon 10:53 has no game, and is frantically googling right now to come up with something.
Charlie's vote is right this time, really wrong with the first bailout. At least he has seen the light.
Both union and management are to blame. I cannot believe I find myself agreeing with Chris friggin Dodd, that GM's chief should quit. Chrysler is owned by a hedgefund that thinks putting money into it is a bad idea, but we're supposed to do it?
There can be an organized, structured bankruptcy with public money backing warranties, so people will keep buying cars while the geniuses implement their new and improved business plan. Then force concessions from both management and the union. If the plan works, everyone wins. If it doesn't, then be ready with additional funding. Enough with the blank checks so these losers can continue on their path of failure.
BTW - GM and Toyota both sold the same number of cars last year. Toyota made 17 billion. GM lost 38billion.
Anon 11:49:
Great post. There's much to think about and consider in what you wrote.
Agreed, 11:49 good job.
The Banker
anonymous 10:06
The UAW made two so called concessions. They told the companies they did not have to put the $30M into the pension fund right of way and they, the union, would be willing to suspend the "reserve work force". They should eliminate the reserve work force. These are the guys that come to work daily, get 95% of their pay and do not do a lick of work. The companies agree to set this up so they could put robots in their plants. These guys need to be fired. The union has given no concessions of any worth that I have seen.
Charlie did the right thing and our automakers will be better off for it.
Chris, you're correct and that's why I wouldn't let him off the hook without answering. Neither of those items is a concession, both are deferrals. I don't consider deferrals to be of any long term value and will not help fix Detroit.
I agree, Charlie did the right thing here.
The Banker
Anonymois 10:10
Take a look at last year's numbers. The Big 3 took 51+% of the market. Combined they sold over 8 million cars to Americans whom we are told really want other cars.
In this nation you can buy enormous cars,Escalades and Hummers. You can buy large Chevys, Fords and Chryslers. You can get mid-size and small American cars. You can buy foreign built here, Toyota, Nissan and Honda. You can get foreign imported-Hyunda, Kia and VW.
The solution here is quite simple. Let the car makers make the cars Americans want. I would venture we do not want a car made out of recycled beer cans on a roller skate. In other words, some of us will like the Volt others need more car. The government should not be making the cars and there is no need for a "car czar". Get the government regulations out of the industry along with the union.
Allow me to make a suggestion. Year ago the rule at GM was that the president of the company was to be a "car guy" usually an engineer. The chairman of the Board was an accountant to watch over the costs. Costs now trump design so accountants are in the President's chair. Let's get the car guys into the responsible positions. Maybe just maybe we get better designs. American cars, and I say this as a former Toyota owner, are great cars.
Another party line vote by Charlie Dent. If the Republicans are blamed for sinking the auto industry they may not win a Big Ten state for the next 30 years. As the one thread said there is plenty of blame to spread around. But to focus on the UAW is to narrow. Our healthcare system is an enormous problem for the Big 3. The unfair global competition is another problem. We are headed to becoming a banana republic (few rich and many poor) if we continue to follow the conservative Republican economic policies that eliminate the middle class and manufacturing. During this holiday season watch "Its a wonderful life" and consider Potterville vs. Bedford Falls. These conservative Republican sentiments are embodied in Potterville. Ho Ho Ho ! Bernie, Hang in there. The Obama turn around is coming after the lame duck flies back to Texas.
Anonymous 11:15
You are correct in that both sides are to blame. The wages are a problem. The Big 3 guys get about $28 an hour while the non-union folks make
$17. The legacy burden of the union presses heavily on the commpany. This is also one of the reasons that the companies are behind on updating the plants.
Why do we need three car companies? Perhaps two will emerge from bankruptcy in a much more globally competitive position. Ford says they don't need money. This is an ill considered jobs program disguised as a bridge loan.
The remaining $300 billion of the credit bailout is equivalent to all Federal Income Tax Withholding and FICA deposits for two months. A proposal has been floated to give this money back to those from whom it's been taken in the form of a two-month federal tax "holiday." I like it. Give it to regular earners and not to management and union fat cats and gold bricks.
Talk about "stimulus!"
Bill Leiner, Jr.
