America: Stevie Wonder Is Driving The Bus
Is it just me, or is it becoming increasingly apparent that America hasn't got a clue what it's doing?
Take the US Treasury's about-face on Wednesday, when it officially abandoned its original strategy of buying troubled assets from banks.
The Bush administration now says it will try to jump-start the stalled credit markets with new lending programs, rather than by buying troubled assets from banks. But the line for help at the Treasury keeps getting longer. A big commercial lender, the CIT Group, applied to become a bank on Thursday in hopes of qualifying for rescue money. American Express took the same step earlier this week. And then, of course, there is the beleaguered auto industry, we'll get onto them in a minute.
Before that, consider the AIG precedent. It shows that once a company has the money and is deemed too important to fail, it can do as it pleases.
It was less than two months ago that the government put up $85 billion for AIG. The interest rate was high, and the term of the loan was just two years. The company, under a new chief executive, would have to shape up or close down within 24 months.
The first thing the new CEO did, as soon as the cheque had cleared, was renegotiate more favourable terms. Plus more money, in exchange for what? For the US government taking on the risk of some of his company's worst assets while letting AIG share in the profits if those assets should prove valuable!
Meanwhile, President-elect Barak Obama is a big fan of the US automakers, and is pushing for Bush to step in now and bailout GM, Ford & Chrysler. News emerging last night suggests that Democratic congressional leaders have conceded that they would face potentially insurmountable Republican opposition to push such a bailout through, ahead of Obama's inauguration. Some industry experts fear that without it one of the Big Three automakers will collapse before then.
The idea is to channel $25 billion of the promised $700 billion bailout fund to the Big Three. Bush, however, has not signaled any willingness to tap the bailout fund, which the Treasury has said is money better spent on financial institutions. And some powerful Republican lawmakers have voiced strong opposition to government aid for the automakers.
Senator Richard Shelby of Alabama, the senior Republican on the banking committee, said he would not support legislation to aid the auto companies and seemed prepared to let one or all of them collapse.
"The financial straits that the Big Three find themselves in is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force," Shelby said in a statement. "The financial situation facing the Big Three is not a national problem but their problem."
"They are producing high-cost products that consumers don't want to buy. And so now we have Washington on the verge of giving them a bailout simply because we have all heard of them and they have high-priced lobbyists," said a Representative.
America: would you buy a used car off it?
Take the US Treasury's about-face on Wednesday, when it officially abandoned its original strategy of buying troubled assets from banks.
The Bush administration now says it will try to jump-start the stalled credit markets with new lending programs, rather than by buying troubled assets from banks. But the line for help at the Treasury keeps getting longer. A big commercial lender, the CIT Group, applied to become a bank on Thursday in hopes of qualifying for rescue money. American Express took the same step earlier this week. And then, of course, there is the beleaguered auto industry, we'll get onto them in a minute.
Before that, consider the AIG precedent. It shows that once a company has the money and is deemed too important to fail, it can do as it pleases.
It was less than two months ago that the government put up $85 billion for AIG. The interest rate was high, and the term of the loan was just two years. The company, under a new chief executive, would have to shape up or close down within 24 months.
The first thing the new CEO did, as soon as the cheque had cleared, was renegotiate more favourable terms. Plus more money, in exchange for what? For the US government taking on the risk of some of his company's worst assets while letting AIG share in the profits if those assets should prove valuable!
Meanwhile, President-elect Barak Obama is a big fan of the US automakers, and is pushing for Bush to step in now and bailout GM, Ford & Chrysler. News emerging last night suggests that Democratic congressional leaders have conceded that they would face potentially insurmountable Republican opposition to push such a bailout through, ahead of Obama's inauguration. Some industry experts fear that without it one of the Big Three automakers will collapse before then.
The idea is to channel $25 billion of the promised $700 billion bailout fund to the Big Three. Bush, however, has not signaled any willingness to tap the bailout fund, which the Treasury has said is money better spent on financial institutions. And some powerful Republican lawmakers have voiced strong opposition to government aid for the automakers.
Senator Richard Shelby of Alabama, the senior Republican on the banking committee, said he would not support legislation to aid the auto companies and seemed prepared to let one or all of them collapse.
"The financial straits that the Big Three find themselves in is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force," Shelby said in a statement. "The financial situation facing the Big Three is not a national problem but their problem."
"They are producing high-cost products that consumers don't want to buy. And so now we have Washington on the verge of giving them a bailout simply because we have all heard of them and they have high-priced lobbyists," said a Representative.
America: would you buy a used car off it?
