To date, our government has provided emergency funding for big banks, insurance companies, and now is considering financial support for the automobile industry. I am truly conflicted whether we should be doing this. On the one hand, if it will keep the economy from a crash landing, the investment may be worth it. On the other, the bailout is basically rewarding organizations and the leaders of those organizations for poor decision-making, poor leadership, and in some cases outright greed. An additional problem is that once you start down the bailout path, where do you draw the line and stop?
In the bluntest terms, the issues are these:
1. If the bailout money will save jobs, that is good for the economy. If the bailout protects jobs that are not producing value, that is just delaying the inevitable. Using a medical analogy, isn’t it better to just rip the bandaid off rather than extending the pain over a long period? If the jobs are going away anyway, why not sooner than later? This argument would lead to a decision not to bailout the company.
2. What guarantees are in place to ensure the bailout money will be used for the intended purpose? In the case of financial institutions, if the money is intended to take the pressure off foreclosing on mortgages, what ensures the money will be used for that purpose? The bailout money this far distributed appears to have loose requirements and controls attached.
3. Many if not most of the organizations asking for a bailout have an overpayed management team. Yet, in a downturn, it is the rank-and-file employee that doesn’t get a raise, doesn’t get a bonus, or loses the job. The rank-and-file employee pays the price of poor decision-making by the overpayed executive. What assurances are attached to the bailout money that the management team will share the sacrifice with the employee? What ensures they will forego bonuses, take pay cuts, eliminate numerous perks to demonstrate that the bailout requires shared sacrifice and the sacrifice should start at the top with the people who got the company into the fix in the first place? What ensurances come with the bailout that jobs will be protected since that is a major aspect of staying in business?
4. Why is the government involved with billion dollar loans to businesses to keep them in business when existing bankruptcy laws exist for exactly that purpose?
5. If a bailout is to be given, then the taxpayer should have an equity stake in the business. While this is nationalization of the company, YOU did ask for a bailout. It should come at a cost.
6. To get a bailout, executives should be removed from the board and taxpayer as well as employee representation should be appointed to the board. A small loan is one thing. When the taxpayer is invested in the company for billions of dollars, they have a right to board representation. Similarly, the CEO should not hold the Chairman’s job since asking for the bailout is proof enough that the CEO needs close oversight.
What are your thoughts on the bailout legislation and the continuing efforts to expand the scope of the bailout?
Political Thoughts
Should We Provide a Bailout?
November 12, 2008To date, our government has provided emergency funding for big banks, insurance companies, and now is considering financial support for the automobile industry. I am truly conflicted whether we should be doing this. On the one hand, if it will keep the economy from a crash landing, the investment may be worth it. On the other, the bailout is basically rewarding organizations and the leaders of those organizations for poor decision-making, poor leadership, and in some cases outright greed. An additional problem is that once you start down the bailout path, where do you draw the line and stop?
In the bluntest terms, the issues are these:
1. If the bailout money will save jobs, that is good for the economy. If the bailout protects jobs that are not producing value, that is just delaying the inevitable. Using a medical analogy, isn’t it better to just rip the bandaid off rather than extending the pain over a long period? If the jobs are going away anyway, why not sooner than later? This argument would lead to a decision not to bailout the company.
2. What guarantees are in place to ensure the bailout money will be used for the intended purpose? In the case of financial institutions, if the money is intended to take the pressure off foreclosing on mortgages, what ensures the money will be used for that purpose? The bailout money this far distributed appears to have loose requirements and controls attached.
3. Many if not most of the organizations asking for a bailout have an overpayed management team. Yet, in a downturn, it is the rank-and-file employee that doesn’t get a raise, doesn’t get a bonus, or loses the job. The rank-and-file employee pays the price of poor decision-making by the overpayed executive. What assurances are attached to the bailout money that the management team will share the sacrifice with the employee? What ensures they will forego bonuses, take pay cuts, eliminate numerous perks to demonstrate that the bailout requires shared sacrifice and the sacrifice should start at the top with the people who got the company into the fix in the first place? What ensurances come with the bailout that jobs will be protected since that is a major aspect of staying in business?
4. Why is the government involved with billion dollar loans to businesses to keep them in business when existing bankruptcy laws exist for exactly that purpose?
5. If a bailout is to be given, then the taxpayer should have an equity stake in the business. While this is nationalization of the company, YOU did ask for a bailout. It should come at a cost.
6. To get a bailout, executives should be removed from the board and taxpayer as well as employee representation should be appointed to the board. A small loan is one thing. When the taxpayer is invested in the company for billions of dollars, they have a right to board representation. Similarly, the CEO should not hold the Chairman’s job since asking for the bailout is proof enough that the CEO needs close oversight.
What are your thoughts on the bailout legislation and the continuing efforts to expand the scope of the bailout?
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