Obama/Geithner "plan" for the auto industry versus the Obama/Geithner "plan" for Wall Street...

[leftofthedial]

Compare and contrast if you would, so that we might better understand.

[HiFructosePronSyrup]

1. Looks like pretty much the same plan to me.

[leftofthedial]

2. so putting auto industries into bankruptcy and further damaging the auto workers' union

is the same as giving multiple trillions of dollars to the banks and insurance companies with little or no oversight?

How so?

[HiFructosePronSyrup]

3. Obama's bailing out the industry.

Using billions of U.S. tax dollars.

:shrug:

[SemiCharmedQuark]

4. Did Obama say he was putting the auto industries into bankruptcy?

[quiller4]

5. No he did not. He said that it may be necessary to

use something akin to a bankrupcy court to clear debt from the books of GM if sufficient progress could not be made with creditors. That is essentially a message to creditors negotiate in good faith or risk having the obligations written down or off by the courts.

[uponit7771]

9. Thank you, it sounds like some aren't playing ball here and the CEO firing was a signal to them to .

...either negotiate or loose everything

[Eric J in MN]

10. Obama said, "using our bankruptcy code as a mechanism to help them restructure quickly"

That means letting them go bankrupt.

Which means union gains would being wiped out.

==========================
"While Chrysler and GM are very different companies with very different paths forward, both need a fresh start to implement the restructuring plans they develop. That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger," Obama said in remarks delivered at the White House.

http://www.edition.cnn.com/2009/POLITICS/03/30/obama.autos/index.html

[BonnieJW]

6. And what about the bank CEO's stepping down?

How about AIG, Goldman Sachs, Citi CEO's stepping down? Let's get rid of them before they can spend millions more on private jets, remodeling and golf tourneys.

[SemiCharmedQuark]

8. The AIG CEO already stepped down. The CEO who was responsible for

the contracts and such.

[Zynx]

16. AIG's stepped down just prior to the bailouts.

Citi's CEO was fired back in late '07 or it may have been early '08. The new CEO is not making very much and inherited a mess. Goldman may have received government money, but it didn't ask for it and they are looking to pay it back.

[Eric J in MN]

7. CitiGroup got a $306 billion guarantee on their bad investments.

GM got a loan of $13.4 billion as of early January.


http://www.nytimes.com/2008/11/25/business/25assess.html

http://www.reuters.com/article/ousiv/idUSTRE50A1T920090111

[Aloha Spirit]

11. In terms of GDP, isn't the financial sector like 20 times larger than the automotive sector?

That's the first thing I'd point out.

Second thing I'd point out is, there are the auto and bank bailouts that happened under Bush and under Obama.
All of Obama's bailouts come with strict oversight.
In both cases, Obama used coersion to get the corporations to act responsibly with the taxpayer $$.
In the auto bailouts, the car companies failed to meet the deadline from the Bush terms, and Obama is ramping up pressure to make them more viable.
Part of this includes pressuring them to have an adequate strategy for bankruptcy, even as everyone works to avoid that.
The terms of the Bush auto bailout were pretty harsh, but to the extent that they force the executives to restructure and avoid bankruptcy, I think it will be better for Detroit.

The bank bailouts, well.. those banks and AIG represent a much larger portion of the economy.
The amount of money that's been thrown at the banks versus the auto companies is not as dramatic as it looks, since the banks (and AIG) represent a much larger portion of the GDP.
I don't know exactly, but it's at least an order of magnitude if I'm reading the reports at BEA.gov correctly.
Many oversight measures were introduced into bank bailout funds under the financial stability plan, you can read about it at the treasury website.

[Raineyb]

12. More like phantom economy

Money made by shuffling money around in more and more exotic "debt instruments" creates bubbles which is what we have here. I don't think those companies are worth nearly as much as they say they are and without the tax money we've been giving them they'd deflate back to where they belong.

When will we learn in this country that shuffling money around doesn't create wealth?

