Other People’s Money

A Congressional committee is currently hearing from the CEO’s of the not so Big Three from the automobile industry. It seems they too, are in need of financial assistance. Then again, aren’t we all. Unless you find yourself among that elite class of “ten-per centers,” you’ve probably taken a hit in the ol’ wallet. Are we allowed to go before Congress and plead our cases so the government will help us remain solvent? Noooooo! Maybe it’s time for the auto industry to man up, and bite the bullet. If they don’t want to bite the bullet, let them chew on this for awhile.
In an unprecedented appeal for government funds, five huge corporations have asked for, and received government fiscal dispensation. There have been only eight other requests between 1970, and 2001, with mixed results. And now the 3 largest American automobile manufacturers want to add their names to the ever growing list…again, for 2008. How soon we forget.
In May of 1970, the Penn Central Railroad needed a bailout of $3.2 billion dollars. President Nixon and the Federal Reserve supported the financial assistance. Congress said nay, and Penn Central filed for bankruptcy the following month, absolving Penn Central from its commercial paper obligations. How nice! On top of that, to counteract the aftershocks to the money market, the Fed provided the funds to commercial banks to meet the credit needs of its customers. Sound familiar? It just so happens that 5 other railroads were in the shitter as well, so they all got together to form ConRail. The government dumped $19.7 billion into the consortium. It took 11 years, but ConRail started to turn a profit. In 1987, the government sold ConRail for $3.1 billion. In addition, the Treasury received a $579 million dividend from the railway. Seventeen years it took for the government to get their money back. I’m glad I wasn’t hanging by my balls waiting for that ship to come in.
The government also bailed out Lockheed in 1971. That turned out really well for the good old U.S. of A. Not so for the Franklin National Bank bailout. We, -I say "we" because the government finances some of this stuff with taxpayer money- didn’t fair so well on that one, mostly to due corporate corruption and lack of legislation. If this piece was a game of “hide and seek” we’d be getting warm about now.
The NYC bailout in 1975, and the Chrysler bailout in 1980, netted the government some serious coin. In 1984, the Continental Illinois National Bank and Trust got a helping hand from Uncle Sam, but they picked their figurative nose before they took it. The FDIC took a $1.8 billion loss on that one; same for the Savings and Loan fiasco in 1989. John Q. Public got bit for $178.56 billion there. Do you sense a trend with these banking industry shitheads?
Believe or not, the government made money on the airline industry bailout. Profits were reportedly to be somewhere in the neighborhood of $141.7 million to $327 million. Big fucking neighborhood if you ask me. The government only did that well because Eastern Airlines, Pan Am, Braniff, National, and TWA to name a few, had the good graces to file for bankruptcy prior to 2001. The government had to step in to save the rest or we’d all be taking trains again. Or, we could start driving everywhere again, and make good use of our massive interstate highway system that is in such disrepair. But then, the ever profitable oil companies would start raising gas prices so the even more elite "one per centers" can keep garnering those huge dividends. Oh, we can’t repair the roads anyway, that would take tax dollars, and we’re too busy using them to bailout unregulated, mismanaged, greedy corporations that have spread themselves too thin.
So who heads the list of least likely to succeed for 2008? Lending institutions. These are the same guys the U.S. government has bet on in the past and lost. Of the-now here’s a big fucking number-$1,352,500,000,000.00 (yes, trillion) in government bailout monies so far, $1,327,500,000,000.00 went to Bear Stearns, Fannie Mae/Freddie Mac, A.I.G. and their credit default swaps bullshit, Troubled Asset Relief Program (Wall Street, and their credit default swaps bullshit), and Citigroup. The other measly $25 billion went to; yup you guessed it, the auto industry.
What’s ironic is that both General Motors, the biggest of the “getting smaller all the time 3,” and Citigroup, are on the Dow Jones. No wonder the damn average is behaving like a hummingbird with ADHD. Let’s remove these two slackers, replace them with profitable, stable companies, and see if things don’t mellow out a little. That’s what’s been done throughout the years.
The original Dow was comprised of only 11 companies; 9 railroads, a steamship firm, and Western Union. The last time the name of a railroad appeared on the Dow was 1927, the last year before the list of companies was expanded from 20 to 30. Since the expansion, companies have come and gone, some have lasted longer than others. Sear Roebuck & Company was added to the short list in January, 1924, and held its place until November, 1999. The huge retailer Woolworth came along in May of ’24, but was replaced by Wal-Mart in March of 1997. Woolworth not only was removed from the Dow, it went out of business altogether. How fast and far the mighty have fallen.
US Steel and Bethlehem Steel no longer share the distinction of making up the Dow Industrials along with Hudson Motors, Chrysler, and Studebaker. Studebaker hung around a little longer by merging with Nash, but they too have fallen by the wayside, and it's been quite awhile at that.
In The Godfather, Hyman Roth declared to Michael Corleone in 1959 that organized crime was bigger than US Steel. That’s nothing to brag about today. Some folks say that unions were the cause of US Steel’s woes, and that’s what’s ailing the automobile industry. That’s not entirely true. There was a need for unions for the coal miners and steel workers back in the 19th century. The premise was a good one; protect workers from greedy management in an unregulated industry. Things changed little over the years until unions became greedy, mismanaged, and unregulated. When union negotiations became versions of “Can You Top This” in the 1960’s, corporations didn’t count on worker life expectancies increasing exponentially. Now the auto industry is paying the price for their lack of foresight. Back when union deals were struck affecting individuals who are now living well into their 70’s, the average life expectancy was 62. That’s over ten more years of pensions and healthcare benefits.
So many things automakers didn’t count on; foreign competition, costs of doing business escalating, mismanagement, and the always popular, greed; the very same components that fueled the downfall of the steel industry in this country.
One thing that the rogue’s gallery of government titsuckers can count on is that the economy is cyclical. Every 14 years or so, it corrects itself. The fiscal elevator stops at all the floors on the way up, and on the way down, as they are becoming painfully aware. Those on this year’s ever expanding bailout list must not employ economists. Hasn’t history taught us anything? Doesn’t any of these overpaid upper management (is that an oxymoron?) wastoids, or Congress for that matter, pay attention to it?
Or maybe what it all boils down to is the acceptance of the rampant mediocrity that has permeated every aspect of our society. But that's a blog for another day... or several.
In 1907, J.P. Morgan bailed out the U.S. government due to unregulated stock speculations. Who is going to bail out the government when they’re done doling out trillions to failing industries? Maybe Bill Gates and Warren Buffet can pool their resources in case of emergency. Oh, that’s right they only make sound investments in adeptly run corporations that turn a profit, and none of those names on the 2008 government bailout list qualify.