Another automotive company bailout

They thought they could slide this one past us!

WASHINGTON (AP) - The House on Tuesday approved a "cash for clunkers" bill that aims to boost new auto sales by allowing consumers to turn in their gas-guzzling cars and trucks for vouchers worth up to $4,500 toward more fuel-efficient vehicles. ... Since the yearlong vehicle program is expected to cost $4 billion, lawmakers would attempt to find the additional money later this year.

This is a just plain bad idea. But the House of Representatives bought it, 298-119, and it will probably sail unopposed through the Senate as well.

Exactly what are Congress and the automakers trying to accomplish here? Reduce CO2 emissions? Stimulate auto sales (as they say)? Or give General Motors, Ford and Chrysler another handout?

Um, maybe buy votes in Michigan, Kentucky, New Jersey and every other state that stands to lose automobile-related jobs?

I don't know exactly what they're trying to do, but it's very clear what they're doing.

They're subsidizing people's poor decisions again.

They're rewarding past bad behavior and reinforcing current bad behavior.

And it's another bailout. A $4 billion bailout.

The Big Three pushed their gas-guzzling vehicles in past years. In fact, all three of them showed commercials touting their gas-guzzling pickup trucks last summer during the $4 per gallon gasoline mini-crisis, and in the fall and winter during the onset of the current financial crisis, and they're still doing it. American automakers have never been serious about selling more fuel-economical vehicles, and their advertising campaigns prove it.

So do their showrooms. Drive past any Chevrolet, Ford or Chrysler/Dodge dealer and compare the number of trucks, SUVs, and big cars with the number of small cars, hybrids and economy vehicles. That's right. They're pushing the big machines. It's as if nothing has changed in the last 12 months, as far as the Big Three automakers are concerned.

That's because that's where the big margins, and hence the big profits, can be found. It's all about money. For Detroit, it has always been all about money.

We must lay some blame on the consumers who bought these vehicles. They're the ones who had to suffer through the gasoline price crisis last summer, remember? I say, let 'em suffer. They chose to buy those big machines, now let them live with their choice.

But now the government wants to ease these buyers' remorse by subsidizing their purchase of more economical vehicles. These consumers are getting a government-subsidized $4500 discount, in addition to the trade-in value on their old cars, to buy new cars. (Okay, in some cases it's only $1500, but the article says "up to $4500," and that number shows up several times in the details. Live with it.)

Problem 1: Not everybody's gonna buy American.
Problem 2: Sellers are greedy.
Problem 3: Hey! What about the rest of us?!

Allow me to elaborate.

Problem 1: I predict that many people will dump their big American cars to buy smaller, lighter cars from Asia or Europe. I didn't read anything in the article that said the $4500 goes towards the purchase of an American car. So this won't help GM, Ford or Chrysler nearly as much as people think it will.

Problem 2: Car dealers won't be able to resist the temptation to jack up the price of the vehicles they're selling, to get their own piece of that $4500 pie. They won't be satisfied with just moving more vehicles through their lot. Don't be surprised to hear about salesmen negotiating with the buyer to "split the difference," so the buyer ends up paying $2,250 more than he should for a new car.

Problem 3: Once again, the good people of the United States are getting screwed. Let me explain that one in more detail.

First, it was home prices: those of us who bought houses within our means, who went responsibly through the traditional loan approval process, have seen our home values plummet because of the irresponsible actions of the borrowers, lenders, and investment entities who are really at fault for the current financial crisis.

Then, it was jobs: as the economy tanked and corporate profits fell, over 13 million hard-working Americans lost their jobs, while the executives who were truly responsible for the losses in corporate profits held onto their jobs, fired those 13 million, collected undeserved bonuses for their actions, and did absolutely nothing to relieve the suffering of their former employees. Do you know how many production workers you can keep employed if you replace an overpaid CEO with one who's willing to take a smaller bonus?

Then, it was tax dollars: while no politician has yet had the audacity to raise taxes on us, the politicians have been happily writing checks against our (future) taxes to pay for so-called "bailouts" for private industry: first the banks, and then the automakers.

(You may or may not remember, but when Congress said "no" to the Big Three the first time, General Motors tried to disguise itself as a bank (GMAC, its financing arm) and sneak in the side door, to get a piece of the bank "bailout" funds. Congress finally gave GM and Chrysler some money, but not as much as they wanted.)

Now, it's tax dollars again: this latest move by Congress is another attempt by somebody to give Detroit the rest of the money they wanted. If this plan works the way it's written, then every person who buys a new car under this plan will be shoveling more government money, $1500 to $4500 at a time, to the carmakers.

Hey! That's my money! Don't you go giving it to that Hummer driver! He's got more than enough money to replace that Hummer -- if he really wants to replace it.

