THE BAILOUTS NEED TO END NOW!
I have just learned through CNBC and the Wall Street Journal that the Big Three automakers are asking the Federal government for $25 billion in loans to help them get through the downturn in the U.S. economy. Enough is enough!!
When a business is struggling, it’s the business model and strategy, not the economic times that dictate performance.
The Big Three need to recognize that they brought themselves into this situation with poor management, inflated labor costs, and terrible product placement. Producing high margin products while the cost to operate them (fuel) rose and demand crashed is just plain stupid.
In the 1970s, Lee Iacocca saw a need for a smaller, more fuel efficient car that can help Americans save money on gas and reduce our dependency on foreign oil. Nobody listened then, and they are too late to listen now. In business, the backstop of a government bailout is always going to encourage higher risk and more irresponsible behavior.
Airlines Amtrak Mortgages Automakers
The business models of each of these companies needs to be changed and if there are such changes already in place, they need to be accelerated. How much more does the American taxpayer need to pay for? In a capitalistic, free market society, the rewards are greater, but we must recognize that the risks are greater, too.
If we attempt to subsidize one of these, we will subsidize both. I would rather have ZERO car manufacturers in the U.S. then have the government funding one (or three) to stay open. A collapse at Ford, Chrysler, or GM would cause companies across the industries above to maybe reconsider their practices before relying on the government to come to the rescue.
Just like the subsidization of bad practices in the auto industry, mortgage companies are still trying to hold onto as much mortgage paper as possible in the hopes of continued government bailouts. These companies need to sell their bad paper at a large discount and take the write-offs. It’s time to eat and digest all of the mistakes of the mortgage market. (As one economist said, “bon appetit!”)
It’s time to hold these companies accountable for their mistakes, instead of holding the taxpayer accountable.
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