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Should we Bail Out the Auto Industry?

What is the cost of bailing out the auto industry? Well, it may be more complicated than a simple yes or no vote. The real challenge may be coming up with an energy plan that stimulates the economy without destroying the environment. Congress is supposed to decide this week whether to extend a new $25 billion loan to the Big Three or apportion some of the $700 bailout money to save GM, Ford, and Chrysler. Some say these auto companies are dinosaurs bound for extinction - but if they fold, according to the Center for Automotive Research, as many as 2.5 million jobs could be lost.
On GRITtv Peter Lazes, Director of Programs for Economic Transition at the Cornell University School of Industrial & Labor Relations, Arun Gupta, writer and editor of The Indypendent, writer and filmmaker Mitchell Bard, Jonathan Cohn, Senior Editor at The New Republic, and Betsy Rosenberg, the creator and host of EcoTalk Radio weigh the costs of bailing out the auto industry.

Playing Chess with the Chinese

Last week, I suggested that Shanghai Automotive Industry Corporation might be the most likely GM buyer, if it came to that.

So if GM goes bankrupt in January, as may happen, it may well have to sell itself off (unless the government guarantees the same kind of financing that it is refusing now). And I believe one company is one of the most likely--and indeed sensible--buyers: Shanghai Automotive Industry Corporation, or SAIC, the Chinese company with which GM partners to do business in that country.

Apparently, the Chinese thought so too.

Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China’s 21st Century Business Herald reports today. [A National Enquirer the paper is not. It is one of China's leading business newspapers, with a daily readership over three million.] The paper cites a senior official of China’s Ministry of Industry and Information Technology– the state regulator of China’s auto industry– who dropped the hint that “the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.” These hints are very often followed with quick action in the Middle Kingdom. The hints were dropped just a few days after the same Chinese government gave its auto makers the go-ahead to invest abroad. And why would they do that?
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For articles on Obama's next Cabinet try the CabinetNewsLadder They are pretty complete.

Larry Summers as Treasury Secretary? Uh, not unless he answers a GREAT deal of questions? Josh Marshall sums it up more concisely

And I don't think that I linked in this excellent article on precisely how much ppl like Greenspan and Rubin and their adherence to Ayn Randian had to do with the economic meltdown Hint: They refused to regulate derivatives cause they thought that the bankers would regulate themselves. (Pause for loud and long LOLS) I especially love this part:

The article goes on to account how, in 1997, Greenspan got into a spat with the head of the Commodity Futures Trading Commission. She wanted to regulate derivatives; he didn't. Greenspan joined forces with Treasury Secretary Robert Rubin and his deputy, Lawrence Summers, to resist her plan.

“Greenspan told Brooksley that she essentially didn’t know what she was doing and she’d cause a financial crisis,” said Michael Greenberger, who was a senior director at the commission. “Brooksley was this woman who was not playing tennis with these guys and not having lunch with these guys. There was a little bit of the feeling that this woman was not of Wall Street.”

“All of the forces in the system were arrayed against it,” [Rubin] said. “The industry certainly didn’t want any increase in these requirements. There was no potential for mobilizing public opinion.”

Yes, that's right, there's bonus sexism in this tale.

Quite. See, if you are a woman, and you don't play tennis and lunch with the guys, your educated, common-sensical opinion doesn't count. And Rubin? That was one of the dumbest excuses I'd EVER heard. The industry doesn't want to regulate itself, so, lets not? Really?

Greenspan has publicly admitted that this idea of human nature is BS. As to whether he's apologized to Ms. Brookesly? That's unknown. Rubin's thoughts on the matter haven't been recorded either.

Thanks giandujakiss ! As a matter of fact, I'll be stealing another omnibus of articles from you, an update on the financial crisis: How incompetent is Secretary Paulson? The depths cannot be plumbed My fav part of this?

over at AIG:

The American International Group is rapidly running through $123 billion in emergency lending provided by the Federal Reserve, raising questions about how a company claiming to be solvent in September could have developed such a big hole by October. Some analysts say at least part of the shortfall must have been there all along, hidden by irregular accounting.

Mr. Vickery and other analysts are examining the company’s disclosures for clues that the cushion was threadbare and that company officials knew they had major losses months before the bailout.

Tantalizing support for this argument comes from what appears to have been a behind-the-scenes clash at the company over how to value some of its derivatives contracts. An accountant brought in by the company because of an earlier scandal was pushed to the sidelines on this issue, and the company’s outside auditor, PricewaterhouseCoopers, warned of a material weakness months before the government bailout.

The internal auditor resigned and is now in seclusion, according to a former colleague.

Let's pause here. The internal auditor is in. Seclusion.

These accounting questions are of interest not only because taxpayers are footing the bill at A.I.G. but also because the post-mortems may point to a fundamental flaw in the Fed bailout: the money is buoying an insurer — and its trading partners — whose cash needs could easily exceed the existing government backstop if the housing sector continues to deteriorate.

Indeed. May we live in interesting times.

On a more upbeat note, however, giandujakiss links to good things coming down the economic pipeline from the Dems Yeah!