Since the Big 3 are international companies,compete abroad and are profitable there how can you say that "unfair global competition is unfair"?
Conservative policy supports captalism the only system that supports and insures freedom. It is the man who is going to take the oath on January 20th who talked about altering and eliminating the free trade agreements that we have. He is all about taking us down the road to mandatory community service, isolationism, a teeny tiny military to take care of the rainforest and public works programs to pay back his pals in the union. This will ultimately give us liberal fascism with a smile.
Bill, is it Party Line when you vote against your party's President? I'm not following you there.
Also, I'm not blaming just the UAW - there were two signatures on the contract. But all have to be part of the solution, and for the UAW to say "give us the $$ now and we'll talk about concessions later" doesn't work for me. Both management and the union have had ample time to work on this. If they haven't, or haven't resolved it, then why would we think it is going to be resolved now?
Fact is, all this "bailout" does is move the problem to April. Nothing gets fixed.
Finally, I'm not sure how this equates to eliminating manufacturing. People won't buy Detroit automobiles at prices high enough to cover their costs. That's a consumer's choice and Detroit's problem, not the taxpayer's problem.
The Banker
Chris Miller and the rest of you Limbaugh Koolaid drinkers,
The union is allowing the big three to renegotiate the contract signed just last year which will result in major wage reductions, also they allowed the automakers to delay billions of dollars to the trust set to take over the legacy health care costs. They also are ending, not delaying the program which gave laid off workers
95 percent of their salaries. Chris, Obama won. get over it. People despise all of you right wing crackpots..
Anon 418, if you keep drinking UAW punch you'll be worse off than we are.
"I'm willing to renegotiate" is not a concession, it's a statement. Renegotiate now, before tax $$ are pumped in. If you haven't started yet, that's your own damn fault not mine.
"I'm willing to delay" is not a concession, it's a deferral. There is no long term benefit.
Your statement about the Jobs Bank program is factually inaccurate. The UAW has offered to suspend it, not end it.
How having said all of this, there needs to be pain EVERYWHERE. Management, labor, suppliers, etc. Everyone needs to participate in a solution. I do not say that it's the UAW's fault, not at all. But they need to be part of the solution and so far they haven't been.
The Banker
4:18
It's called Chapter 11. Google it. It's what poorly run companies do to reorganize. Why is this a problem? Afraid union concessions will be looked upon as inadequate by a bankruptcy court? Maybe. Maybe not. Play by the friggin' rules and stop throwing political grenades to distract from your failure to respond to the arguments posed.
You seem way to familiar with Rush Limbaugh. I thought the guy went to jail or something for drugs. At any rate, I'm sure he's glad to have your loyal listenership.
It's not just about UAW taking cuts. They've got to rethink the way they hinder the automakers' manufacturing possibilities.
Ford's most advanced assembly plant operates in rural Brazil
Q: Why Not The United States?
A: The UAW won't let them integrate suppliers under one roof!
Video
http://info.detnews.com/video/index.cfm?id=1189
OR Just Click On My Name
Anonymous 4:30PM
Your belligerant attitude is certainly not conducive to a productive discussion. 20 Million people on average listen to Rush for a wide variety of reasons. But they also get their information in a lot of other places.
The UAW and their Democrat buddies want a bailout so that the union can renege on their offers in January when the Democrats control the Congress and the White House.
Banker pretty much says it all in that both Union and Management need to work this out. Congress should have laid this on their back and a solution should have been forthcoming prior to a handout was asked for. However, when steel offered to modernize many years ago. The union turned it down only to come back and say okay let's modernize. It was too late by that time. When I entered Moravain in 1962, 30,000 men walked through the gates at Steel. While both sides participated at the demise of the plant, I lay the biggest part of the blame at the feet of the pigs in the union.
Rush Limbaugh is a phony addict who, if prosecuted under the draconian drug laws he espoused, should have been executed by firing squad long ago.
That being said, he's right on the bailout.
Wow! This blog has really turned into Bernies Clear Channel.
Just a couple points. It is clear two positions are being pushed here one is pro-Union and one is anti-Union. I'm really not so much into worrying were you come down except that both sides play foot looses and fancy free with facts and sources of facts, when making their arguments.
