Obama Video Address: December 13, 2008

In this week’s address, the President-elect oddly ignores the elephant in the room. What is on most people’s minds right now is the recently defeated effort to rescue the Big 3 automakers. The sticking point appeared to be the UAW’s refusal to take immediate pay cuts in order to get the 14 billion bailout. The Republicans in the Senate have been accused of union busting. At first, I was disappointed that the UAW stuck to its guns on this until I was reminded that no where in the proposed bailout plan is an immediate requirement for executive pay cuts or even better, executive resignations.

As I have said before, no matter how this goes down, the blue collar worker is the one who will get shafted. If the GM and Chrysler (Ford finally said “we don’t need your money”) don’t get the money heads will roll. If they get the money and re-tool their business, heads will roll. It really does not matter. I still stick to the principle that in a capitalist society, companies that cannot succeed, deserve to fail.

Here is the solution that I have not heard from anyone. The Fed and the Governor of Michigan, Jennifer Granholm should sit down with Toyota, and Volkwagen, to name two good companies, and work out a plan where these companies would receive government subsidies to purchase and operate all of the GM and Chrysler plants. They would agree, at least for a period of time, to take over the brands made famous by GM and Chrysler (Cheverolet, etc.). Essentially, GM and Chrysler would sell themselves to these companies who are doing quite nicely, thank you, down in Alabama and other Southern states.

Many have said “America cannot afford to not have an auto industry.” Nonsense. America cannot afford to have millions unemployed. The notion of an American company is passe. We live in a global market and where a particular company’s headquarters resides has little relevance to international economic health. What we are talking about here is nationalistic pride and in this case, pride goeth before the fall. We need to save jobs not companies.

As for Barack Obama’s address, while he did not discuss our most pressing problem, he did discuss his plans for one of our other very distressing problems, namely the housing crisis. He announced today the appointment of the Secretary of Housing and Urban Development (HUD), Shaun Donovan, a former HUD employee from the Clinton administration who has most recently done outstanding work under Mike Bloomberg in New York City.

And now, the President-elect:

Respectfully,
Rutherford

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A Tale of Two Bailouts and I Got Punk’d — NOT

A Tale of Two Bailouts

The other night I watched documentarian Michael Moore on MSNBC’s “Countdown with Keith Olbermann” discuss the potential government bailout of the Big 3 auto makers. I agree with Moore’s opposition to the bailout but I got taken in by another comment of his that I then had to back up and reevaluate. Moore touched on the notion that the auto bailout involves some sort of class warfare. He made similar remarks in the Huffington Post:

Two weeks ago, the CEOs of the Big 3 were tarred and feathered before a Congressional committee who sneered at them in a way far different than when the heads of the financial industry showed up two months earlier. At that time, the politicians tripped over each other in their swoon for Wall Street and its Ponzi schemers who had concocted Byzantine ways to bet other people’s money on unregulated credit default swaps, known in the common vernacular as unicorns and fairies.

But the Detroit boys were from the Midwest, the Rust (yuk!) Belt, where they made real things that consumers needed and could touch and buy, and that continually recycled money into the economy (shocking!), produced unions that created the middle class, and fixed my teeth for free when I was ten.

via Michael Moore: Saving the Big 3 for You and Me.

The other way it has been put is if you shower before you go to work you get a bailout. If you shower when you get home from work, you don’t.

I say baloney! The two bailout scenarios are in one way fundamentally different and in one way fundamentally identical in such a way as to make the class warfare cries absurd. First the TARP (Troubled Assets Relief Program) designed to bailout the financials was implemented to stop a cross-industry international disaster. The goal was to prevent a complete financial meltdown which would effect virtually every citizen. On the other hand, the bailout of the “auto industry” is an attempt to rescue three poorly run companies who deserve to suffer the same death as every unsuccessful company in a capitalist society. Will the failure of these companies cause ripples outside the auto industry? Of course, but the ripples will not go out nearly as far as the tsunami created by a complete financial meltdown. This fundamental difference means the solution to the two problems should not be identical. It’s not class warfare, it’s capitalism.

Second, there is a fundamental similarity to the two bailouts that makes the class warfare complaint a non-starter. There is this misconception that while the TARP bailed out rich fat-cats, the auto bailout gives relief to the blue collar working man. Sorry folks, the auto bailout will give relief to the white collar, multi-million dollar salaried executives who ran their companies into the ditch. Guess what each company plans to do after they get the government money? They plan to layoff thousands of workers. This bailout will save the CEO’s asses, none of whom have volunteered to resign if their companies get the money. The blue collar, salt-of-the-earth, shower-after-work guys are still going to get royally screwed.

