Bailouts and handouts
Dec 1, 2008 12:00 PM, Brad Dick Editorial Director
I'm typing with clinched teeth this morning as the news reports continue nonstop about the automotive industry's demand that taxpayers bail out its poorly managed, high-union-labor-cost industry. One pundit called giving the automakers any bailout simply pouring bad money into a black hole. He continued by asking what do you get after $25 billion? His answer: the same bankrupt, inefficient, high-labor-cost industry, making cars people don't want.
It seems to me that most of the industries clamoring for tax dollars are looking to be saved from their own greed. A recent example shows how one company responded when the government rode in to rescue it from its own bad decisions. The insurance giant, AIG, was called too big to let fail, so in early September, the government loaned AIG $85 billion.
Less than a week after receiving that $85 billion in government bailout money, the company threw a $440,000 party at the St. Regis resort in Los Angeles. This included $23,380 worth of spa treatments for AIG employees.
Congress was apoplectic, quickly demanding testimony. Company managers groveled, apologized, pointed fingers at each other and promised they'd never again waste government-loaned money on company parties.
Bad habits must be hard to change because shortly after the above apology, undercover reporters from Phoenix TV station KNXV found the “broken” insurance carrier again at the party table. This time, AIG held a $343,000 corporate event at the Phoenix Pointe Hilton Squaw Peak Resort. Organizers apparently tried to hide the affair, calling it a meeting for “independent financial advisors” and used no AIG logos in the signage. This party took place just before the U.S. Treasury announced it was increasing the total aid for AIG to $150 billion, saying the original $85 billion loan was putting too much strain on the company. What? How does giving a company $85 billion create too much strain? Please give me some of that strain. It's no wonder there's a waiting line of lobbyists in front of the Department of the Treasury, all with their hands out for taxpayer bailout money.
Which cheesy industries are looking for a free ride? There are the savings and loan associations, and their insurers and community banks. Add to that roster the National Marine Manufacturers Association. After all, if you can't get loans, you can't buy expensive boats. Also include the National Automotive Dealers Association for similar reasons. Then we have Allstate and MetLife, GE Capital and GMAC, and American Express.
Of course, first on the list for government handouts are the big three automakers — Chrysler, Ford and GM. To hear the three automakers' presidents and the UAW representative, the sun may never rise again if these companies are allowed to go bankrupt. At the time this editorial was written, it appeared the automakers were about to be sent packing. If so, I say right on!
The list of those wanting bailouts will certainly grow. In addition to the debt such government bailouts create, they allow politicians to decide who survives and who doesn't. Jeb Mason, the U.S. Treasury's liaison to the business community, said, “The government shouldn't be in the business of picking winners and losers among industries.”
But that's exactly what is happening. Lehman Brothers was allowed to go bankrupt, but AIG was saved with $150 billion. My bank goes into foreclosure, but your bank gets billions in bailout money, which it then uses for mergers and acquisition. The government is picking the winners and losers.
Question: So, when will broadcasters get their bailout?
Answer: About the time hell freezes over.
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