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?
Posted by wwcasey 
Political Thoughts 
More Thoughts on Bailout
November 14, 2008I have given a lot of thought since my last post on the proposed automotive companies’ bailout. Indeed, I am also rethinking my position on the financial institutions’ bailout. The problem, as I see it, is these companies got themselves into this position through greed and short-term profit strategy. If this is not the case, how come senior executives still stand to get their bloated salaries, still get their golden parachutes, still get their bonuses, and still get their corporate perks even though their respective companies are going down the tubes? Among many leading companies in the world (none of which seem to have the problem that US automotive and financial institutions have), there is an old saying, “Innovate or die.” Yet, the very automotive companies that are asking for a bailout want that bailout to spend on innovation. These very automotive companies used lobbiests and spent multi-millions of dollars fighting increased gas mileage so they wouldn’t be forced to innovate. The boards of directors of these organizations endorsed this behavior by paying the management of these organizations obscene amounts of money. And finally, the stockholders of these automotive companies acted as rubber stamps to this board and executive behavior.
A pox on all your houses. If your organization can’t figure out the solution on your on, then you are doomed anyway and deserve to go into bankruptcy, be acquired, or be parted out and sold off. My tax dollar didn’t get you into this mess and most likely won’t be able to get you out. If you aren’t able to do it on your own, then file for bankruptcy protection. Doing so will allow the courts and debtors to throw out the board, change the management, and do so for pennies on the dollar. Yes, jobs are going to be lost, but they are going to be lost anyway–might as well be sooner than later. Yes, pension benefits and healthcare benefits are going to be lost–might as well be sooner than later. Doing so may just make those green jobs plans and universal healthcare plans look a little more reasonable. I would much rather that $700 billion going to make bad financial managers look good go to the creation of real, needed, and valued green energy jobs. I would much rather that $25 billion automotive bailout go to the transition to a universal healthcare plan.
The fact is, the current bailout activity already authorized and executed by the Federal Reserve, the Treasury Department, the SEC, and the FDIC is over $2 trillion dollars. Think what that amount of money would have done for physical infrastructure improvements, technology infrastructure improvements, universal healthcare, and re-skilling the US workforce!
Stop the insanity! Let those greedy short-term thinking companies fail. There will always be a replacement.
[Posted with iBlogger from my iPhone]