"To Big to Fail" or "30 Days to Merge" Can it really be both?

Discussion in 'Politics, Religion, Social Issues' started by fivepoint, Mar 31, 2009.

  1. fivepoint macrumors 65816

    fivepoint

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    #1
    First the Obama adminstration said that GM, Ford, Chrysler were "too big to fail", plunking billions of dollard down to save them, and now they're requiring that Chrysler merge with Fiat to receive more billions of dollars in government funds...

    Apparently being 'to big to fail' is something to aspire to? Something the U.S. taxpayers should pay to see happen? Maybe a supporter of the Obama administration could help us out on this one?

    I, like I think most free market Americans, and apparently the Canadian Industry Minister Tony Clement tend to think otherwise... that no company is or should be "too big to fail." We know that in the end, propping up failing businesses and allowing the bubble to ever expand... just means that you'll deal with more pain, more suffering, more jobs lost, a larger depression, later on.
     
  2. NT1440 macrumors G4

    NT1440

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    #2
    Where did you get this gem from?:confused:

    "Apparently being 'to big to fail' is something to aspire to?"
     
  3. .Andy macrumors 68030

    .Andy

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    #3
    Isn't this exactly the same thread as you posted last week but this time instead of quoting the Czech prime minister you are quoting the canadian industry minister?
     
  4. leekohler macrumors G5

    leekohler

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    #4
    Don't we have enough threads on this subject already? Do we really need another?
     
  5. fivepoint thread starter macrumors 65816

    fivepoint

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    #5
    No, it's actually quite different. That thread was referencing the stimulus bills, and whether or not they would do good or do bad.

    This thread is discussing the Obama Administration's requirement that Chrysler merge with another large company... even though it seems pretty obvious that being "to big to fail" is not a good thing.

    I will grant you that they are both discussing Obama's big government statist policies... and both have to do with the current economic collapse, but that's about it. And Lee, the reason there are lots of threads on Obama's statist policies and the current economic collapse is because they're part of the biggest story in the world right now. Just like there were 20 threads at a time regarding McCain vs. Obama during the presidential race of 2008.
     
  6. leekohler macrumors G5

    leekohler

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    #6
    Then by all means, post more of them.
     
  7. fivepoint thread starter macrumors 65816

    fivepoint

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    #7
    Did Anyone say the same thing about all the Prop 8 threads? :)

    Seriously though... the reason I'm posting is to ask if this bothers anyone else? Does anyone else find this the least bit hypocritical? To me this looks like corporatism and one of the worst expansions of government power I've ever seen. They're pretty much managing these private companies now... essentially firing CEOs, telling companies when they must merge with others, etc. And to boot, they claim companies are too big, and then require that they get bigger.

    I think if we had let Chrysler fail (30 or whatever years ago, when they failed the first time) we'd all be better today and going forward. Continuing to prop up a failed system seems like a great way to do further damage to our economy and free market system.

    What are your thoughts on the topic, Lee? Am I way off base here?
     
  8. NT1440 macrumors G4

    NT1440

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    #8
    I care about the millions of workers who would lose jobs if these companies went under. Couldn't care less about waving the "free market" flag anymore. If anything we've seen the free market is easily susceptible to greed, corruption, and manipulation.
     
  9. .Andy macrumors 68030

    .Andy

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    #9
    Really?

    When did "they" say this?
     
  10. Sun Baked macrumors G5

    Sun Baked

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    #10
    Too big to fail doesn't mean that they won't take a company through bankruptcy, just means that they won't liquidate it.

    Bankruptcy is really the only method for ejecting the brands they don't want, otherwise it is very expensive to do it.

    Also a crapload of dealers have to fail, likely 50-60% or more to make them viable.

    Also the bondholders and stockholders will get sacked big time, but because the unions likely are big reinvestors in the company -- they will get hit again if they are not very diversified.
     
  11. freeny macrumors 68020

    freeny

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    #11
    It appears the Obama admin. is putting requirements on companies that accept Gov. funds.

    Whats the problem?
    They can just refuse the $$$

    "Too big to fail" is politics speak for "too many jobs will be lost".
    It is best to try to keep those jobs. But to your point, no, the companies are not "too big to fail". They will just create huge waves of unemployment if they do.
     
  12. NT1440 macrumors G4

    NT1440

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    #12
    It also means that it would most likely cause economic havoc. Stocks plunge at the mere mentioning of companies failing. A CEO farts, thats 2000 jobs right there.....
     
