Mike the Mad Biologist

From Bloomberg News:

Nov. 24 (Bloomberg) — The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

When I read this, a line from a movie* kept running through my head:

With a lie this big, we can get away with anything.

Seriously, we have no conceptual means to grasp something of this magnitude. And tell me why we can’t lend Detroit $25 billion? That is one three-thousandthhundredth of the package to rescue the banks–and banks don’t make things.

*Maybe the movie was Doomsday?

Comments

  1. #1 Joshua
    November 24, 2008

    I can’t really evaluate the validity of this, but I can spit back a stock answer. Supposedly, the reason that we’re bailing out the banks but not Detroit is that, if the banks fail, they’ll bring otherwise healthy business down with them. Whereas, if Detroit fails, it’s largely the automakers’ own damned fault. Although then, you end up with a whole state being punished, so I don’t see how it’s that much better.

  2. #2 Orac
    November 24, 2008

    Actually, if the automakers fail, they’ll bring a whole lot of other reasonably healthy businesses down with them, too, including dealers, parts suppliers, etc.

  3. #3 Eric Lund
    November 24, 2008

    And tell me why we can’t lend Detroit $25 billion?

    As Atrios has pointed out, that runs the risk of bringing the WTO on us like a ton of bricks.

    But I guess the old saying applies. If you have a $10k loan that you can’t repay, you have a problem. If you have a $10B loan that you can’t repay, the lender has a problem.

  4. #4 Troublesome Frog
    November 24, 2008

    Again I have to ask the question: Why should GM get a bailout instead of a promise of bridge financing during bankruptcy? I can understand why we don’t want to liquidate GM. It’s a useful company, employs a large chunk of our industrial base, and has its fingers in many pots in our national economy. That doesn’t mean that it should be treated like an insurer or a lender whose failure could cause the collapse of the banking system. Let them go bankrupt and step in to guarantee the financing that won’t be provided by the tight credit markets. That’s what chapter 11 is for.

    As for numbers like $7.8T, they’re largely meaningless without context. Being “prepared” to spend that much money is not the same as actually spending it. If it was, insurance companies would be insane because they have ridiculous piles of potential liabilities that will almost certainly not materialize. I would like to see the government take a more aggressive and–dare I say?–socialist approach to failing banks as the rescues so far have been too generous, but let’s not blow things out of proportion.

  5. #5 Tex
    November 24, 2008

    With apologies to Senator Everett Dirksen;

    A trillion dollars here, a trillion dolalrs there. Pretty soon, it adds up to real money.

  6. #6 Janne
    November 24, 2008

    Different problems need different solutions. Your auto industry was in deep trouble for years before the financial crisis. The crisis did not change anything; it’s just been hastening what was already hapening anyway. You might look at the example of British Leyland before you get all set on the idea that bailing out your Shrinking Three is a good idea.

  7. #7 Paul Murray
    November 25, 2008

    GM (ect) is failing because they build lousy cars that no-one wants to buy. They should be allowed to fail. If that would cause too many ripples, then the problem underlying the problem is that they have been allowed to get to big. Trusts “too big to fail” are a danger to the nation, and anti-trust legislation exists precisely for the purpose of stopping them from forming. The legislation should have been applied way before it all reached this stage.

  8. #8 llewelly
    November 25, 2008

    … and banks don’t make things.

    As most of the news, movies, tv, and other entertainment has been telling us for decades, people who make stuff are scum. It’s ‘executives’, ‘investors’, and ‘entrepreneurs’ who deserve all the accolades.

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    November 25, 2008

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  10. #10 Ktesibios
    November 25, 2008

    I think I see a solution:

    1. Government buys $7.4x 1012 worth of American-made cars.

    2. Government gives cars to the banks, preferably by dropping them from high-flying airplanes.

  11. #11 Jon Orly
    December 3, 2008

    There was an in-depth analysis of how to use the $25 billion to actually save the big 3 at TNR yesterday instead of just using it to delay their inevitable bankruptcy. I wasn’t sure they could be saved until reading that.

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