Mad rantings about politics, evolution, and microbiology. Comment policy: say what you want, but back it up with an email address. I don't like anonymous trolls.
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?
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Comments
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.
Posted by: Joshua | November 24, 2008 4:38 PM
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.
Posted by: Orac | November 24, 2008 5:02 PM
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.
Posted by: Eric Lund | November 24, 2008 5:49 PM
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.
Posted by: Troublesome Frog | November 24, 2008 5:56 PM
With apologies to Senator Everett Dirksen;
A trillion dollars here, a trillion dolalrs there. Pretty soon, it adds up to real money.
Posted by: Tex | November 24, 2008 6:43 PM
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.
Posted by: Janne | November 24, 2008 9:43 PM
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.
Posted by: Paul Murray | November 25, 2008 12:09 AM
Posted by: llewelly | November 25, 2008 4:04 AM
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.
Posted by: Ktesibios | November 25, 2008 1:45 PM
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.
Posted by: Jon Orly | December 3, 2008 12:39 PM