30+ years ago the compensation rate difference between Executive level and Line level staff in America was aout 20-25% now it is about 75-80%. The Union greed can certainly be tied to overall greed that has consumed America as it headed into the eighties.
The foreign manufacturers Honda, Toyota nad the some others maintain a much lower compensation rate.
Also the liberal governemnt medical benefits and other subdidies in foreign countries where Ford and Chey make cars aid their profit margins. The very same Socially Left Governemnts you damn, make American car manufacturers smile.
Just a few things to ponder. My research is neither MSNBC or FOX.
I'll be back with more later.
As the late Walther Brennan use to say, "No brag, just fact".
To the liberals/Democrats on this site I write, just be patient, in short order you will be in complete control of the government and can do as you please. I have no doubt that as soon as Obama and the new congress are sworn in a very generous bailout bill will surface.
Then it will be your baby, and then you can take the all the credit or the blame.
Scott Armstrong
"Bill Leiner Jr. said...
Another party line vote by Charlie Dent."
If you want a straight party line there isn’t a more predictable source than Bill Leiner Jr.
Scott Armstrong
Advice to Democrats
Labeling conservative opinion or commentary as “Rush” talk is clearly nothing but diversionary name calling. Those who chose this tactic to impugn the commentary of their political opponents might instead chose to raise the level of their own rhetoric and stick to the points of the ongoing conversation.
For the record I listen to Rush when I get the chance, I also have listened to NPR since it came on the air in 1978.
Scott Armstrong
"Wow! This blog has really turned into Bernies Clear Channel."
I welcome both conservative and liberal points of view here. If we want to know what has happened to the Big Three, all we need do is study Bethlehem Steel. There is plenty of blame to go around, and I have no intention of singleing out unions. But they are certainly part of the problem. The suggestion they made lots of concessions is, quite simply, false. The management is just as guilty.
I look at a Chapter 11 reorganizational bankruptcy as the best way to resolve this problem in the long run. I don't see much of the "tough love" Nancy Pelosi bragged about. It's a handout.
We can do it because we can just print the money, but that just devalues our dollar and puts us more in debt to nations like China. So even as a matter of national security, Chapter 11 is the best solution.
The auto industry has mucked things up for decades. Let them learn to be competitive.
Unions in Detroit make $73 (wages and benefits) an hour. At car manufacturers in the US which are doing okay, the workers make $40 an hour. (They are in Right to Work states.)
But what is more important are the work rules established by the unions. In the 'other' car industry in the US if a worker is needed to do another job or task, they do it. In Detroit, you have to file requests, make sure the 'right' worker is asked, deal with grievences, if there is no 'correct' work available they stay on the clock while doing nothing, etc.
Plus, in Detroit they have the infamous "Job Bank" which has 12,000 laid off workers who still receive pay. How insane is that?
Unions destroy efficiency. Which destroys competetiveness. Which destroys companies. It is that simple.
Charlie got this vote right. Though I do agree with the others who don't think that Wall St. should have been bailed out either. They are correct. Incompetent management destroyed those financial companies. They should have received no help either.
Bill Leiner,
Please, don't lecture anyone about straight party voting or support. You are a master of it in the Democrat Party.
I am not saying that no Republicans do it, but for you to judge others is a joke.
I am able to judge because 75% of my time is spent battling those within my own party.
Your score is probably about 0%.
You are as blindly straight party as they come.
There's a book called "Crisis in Bethlehem: Big Steel's Struggle to Survive," by John Strohmeyer that really mirrors what's going on with the UAW and CEO's of the big 3. It's no wonder they're going under and they can only rescue themselves. All external help is as good as a band aid on the hole of a sinking ship.
That said I bought Ford at 1.82 and feel of the big 3 Ford is the one with the best plan.
Oh yeah, up a little late aren't we drunky?
One point that I think needs to be raised: Some have claimed that bankruptcy will lead to the end of the domestic auto industry. Over the last decade or two, every major US airline except Southwest has gone through bankruptcy, some more than once. Some of them have merged, and a very small number have gone out of business, but we still have many domestic airlines and will for a long, long time.
