The failure of Congress and the President to come up with some kind of workable bailout, or prepackaged bankruptcy plan will have nasty consequences. But they won’t be as rapidly apparent as those of the Lehman collapse. Make no mistake, however, there will be long term systemic effects if the automakers are allowed to twist in the wind and not given some kind of cash infusion. Here’s what amazes me: Wall Street firms were bailed out to the tune of billions, some were forced bankruptcies, like the forced purchase of Bear Stearns, others were outright nationalizations, a la AIG, Freddie and Fannie. These deals will cost more in the short-term (and already have) than the paltry $15 billion the automakers were willing to beg and grovel for. There is a nasty double standard at work here, as many have already mentioned. But what troubles me the most is that several hundred thousand good paying, factory jobs will be lost adding to an already stressed employment market. Add to the loss of auto manufacturing jobs are those of the parts suppliers. Add to that the loss of income from these folks, which will undoubtedly ripple through the general economy in the form of even less consumer demand and you have a mess. A mess that could be staved off and solved, or at the very least managed in a well thought out manner for the price of $15 billion in bridge loans. This wouldn’t be like Congress and the President and Paulson just throwing money into the black holes of AIG and many other banks.
I’m not saying bailing out the fools in Detroit is the best choice in the world. But it was the least worse one, for the time being. It’s also another clear indicator that our political class hasn’t a clue, lacks real leadership, foresight and courage. If GM and Chrysler go bankrupt there will be hell to pay.
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