Monday, November 17, 2008

About Face On The Bailout

The White House has all but ended any chance of saving the US auto industry, now saying it's opposed to the Big 3 bailout because the industry is no longer worth saving because the industry is no longer "viable".

The White House Monday came out swinging against a Democratic plan to aid America's ailing auto industry, as the Senate prepared to debate a $25 billion package.

"We believe that this assistance should come from the program created by Congress that was specifically designed to assist the automakers -- from the $25 billion Department of Energy loan program," said White House spokeswoman Dana Perino in a lengthy statement.

Senate Democrats want to use a different $25 billion from the financial rescue package passed last month. The White House wants to use the same amount from a loan, passed in September, to help carmakers improve fuel efficiency.

"We should not seek ADDITIONAL funding while $25 billion sits available in a program that was designed for automakers. Congress should instead amend the Department of Energy's loan program to ease the availability of those funds and relax restrictions on their use -- as long as qualifying firms make the difficult decisions to demonstrate their viability going forward," she said in a statement.

Democrats contend the fuel efficiency money was meant to help carmakers for that purpose, not to help them survive financially.

But, Perino said, there's also a philosophical argument for not allocating $25 billion from last month's program.

"Taxpayers should not be asked to subsidize private companies that are unwilling to show that they can be viable. It is clear that U.S. automakers must restructure in order to be viable," she said.

Saving white collar executive jobs at America's financial instututions? Vital to the American way of life. Saving millions of blue collar union jobs? The industry is not viable.

Republicans hate blue collar workers. They don't care if Joe the Auto Plant Worker loses his job at all. Joe the Hedge Fund Manager? We need to spend $4 TRILLION NOW, and any more would be fiscally irresponsible.

Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track.

CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved.

Try $4.28 trillion dollars. That's $4,284,500,000,000 and more than what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources*.

Not only is it a astronomical amount of money, its' a complicated cocktail of budgeted dollars, actual spending, guarantees, loans, swaps and other market mechanisms by the Federal Reserve, the Treasury and other offices of government taken over roughly the last year, based on government data and new releases. Strictly speaking, not every cent is directed a result of what's called the financial crisis, but it arguably related to it.

If the White House can go out of its way to see the last major unionized industry destroyed and the jobs laid on Obama's doorstep, so be it.

Bad News, Bears

That grim economic data I mentioned down below starts off with Citigroup's expected move to lay off anywhere from 35,000 to 50,000 employees.
Citigroup Inc plans to shed about 10 percent of its global workforce, a person familiar with the matter said Friday, as the bank tries to return to profitability and faces mounting criticism of Chief Executive Vikram Pandit.

The cuts could result in a loss of roughly 35,000 jobs, based on the bank's reported 352,000-person workforce as of Sept 30. The cuts will be on top of the 23,000 jobs Citigroup has already slashed this year.

Additional reductions would come from layoffs, the sale of units and attrition, said the person.

The financial sector is getting gutted. It won't be the only sector of the economy that takes massive job loss numbers either. The stubborn belief this will be a short recession, with predictions of an unemployment rate peak of 7.5% and a recovering economy in summer 2009 are downright silly.

This is a consumer-driven recession. It will be long and painful because the US consumer drives not only the US economy but increasingly the global economy as well. If the US consumer isn't consuming stuff...who will? We don't have the money for stuff, we're tapped out, credit is drying up and we have no more money to spend.

And as US consumers save money and spend less, the recession will get worse and worse as more businesses that depend on consumption go under, taking more money out of the economy. There's no real hope for any serious recovery until the housing depression ends. That may not happen until 2010.

And by then it may very well be too late. But all that is Obama's problem now. If he's still listening to the same economists that got us into this, we're doomed.

Even so, there's little Obama will be able to do other than turn on the inflationary printing presses. When that happens, all bets are off. Bush has done too much damage to the economy. In reality the damage to our economy started with Reagan, but some say even earlier when we went off the gold standard with Nixon, and some say even earlier then that with FDR and the New Deal.

The specter of global depression is becoming increasingly likely with each week that passes.


Related Posts with Thumbnails