Same with the auto industry. Bankruptcy will be painful. Creditors will lose money, stockholders will end up with worthless shares, many workers (union and non-union) will lose their jobs, union workers will probably end up with lower wages and benefits, and more. But in the end, the companies will emerge stronger and better able to compete. That's why we have bankruptcy laws.
anon 12:31 am
You stay out of this
"Unions destroy efficiency. Which destroys competetiveness [sic]. Which destroys companies. It is that simple."
Joe,
Unrestrained capitalism leads to some of the most horrific abuses of workers, natural resources, and even consumers.
Have you read about working conditions before the rise of labor unions? In the steel industry, for example, workers were required to work 12 hour shifts, seven days per week. Every other week, they worked a 24 hour shift to give their shift counterparts a whole day off, and every other week, they received that whole day off. If their counterpart did not report for work, they had to work that person's shift and then continue on to their own--36 hours straight. Worker injuries and deaths were common, and companies were not held responsible for them. The list could go on and on.
So, yes, unions have destroyed efficiency. But the cost of that efficiency was an awfully high price to pay, and I'm glad I don't have to pay it.
That said, I feel the pendulum has now swung too far in the other direction, and labor unions sometimes (perhaps often) wield too much power. There needs be a balance, and "right to work" laws seem to offer much of the necessary balance. We need to improve these laws, pass them in states like Michigan, and restore that balance. But simply banning unions? I don't like where that path might lead.
Can anyone explain to me why we're still talking about a $15 Billion bailout, even though Ford has apparently said "thanks, but no thanks" at this time?
I know we're talking about Washington, but shouldn't the amount have dropped by about 1/3?
Anon 2:15am
Because Ford still wanted a few billion as a credit line in case GM or chrysler went under because of the strain that would put on parts manufacturers.
For those anti-management people, or if you just want a good chuckle:
http://www.comedy.com/video/landline-tv-carmakers-party-with-bailout-money
The Banker
When there is a problem to be solved in America, the pissing contest starts. Liberal/Conservative. It's counter productive and not only divisive but a smoke screen for those of greed. So rather then two points of view we revert to party politics. Yeah that works! Now both sides get pissed off and beat each other up, the guilty ones carry on business as usual. It's like while two muggers fighting over a wallet, a third guy picks it up and walks away unnoticed in the commotion.
There are problems with the managers, labor and in the business model of industrial manufacturing. One of the biggest being the disparity between the wealthy and the majority of working America. Somewhere between the accusations of Socialism and Capitalism (run amuck) lies the answer.
A while back Japan had it right. What they used to do was run business somewhat like sports teams to level the playing field with salary caps. Now here's what I propose... That the highest paid executive can receive no more then a multiple of the lowest paid employee. A company can feel free to negotiate whatever monies they feel necessary to obtain talent hand unfettered, but no man's talent is worth less then a certain multiple of the least compensated worker within.
Call it Socialism, but there simply has to be a limit of the differences between wealth and poverty for this nation. The result being, the poor will either rise up or just sit down in hopeless frustration. Currently the wealthy take the whole company for a ride into the ground and go home with their millions and live the high life. An executive who has millions in reserve simply doesn't care. He/she need the stimulus to return to work each day, just like the small guy. The small guy on the other hand sees this and attempts his own hand at the greed game he has witnessed in top management. Now you have two greedy forces tearing a company apart. Not Good!
Continuing to discourage workers will not breed national wealth. Neither the 'redistribution' (stealing of another's fortune)! So by placing 'CAPS' neither re-distributes, nor allows the people in executive positions to hoard all the marbles. If those at the top want more money, they must first reward the lowest paid first.
Not a perfect solution if both should be full of greed. However both sides should consider that by killing the golden goose, no one would be left with future financial income.
Glenn, I understand and share your frustration. I've said many times there's so much blame to go around, and it's on all sides. And making it worse, each side makes it personal - the other guy is a crook. We can't have legitimate disagreements anymore without accusations of fraud, impropriety, etc. What the hell happened to honest disagreement?
That being said, I do not support legislating compensation - that is socialism and to me that is a problem I can't overcome.
Capitalism is not perfect, but it's the best we have.