Not only that, but: Hey! When are you going to reimburse me for my purchases? While so many other people have been buying trucks, SUVs, Caddys, Lincolns, and muscle cars, I've been driving economy vehicles since 1984! No government entity has ever given me a nickel for my good citizenship. Just like with the mortgages and everything else, the government is punishing good behavior and rewarding bad behavior.

GM is no longer "too big to fail." And Fiat almost gave up on their Chrysler acquisition because of meddling by the feds. I say, let 'em fail. Let the market sort it out. Enough with the government "intervention," already. You're making things worse, not better.

If you are as outraged as I am, please send this article's URL to your friends. Then print this article (yes, on paper) using Internet Explorer, and snail-mail a copy of it to your Senator, Representative and President. Make sure to include a cover letter expressing your outrage, and including your name and address so they know you're serious.

And now we find out they owe BACK TAXES?

The late famed witch / hotel queen Leona Helmsley is reported to have said, "Only the little people pay taxes."

In today's news is this AP report:

"At least 13 companies receiving billions of dollars in bailout money owe a total of more thean $220 million in unpaid federal taxes, a key lawmaker [Rep. John Lewis, D-Ga] said Thursday."

One of these companies owed $113 million from 2005 and 2006. Another owed $102 million from before 2004. And yet, according to the AP, all recipients of government bailout funds had to sign a contract stating that they did not owe any back taxes. In other words, these companies, or their representatives, LIED.

But they got their money anyway. They got their money from a treasury secretary who has had to pay $43,200 so far to cover back taxes, interest and penalties for taxes he "forgot" to pay between 2001 and 2004. I'll bet that Treasury Secretary Timothy Geithner wouldn't even have ponied up the money if he hadn't been caught during his confirmation hearings.

Enough about Geithner. He's already a national embarrassment, who ought to do the honorable thing, resign and go home. Let's go back to the bailout beneficiaries.

Why should we give any government money, funds from the public trust, to anyone who has not paid the government their dues, who has basically swindled the government, and then LIED about it? Don't give them a cent!

Living here in small-town America, we have seen what happens to individual taxpayers and to small businesses when they don't pay their taxes. The IRS comes down on them like a ton of bricks.

I guess once you're "too big to fail," you're also too big to pay taxes, right?

This is the spot where I should insert several fragrant expletives.

This entire bailout fiasco is going to turn into a huge scandal. It will taint the Obama presidency, and it will permanently taint the reputations of many, many people in the executive and legislative branches of the federal government, as well as many titans of industry. Oh sure, they'll all get rich out of it, but their names will be mud for the rest of their lives. The American public, the "little people" who pay taxes, will have lost the last dregs of respect for, and trust in, all of these people.

We Can't Trust Them With Our Money

This time I'm speaking, not of our elected officials, but of the presidents of the banks and other struggling institutions that are quickly consuming the $700 billion from the first bailout.

Every single bank that made bad loans in the past 3 years knew exactly what they were doing. They threw away all of the rules or guidelines or due diligence or what have you, about making loans to people when you know there's not a snowball's chance in Phoenix of the borrowers ever making good on the loans. But they did it anyway. Call it greed, or hubris, if you want.

Basically, all of those banks were irresponsible with your money.

Then, all of those loans and mortgages were repackaged into financial instruments (like stocks or bonds), called "mortgage backed securities," which the banks then sold to each other at face value. The buyers and sellers knew all along that a lot of the mortgages backing those securities were bad mortgages. They should never have been sold at face value. They should been discounted, sold for face value multiplied by the probability that the mortgages backing them would ever be paid off. The buyers and sellers knew the score. They knew that many (most?) of those loans were risky and would probably end in default. For a bank or lender to say "Well, I didn't know" or "Well, the borrower qualified for the loan" is just stupid. I wouldn't fall for it. My next-door neighbor wouldn't fall for it. What made those MBAs and Wall Street tycoons fall for it?

Basically, all of those banks and investors threw away their common sense in the name of greed -- although they would never call it "greed."

Then, when borrowers started defaulting en masse and these mortgage backed securities started dissolving and slipping through the bankers' and investors' fingers, they ran crying to the government, begging to be saved from their own greed and stupidity. President Bush's Secretary of the Treasury, as one of his last acts, gave them over $700 billion with no strings attached and no provision for accountability.

Do you know what they did with that money? Fannie Mae and Freddie Mac sent a lot of their managers to a golf resort in Texas, for a week of relaxing and unwinding. A banker in New York had his office remodeled, spending $1.2 million on the job. One bank completed the purchase of a customized, luxury jet that they had ordered two years earlier. And executives at many of these failed institutions rewarded themselves for their greed and their irresponsibility by taking huge bonuses from the bailout money, in a period when thousands of people per day were losing their jobs. Maybe they thought we wouldn't notice.

Basically, the banks and their executives were stupid.