Interestingly, for all his populist talk, I think Moore ultimately understands this. He knows the problem with the Big 3 is corporate mismanagement and that, not class-ism is the reason the government should not give them a red cent.

I Got Punk’d — NOT

Dead set on not being played a fool like Sarah Palin, Florida Representative Ileana Ros-Lehtinen hung up on President-elect Barack Obama not once but twice.

Obama called her cell phone to congratulate her on her recent election win despite the fact that she is a Republican who supported John McCain. Ros-Lehtinen was convinced that in no political reality that she had ever experienced could such a thing happen. So she assumed it was a prank call from a local radio disc jockey, much like the fake-Sarkozy call that Sarah Palin fell for over a month ago. As Obama introduced himself, Ileana interrupted him, told him she wasn’t going to fall for the prank and then hung up on him.

Obama’s choice for Chief of Staff, Rahm Emanuel then called her. With Emanuel and Obama both on the line, Ileana was not buying it and she hung up again. Finally, her colleague Howard Berman called her to clear up the matter and she made him answer a question that only he could answer before she even believed he was legit. This lady is hard core! Once Berman convinced her that she had indeed been called by Obama, she asked that the President-elect call her one more time. They had a good laugh and no permanent harm was done. Reportedly, Ros-Lehtinen told Obama,

“You are either very gracious to reach out in such a bipartisan manner or had run out of folks to call if you are truly calling me and Saturday Night Live could use a good Obama impersonator like you,”

via Ros-Lehtinen hangs up on Obama. Twice. – Yahoo! News.

Apparently, Obama’s truly bipartisan style was change that the Congresswoman simply could not believe in!

Respectfully,
Rutherford

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To Bail or Not to Bail

For the past few days I have been waffling on the subject of whether our government should bail out the big three auto makers. On the one hand, this is a capitalist country and the way capitalism works is if you can’t compete, you lose. Period.

On the other hand, our economy is in the tank and the failure of our auto industry would send ripples through all sorts of directly and tangentially related businesses. As they said about AIG a few weeks ago, the Big 3 may be too big to fail.

I’m waffling no more and you know what tipped the scales for me? The CEO’s of  Chrysler, GM and Ford, testified before Congress this week in an attempt to get a bailout loan.  Guess how these guys got from Detroit to Washington D.C.? Using their private jets. Not even just one private jet. Three private jets at an estimated cost of $20,000 each.  The arrogance on display here is beyond measure. These guys don’t get it and Congress did not turn a blind eye to it either. Representative Gary Ackerman put it nicely:

“There’s a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands,” Rep. Gary L. Ackerman (D-N.Y.) advised the pampered executives at a hearing yesterday. “It’s almost like seeing a guy show up at the soup kitchen in high-hat and tuxedo. . . . I mean, couldn’t you all have downgraded to first class or jet-pooled or something to get here?”

via Dana Milbank – Flying From Detroit on Corporate Jets, Auto Executives Ask Washington for Handouts – washingtonpost.com

So you know what I say to these arrogant, in-the-pocket-of-the-oil-company fat cats? File chapter 11 like every other business that can’t compete. You’ve had your head up your hind quarters for decades, resisting every suggestion to modernize the fleet and make your cars both competitive and future oriented (i.e. more electricity, less gasoline).

Now there are those who ask whether this hard line attitude is worth the damage that could be done. I have heard only one credible objection to the auto makers going bankrupt and that is that no one will buy a car if they can’t be sure the maker will be around to warranty the car down the line. So, I suggest that the government play a limited role here. How about a government subsidized warranty program for the auto makers until they get back on their feet? This way the money is specifically targeted towards helping the auto makers maintain sales while they retool their organizations.

Bottom line: the CEO’s joyride to Washington is proof positive that they are unfit to lead this industry into the future. Their companies need to go bankrupt, re-organize with a new business plan and clean up shop. One of the on air pundits suggested putting Steve Jobs in charge of the retooling. It’s a damn good idea. As my wife says, give Steve Jobs a year and we’d have the i-Car. It would sell like hotcakes and would address the environmental and economic concerns that the auto industry has ignored for the past 30 years.

Respectfully,
Rutherford

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