Maybe if Treasury Secretary Henry Paulson had been a former CEO of General Motors instead of a former CEO of financial powerhouse Goldman Sachs, this tale of two bailouts would be playing out differently.
There seems to be little sympathy in this country for the U.S. auto industry right now.
“Let the sick patient die already,” seems to be the refrain among politicians, pundits and economists. The big three automakers want bailout money just like their banking counterparts but the bar seems to have been set way higher for the Motor City than it was for Wall Street.
“They’re a dinosaur,” Richard Shelby, senator from Alabama, told Tom Brokaw on “Meet the Press” on Sunday, about why the auto industry should be allowed to fail. And an analysis in the Wall Street Journal on Saturday titled “Just Say No to Detroit” by renowned economist David Yermack suggests: “We would do better to set this money on fire rather than using it to keep these dying firms on life support.”
Strong words for an industry that has in many ways created the middle class in this country.
Clearly, the auto industry has made some bad mistakes in the past 20 years, most notably, not moving fast enough to compete with foreign auto makers who made better cars.
But the banking sector — that almost everyone acknowledges created its own disaster because of greed that led to the subprime mess the whole country is now suffering from — got better treatment when it put its hand out for billions of dollars in taxpayer money.
When the $700 billion bailout was proposed, few went after the fat paychecks or retirement plans of the mortgage brokers or financial traders who helped navigate the mess. And CEOs — well they had to keep the millions they already pocketed and get the money they were promised because they had contracts with the companies they ran.
On the flip side, it seems to be open season on the compensation of middle class auto workers, with many suggesting union contracts should be renogotiated and payments slashed for existing workers if a bailout were to happen.
To that, United Auto Workers President Ron Gettelfinger, told a Detroit TV station over the weekend:
“Let’s go to AIG, Bear Stearns, active and retired workers: Did anybody go in and ask them to give back wages and benefit levels? What about the bond traders? Did anybody ask them? What about the cleaners in the building? Why would the UAW be any different?”
“We made an agreement, and we made major concessions,” he said. “So how can you blame the autoworkers?”
It’s an interesting question.
What do you all think? No matter where you stand on whether we should be bailing out corporations at all, do you think there is a double standard here?
Adding insult to injury, in his Wall Street Journal piece, Yermack — a finance professor at New York University’s Stern School of Business — actually suggests the government should just cut a $10,000 check to the workers instead of trying to bailout GM, Ford and Chrysler.
I’m not sure if Yermack has checked lately but veteran assembly line workers make about $1,200 a week and many own their own homes and are able to send their kids to college. While newer workers entering the industry will make less than that, there are few places in our economy where these people will be able to find equivalent paychecks.
Someone should inform Yermack that his generous $10,000 offer would mean little if these men and women lose their well-paying manufacturing jobs, jobs that are already few and far between in this country.