I may be naive, but my hope is that corporate boards and shareholders better understand their roles and take a much more active role in how their companies are being run - that's one of the checks/balances, and in most respects the most important, that failed during this fiasco.
To put something else on the table to consider - let's consider legislation requiring a corporate board member to hold a certain amount of company stock (and not a small amount) - align his personal interests w/ the shareholders. Same for management - not options, real $$ invested. Too much compensation is outside of company performance, they need to be realigned.
The Banker
If you think an auto bailout would solve America's dilemma let's have a look at what Bank of America has done!
Bank of America to boost stake in China's CCB...
Taxpayers gave BOA $15 billion to stave off bad loans to help American homeowners and the like. So let's see what we got for the taxpayer's money.
* 35,000 to be laid off and instead of the money used to shore up our American economy
* They went out bought 44.7 billion shares of a bank in China with $7 billion of it!
Yeah they said they didn't use the TARP money, however it did seem they had an extra $7 billion just laying around, eh?
(More on this story by clicking on my name)
So I'm with Dent on this one!
Banker:
We here in the USA have a absolute fear that almost any solution other then flat out profit taking is a 'Socialist' scheme. However notice China has no such reservations on mixing in a bit of good ole' Western Capitalism and making it work while maintaining their Communist stranglehold. Thus advancing their own communist agenda amongst the world.
Are we absolutely so stubbornly rooted in free for all capitalism that we can find better tools to advance our won capitalist agenda without compromising it's basic principles in a better fashion?
Socialism (in theory) is nothing like Salary Caps in sports. If that is so, are you saying the sports leagues have gone to socialism? If so, isn't that implying we have a tinge of that now amongst the business of sports? Should we remove them?
Glenn, there are so many thoughts running through right now...
I have to admit I am stubborn, but not unwilling to consider changes that keep in line with a free market / capitalist approach. But I consider legislating salaries to be a big step, not a small one.
If I owned my own company, would your approach apply to me? That would force me to distribute my profits in the form of higher salaries instead of retaining those profits, reinvesting them, and making my business stronger. Also, I was the one who took all the risk in starting my business – why should everyone benefit equally, when others didn’t take the risk?
I believe that you can’t legislate against stupidity. We as a country were stupid, all of us – investors, boards, banks, management, unions, government, etc. What happened over the past 10 years in particular will be a case study for generations to come. Understanding that, I do not believe we’re at risk for something like this happening again for at least 50 years. Do we need legislation now to protect ourselves from what might happen that far out?
On the sports side, the players agreed to a salary cap as a reasonable “give” so that they could continue to receive their exorbitant salaries (i.e., C.C. Sabathia for $160MM). The big difference is that they made a choice, it wasn’t legislated. Also, there is no correlation btw/ player compensation, team staff compensation and owner compensation. So no, I think it was a negotiation, not socialism.
Enjoying the conversation!
The Banker
Banker;
Excellent points. The suggestion I made, certainly would require massive tweaking. Taking your given example. Privately held companies versus publicly traded stockholder held megas'. Just a basis for some kind of foundational theory to build upon .
And dittos on short sighted 'stupidity' !
As far as sports comparison... perhaps same negotiated (choice) ideology could be applied between unions and corporate heads. However would they? But alas'... we're back to that 'stupid' thing again.
Glenn,
On your theory, understood. It’ll be very interesting to see what does come down the pike.
My biggest concern there is the politics. There aren't many legislators in Washington who are capable of understanding the ramifications of their actions (seen it countless times). I hope they truly listen before they act. Unintended consequences are a bitch, and especially so with what will no doubt be on the table in the coming months.
The unions and corporate heads are the same as Rs and Ds – everyone thinks the other guy is a crook. Honest and effective negotiation requires belief in the good intentions of the other party. That’s impossible now, and that’s a problem.
The Banker
Glenn 10:02 AM
We do not have Capitalism run amuck we have a mixed economic system--capitalism and socialism. I would think that by now most of us would know that socialism or "trickle up" economics does not work and never will. Let me point out that none of us is old enough to remember true capitalism. It ended with Teddy Roosevelt and the Sherman Anti-Trust Act that killed the so called Trusts. I would strongly recommend that if you want to learn about real capitalism pick up Andrew Bernstein's The Capitalist Manifesto. You might want to follow that with Ayn Rand's Atlas Shrugged and then some research on Woodrow Wilson and how he and big business ran World War I
Alan,
I never advocated a "ban" of unions. However, the pandering to them by politicians in both parties should cease. They should be forced to compete like everyone else.
