Auto Bailout: All But The Name
Washington has a big problem with "Bailout," "Nationalization," "Foreign Takeover." These happen all the time, but no political leader wants those names attached to anything they do.
George Orwell famously wrote 1984 to decry totalitarian regimes that depend importantly on "Newspeak." Wikipedia says, "The basic idea behind Newspeak is to remove all shades of meaning from language, leaving simple dichotomies (pleasure and pain, happiness and sadness, goodthink and crimethink) which reinforce the total dominance of the State."
Though far from under a totalitarian regime, U.S. taxpayers are at risk from the auto company bailout, which became "assistance" to the auto companies in the words of President-elect Obama a 60 Minutes interview on November 16, 2008:
"So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all the stakeholders coming together with a plan (for) what does a sustainable U.S. auto industry look like? So that we are creating a bridge loan to somewhere as opposed to a bridge loan to nowhere."
Whether you agree with President Obama is not the issue. The issue is whether the taxpayers end up footing a big bill in the end, whether we effectively nationalize the companies by directing their business decisions, their labor contracts, and the haircut or worse suffered by the equity owners and bondholders, and whether, after all of those taxpayer investments, the benefits go to a foreign takeover "partner."
Tomorrow, the auto companies will unveil their plans for reorganizing. They will have been pre-approved by President Obama's economics team. More taxpayer money will be injected via TARP, and "jobs will be saved," but at what cost?
This afternoon, The New York Times DealBook Blog posted a particularly good piece by Michael J. de la Merced on NYU Stern Business School Professor Edward Altman's analysis of the auto bailout. Notice how unnamed source says Treasury officials and their newly hired law firms are on the job making sure "the taxpayers fall in the top layer of G.M.'s capital structure..." What was that about Newspeak?