Regards

[Aloha Spirit]

14. I agree that the financial sector reached beyond its utility, but banks do create real wealth.

Think of it this way.
Let's say we don't have banks.
Imagine all the extra effort everyone would have to go through for every single financial transaction.
Okay, now think of a world where we can conduct our financial affairs through banks, who insure our money, who provide us with loans, and allow our money to collect interest as it's sitting in an account and being "productive."
Think of all the inefficiencies in our lives that are removed by having banks. More time in the day. Less stress. More opportunities to start businesses and families and careers. That's all wealth creation.
There's your economy, in a very very very simplified form.

[leftofthedial]

17. having (in effect) a checking account it worth "real value" as you say.

Unfortunately, the deregulated Wall Street criminals created hundreds of times the "wealth" represented by their actual assets, inventing "wealth" out of thin air (or, as it turned out, from LESS than thin air). They rewarded themselves and their stockholders extravagantly for having done this. Now Obama/Geithner have agreed to make up their "losses."

Imagine that GM had created millions of little pieces of computerized "paper" claiming that each GM car that has ever been sold is worth $300,000. Then GM bought and sold these pieces of paper as though they had value, counted them as corporate assets, and had GMAC issue insurance guaranteeing that each IS actually worth $300,000.

That's basically what the banks did. Now Obama/Geithner wants to make sure that the taxpayers pay a minimum of 94% of the missing money. They are using treasury money to subsidize private enterprise on Wall Street, even though the need for subsidization is a result of stupidity/greed/crime. Estimates of the total amount of this subsidy range as high as $4.5 trillion so far.

By contrast, they offer auto makers (and their millions of unionized workers) "tough love" and tough talk about fiscal responsibility. Actual money given to help save the last bastion of American manufacturing and its millions of jobs for real people? A few billion bucks.

[Aloha Spirit]

18. Whoa, I agree that several of the financial institutions screwed up, but

their real wealth as an industry is still several fold the value of the auto industry.
Everything I've read supports this.
Second, the tax payers aren't paying 94% of the missing money.
The banks get like %5 in equity depending on what the FDIC agrees to leverage the assets at, and the remainder is guaranteed loans.

Edit: and the value of those assets upon auction will definitely not be 100% of what the banks value them at.
And those assets do have real value.

[Raineyb]

20. I didn't say anything about removing banks.

What I'm saying is twofold. 1. The banks are "making money" by selling bets on bets on bets. There's no added value here it's just shuffling paper. Therefore there's no real wealth being created. The banks are not worth what the say they're worth. Let's say I lent someone $100. Now I decide instead of keeping the asset note payable on my books I decide to sell parts of the loan to 5 other people at $25 apiece. These people split their bits and sell them to two other people at $15 apiece. How much is the original note worth? Yet I managed to sell this stuff off to a bunch of other people who also sold pieces off to other people. There's no real wealth being generated but everyone made a few bucks shuffling around these bits of loans. There's a lot of money floating around but the note is still only worth 100 dollars.

My point is, that not only are the assets not worth nearly as much as they say they are but neither are the banks themselves. They can't be. The banks have these toxic assets that are on their books at say 100X. No one is going buy them at 100X; everyone knows they're inflated. Let's say you get some suckers to buy them at 10X. The banks still have a problem. If they sell these assets at what they're worth they'll bring down the equity in the enterprise and the business isn't worth as much. (basic accounting equation Assets = Liabilities + Capital) They'd have to write them off which will reveal that the company itself isn't worth what they say it is. So they literally want the taxpayer to pump up the bank at the overinflated price by making up the difference between what the market says the assets (and hence the bank) are actually worth and what the books say the assets are worth.

The banks are not as big as they say they are. They don't have as much money as they say they have. They're only as big as they say they are if you allow them to inflate their assets that is to sell the assets they have at book value despite the fact that the market value says it's a lot lower.