Adopt Right to Work laws. Keep the secret ballot for unionization votes. Eliminate the "Prevailing Wage" law - which, as a School Board member, adds an additional 20-25% to public construction projects. Public Employee contracts should be approved by voter referendums (something that will eventually happen).
Chris:
As far as a philosophical debate on the virtues of capitalism, a three word response...
The French Revolution:
France was nearing bankruptcy and outlays outpaced income. The country's tax system subjected some to an unfair burden; numerous exemptions existed for the nobility and clergy. The country could not be taxed higher so borrowing was used to solve the country's fiscal problems. Sound familiar? Yeah the Broadway musical was great, the real thing not too much!
As far as Capitalist Manifesto; We don't have to be "old enough" to know about the likes of Charles Ponzi, Richard Whitney, Ivan Boesky, Michael Milken, Bernard Ebbers, and now Bernard Madoff and their antics free of restraints.
I'll stick with my prior belief that unchecked "capitalism" can and has run amuck. And undeniably with more then a few analogous of their kind that came before either Teddy Roosevelt or Woodrow Wilson's manipulations. You simply cannot leave businessmen entirely free to their own devices and expect a positive outcome for all men to enjoy freedom (and finances) as the 'Capitalist Manifesto' implies.
Although I do agree in part with the fact all great free nations are based on capitalism. And that any other system is doomed to failure. Our differences is on how to define fair standards within capitalism.
What I proposed originally was certainly not 'trickle up' in any way. While it's a awkward balance, continuing in the current direction we are now going, we will befall the misfortunes of business and labor as was in ye ole' industrial France of the 19th century.
Chris:
As far as a philosophical debate on the virtues of capitalism, a three word response...
The French Revolution:
France was nearing bankruptcy and outlays outpaced income. The country's tax system subjected some to an unfair burden; numerous exemptions existed for the nobility and clergy. The country could not be taxed higher so borrowing was used to solve the country's fiscal problems. Sound familiar? Yeah the Broadway musical was great, the real thing not too much!
As far as Capitalist Manifesto; We don't have to be "old enough" to know about the likes of Charles Ponzi, Richard Whitney, Ivan Boesky, Michael Milken, Bernard Ebbers, and now Bernard Madoff and their antics free of restraints.
I'll stick with my prior belief that unchecked "capitalism" can and has run amuck. And undeniably with more then a few analogous of their kind that came before either Teddy Roosevelt or Woodrow Wilson's manipulations. You simply cannot leave businessmen entirely free to their own devices and expect a positive outcome for all men to enjoy freedom (and finances) as the 'Capitalist Manifesto' implies.
Although I do agree in part with the fact all great free nations are based on capitalism. And that any other system is doomed to failure. Our differences is on how to define fair standards within capitalism.
What I proposed originally was certainly not 'trickle up' in any way. While it's a awkward balance, continuing in the current direction we are now going, we will befall the misfortunes of business and labor as was in ye ole' industrial France of the 19th century.
Glenn,
You just blew me away. You, Chris, The Banker, Pete, Mike McShea (the Bishop's cousin!), Bill, Joe H, Alan and Bernie4 really have a lot to offer. I'll pick up on this next week, but you are all extremely well-informed and I learned a lot reading you. Thanks to all.
Fascinating how Dent and the media have everyone focus on the $30-50 Billion dollar bailout / loans to the auto industry. It's a BIG DISTRACTION, the same week this all started Citi Bank was given $300 BILLION+ of tax payer money without any guarantees or even a business plan! At least the Auto industry is in the real economy and actually make something tangible. What does the financial industry make? Derivatives of derivatives and some where there is suppose to be a real asset that no one seems to be able to price including the geniuses that invented them. Wake up we are all being converted to "indentured servants" unless we take back control of our lives and stop waiting for someone else to fix things.
Post a Comment