Do you know who should have lost their jobs? The entire executive suites at these banks! Some bankers and politicians tried to justify those bonuses, but their words rang hollow in the ears of ordinary Americans. A bonus is a reward for doing something right, and it's clear to everybody in America except the aforementioned stupid executives that they didn't do anything right last year.

Now the Obama administration and Congress want to give Wall Street and Company another $820 billion bailout. NO! The people who run Wall Street and Company (along with the people who run Washington) have shown that we cannot trust them with our money.

I have a better idea. If the federal government is serious about bailing out those in financial distress, if they really want to stimulate the economy, and if they're willing to spend $820 billion to do it, then give that money directly to the people.

According to the U.S. Census Bureau, the population of the United States right now is 305,729,371. If the government were to distribute that money evenly to every man, woman and child in the United States, we would each get a check for $2,6822.11. And I can promise you that the majority of Americans would be a lot more wise and responsible in how they used that money than the great minds of Wall Street and our elected officials in Washington have proven themselves to be.

American automakers think we're stupid

Okay, the American economy is in meltdown. After 12 months, the experts finally decided to call it a "recession." Maybe this time next year they will have decided that it's not a recession, it's a depression. Those of us who are out of work must be smarter than those experts, because we already know it.

Credit is hard to get right now, because most of it is tied up in those "toxic securities" -- secret code for "bad mortgages," which the lenders and investors might as well write off and forget about, and start over.

The domestic automobile industry, at least that overweight segment of it known as The Big Three, has been in Washington D.C. twice begging for money to "bail them out," because they're too incompetent to bail themselves out of the mess they created. For years now they've been ignoring the signs of the times, the writing on the wall, the metaphor of your choice for the consumers who abandoned the Big Three in favor of Toyota, Honda and other Japanese (and Korean!) brands.

Detroit ceded the market for medium, small and subcompact sedans to Japan without a fight, choosing instead to concentrate on "luxury" cars, muscle cars, SUVs and manly pickup trucks. When gasoline jumped to $4 per gallon this summer and Americans suddenly stopped buying all those thirsty Detroit products, the Big Three's collective income fell far below their outgo, and they started losing money fast.

What Detroit should have done is instantly change their product mix and convert factories from making trucks and SUVs to making the smaller, leaner cars that Americans wanted. They should have noticed all the Priuses and Civic hybrids on the road and rushed to get their own hybrids into production. But they didn't have any smaller, leaner cars, and they didn't have any domestic hybrid options.

Actually, that's not strictly true. They didn't have any smaller, leaner cars that Americans wanted. What they offered for smaller cars was ugly and poorly put together. What they offered for hybrids got worse gas mileage than the Japanese non-hybrid alternatives, and again, they were poorly put together.

Our senators and representatives in Congress, bless 'em, were persuaded that giving Detroit zero dollars, while it would have been a bold and courageous move, might not be the right thing to do, but they were able to see past the Big Three CEOs' self-serving arguments and pare down their request to something more, um, realistic. I'd still like to see Congress try something bold and courageous for a change. But at least they got it down from over $30 billion to under $15 billion before the proposal got snagged on a tree branch.

In the meantime, while the car companies are crying to the government about all the money they're losing, Dodge aired a TV commercial this evening that makes one slap one's forehead and cry, "What in the world are you thinking?"

This was an advertisement for what Dodge called a "luxury truck": a dual-cab monstrosity with leather seats, built-in WiFi, a backup camera, built-in toolboxes, a really thirsty engine and a suspension that would do the Army proud.

Hey! Dodge! Which Americans are you trying to sell these air haulers to? Haven't you been listening to the majority of the American public? We don't want luxury trucks! We want vehicles that take less gasoline (or diesel), or no gasoline (or diesel) at all! These ain't them!

Dodge wants to push this "luxury truck" for one reason only: because of the profit margin. They make more money per sale on "luxury trucks" than on more sensible vehicles. I guess they don't expect people who need car loans to buy these things, do they? Because, according to the news and the CEOs themselves, car loans are hard to come by right now, so the buyers of these beasts will need cash.

The commercial, naturally, emphasizes the manliness of the truck, and appeals to the buyer's need to feel manly. The commercial goes over the top in an attempt to get the buyer's insecurity (or need to compensate for perceived deficiencies elsewhere) to override his caution and the frugal attitude so vital in this economic climate.

This truck is the reason why the majority of Americans don't want to give the Big Three one red cent of their money. It's symbolic of everything that's wrong with Detroit right now.

The first thing the Car Czar should do, once he's appointed and the Big Three get their bailout money, is fire the sorry idiots at Chrysler who approved the design and construction of the "luxury truck," and the sorry idiots who approved this advertising campaign, and the sorry idiots who signed the contract with the advertising company, and the advertising company itself.

After that, it wouldn't be a bad idea to go after the associated idiots responsible for the Cadillac Escalade, the Ford Excursion and supertrucks, and the Hummer product family.