Regards

[tama]

31. Wake up

Banks do not create real wealth. They create money out of nothing to suck real wealth - natural resources and fruits of labour - through debt and interest. For easy explanation of how the scam works, see for example the zeitgeist movies. Banks and stockholders do nothing but rob working men and natural wealth - lives of our children.

Under the tyranny of banks there is no "more time in the day" nor "less stress" for ordinary citizens whose work day has been getting longer and longer, work all the time more and more menial and hectic and stressing. While the purchasing power of ordinary citizen has stayed the same or gone down - while consumerism has become possible only throug debt and more debt.

[Aloha Spirit]

32. I disagree, but it would be fruitless to debate..

so I'll just leave it at that--I respectfully disagree.

[tama]

35. It would not be fruitless

rather, the banksters case is just indefensible, if given any serious thought and context wide enough to be meaningfull.

[Zynx]

15. The financial sector is overcompensated, but it is still essential.

Without institutions to extend credit it would be very difficult to imagine anything approaching our modern economy existing. That certainly includes the "real" sector of the economy.

[Raineyb]

22. Perhaps you didn't notice but the banks have sucked up a large amount of tax payer dollars

and they're still not lending out money.

When I say that it's a phantom economy I'm saying that they're making money on shuffling paper and not actually doing anything that's value added. In essence they're making it out of thin air. It's obviously not sustainable and it creates bubbles which eventually crash. If we keep funneling money into these banks to keep them at their inflated levels they will suck every last one of us dry. This is basically a transfer of wealth from the poor and middle class to the rich. Not acceptable!

Regards

[Aloha Spirit]

23. I'm not sure that's the case... here's something from today's GAO report

"...the largest CPP recipients extended roughly $245 billion in new loans to consumers and businesses in both December 2008 and January 2009, according to the Treasury's new loan survey."

[Raineyb]

25. And what numbers is this based on?

As the banks have been giving us the finger when asked about money. Where did the GAO get its numbers?

Regards

[Aloha Spirit]

26. It's from the treasury's bank surveys from Dec/Jan..

It's at http://www.financialstability.gov/impact/surveys.htm

There are hyperlinks at the bottom...

The GAO report is here
http://www.gao.gov/products/GAO-09-504

[tama]

33. Modern economy is not essential

what is essential is food, clothes and shelter, for us and for our children and their children, healthy environment that can provide for all of that. Not banks, not money - they are sickness.

Yes, I'm a simpleton and can think of only simple thoughts like that. Modern economy is based on fractional banking and debt over debt derivatives and other really complex stuff, not on simple and most self evident truths.

Like:
- unlimited growth in limited environment is logical impossiblity
- economic system (of obsessive growth) that undermines the carrying capacity of the planet is nothing but suicidal, literally insane.

[ieoeja]

34. What you say is very true.

If we moved to an essential economy we would need something like:

- play time til you turn 25
- work 20 hours a week from 25 to 30
- retire

[MarjorieG]

13. Isn't auto industry bankruptcy what DU propsing for Krugman's nationalism takeover.

Difference is cost and unknown risks in financial markets, but selective reasoning to think that different in appeal.

[leftofthedial]

19. where are all the name-calling stalkers who disrupt any thread about the issues?

Their cell captains must have given them Monday night off.

[MadBadger]

21. I want to see you do it oh Wise One

[spoony]

24. You know I can't fly a fucking plane either

but if I'm on one and it starts into a nose-dive, it doesn't take a pilot to say something might be wrong with what's happening.

[jenmito]

27. I see you disguised THIS negative Obama thread by putting it in the form

of a question without giving your obvious opinion. :eyes:

[dionysus]

30. .

:rofl:

[polichick]

28. To me it looks like Wall Street is still holding us hostage, while the auto industry...

...is without power at this point.

[LanternWaste]

29. I'm not a very bright guy...

I'm not a very bright guy-- far less clever than most of you by half, so the best I can come up with is, "what works for industry A won't necessarily work for industry B".