Earlier this week, I wrote that I questioned the GM bailout. For me, it was ideological. Does anybody really believe they can ever compete again effectively? But perhaps, ideology needs to be softened and pragmatism needs to take center stage.
I had lunch yesterday with a close friend and former Goldman Sachs executive who is quite centrist in his views. He wants to bailout Detroit because at some point the unemployment rate becomes an issue of domestic security. He argued, “There are many more guns and angry people in the country today and if tens of millions of peple can’t find work, there will be violence in the streets.” Fun lunch.
The NYT editorial page gives us a couple of other viewpoints this morning. The editors argue that any bailout should come with energy efficiency promises. Right now Detroit is on the hook for 35 MPH average by 2020. Perhaps, the NYT suggests, we could do better.
Bob Herbert pleads for us to protect the millions of people who need to pay their mortgages and feed their families. He claims that the automobile industry creates 1 in 10 jobs in this company.
All in all I came away thinking that these are times that require flexible thinking about a person’s idelogical views. I really do not like throwing good money after bad and I do not believe the Big 3 as constituted or as integrated can turn things around. That said, perhaps I can believe that my taxpayer money should be deployed to keep certain industries afloat while the United States overhauls the economy. In this sense, my taxpayer dollars go to smoothing the sunset of the automobile industry and preventing the country from spiraling further into chaos.
This is what’s happening with AIG. AIG insured all the banks that were playing in the unregulated CD markets. Along the way they made a amazing commissions on those premiums If they collapse then banks all over the world will collapse too. So right now AIG is transferring their bailout money to these banks and that’s keeping the industry afloat. It’s sickening that AIG can survive this staggering level of mismanagement (makes Enron look like a lemonade stand) but they are literally too intertwined too fail. I’m starting to believe this would be a good use of taxpayer money, if the bailout crew were extracting concessions and reforms like Roger Ehrenberg has written about extensively.
I think all of our long-held ideological views need to be questioned. This is a time for flexibility in our thinking.