  13. BoyBach macrumors 68040

    BoyBach

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    #13

    "Too big to fail" is politics speak for "Too many voters will lose their jobs."
     
  14. leekohler macrumors G5

    leekohler

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    #14
    I think you're somewhat off base.

    First of all, the free market f***ed itself in the cases of these companies. It's about time that the "best and brightest" myth was dispelled forever. That is not how corporate America has worked for a long time. It's all about who you know, not what you're capable of. Anyone who claims otherwise hasn't worked in corporate America for any length of time.

    That said- getting rid of these CEOs is the most responsible thing we can do if indeed we're going to give them money. They obviously aren't worth the suits they wear. Regulation also needs to be put back, and there needs to be a mechanism in place for this money to be paid back, like Chrysler did before (Chrysler bounced back quite nicely from that too). Also- these companies need to be researching new energy other than petroleum.

    Also, I'd much rather see the auto industry bailed out, than AIG. AIG obviously didn't appreciate it the first time.

    And yes- if we're giving these companies our money, we damn well have the right to get rid of their CEOs.
     
  15. fivepoint thread starter macrumors 65816

    fivepoint

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    #15
    I would suggest that you're working under the wrong set of assumptions here. First, I and many economists disagree that the free market is what caused this problem. Second, thousands of businesses have failed over the lifetime of the U.S. Why aren't their past workers still out of a job?

    When companies go under it can be for many reasons. Maybe there's no demand for what they're offering. Maybe their expenses are high? Maybe their business model is faulty. Maybe their management is poor. Maybe they have marketing problems. Regardless of the reason, the entire idea is that bad companies fail, and good ones prosper. Through this method, the stronger, better, smarter companies grow to hire more employees and provide better products/services, and as the bad companies fail a select few people lose their job, but others get different jobs and better jobs.

    Under this system the NET result is more jobs, better jobs, a healthier economy, and a better system more capable of stemming loses incurred through economic downturns.

    When the government gets involved what they do is refuse to let bad companies fail in the hopes of saving a few jobs, thereby growing the problem, preventing the bubble from popping, and ensuring that we all pay for one company's misdeeds. I ask you this... what would have happened if we would have let Chrysler die in 1979? A lot of people would have lost their jobs... that's what. But would they have been unemployed a few years later? No. Would we be in the same situation we're in now where we have the potential of losing WAY more jobs? And way more wealth? No, not to the same extent.

    If you really want to help people, should you be supporting the bailouts, stimulus, etc.? I would respectfully suggest... NO!!!
     
  16. NT1440 macrumors G4

    NT1440

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    #16
    So you want millions of people to be out of work in the hopes that they will find other jobs in the middle of this economic climate?

    I can't even find a minimum wage entry level job right now!
     
  17. Apple iKid macrumors regular

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    #17
    Ya its the same with me. Once people lose their job, thats pretty much it. Thats one of the biggest problems.
    We need to focus more on people keeping their jobs. :(
     
  18. Desertrat macrumors newbie

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    #18
    Part of my problem with this is that I don't think the goverment bailouts can actually save GM. Or AIG, for that matter. Short-term help, yeah, but the fundamentals remain. Same for stimulus packages; short-term easing of pain, but the fundamental problems which caused the pain remain in place.

    All that's happening is a huge increase in public debt and a degradation of the buying power of the currency. That's rough on children and grand-children. Too much of a government attitude of, "Hey, what did an unborn generation ever do for me?"

    The Chrysler bailout is not the best example. No money was loaned; the government set up a loan guarantee which was never used. Iacocca restructured Chrysler's union contracts and product lines, restoring profitability for at least a while. (The UAW folks had it explained that they could take a 20% pay cut and have jobs, or they could see Chrysler go under and take a 100% pay cut.)

    My own view is that for any company with serious troubles, Chapter 11 is the way to go. Restructure and try again. Fire the people who are identifiably responsible for bad decisions. Rework payscales and whatever internal structures and methods contributed to inefficiencies.

    Times change and products change. We didn't save buggy whips, linotypes or punchcards via government bailouts.

    'Rat
     
  19. .Andy macrumors 68030

    .Andy

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    #19
    What caused it in your, and "many economists" opinion?
     
  20. fivepoint thread starter macrumors 65816

    fivepoint

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    #20
    I guess I don't understand. I mean... are you suggesting that the only people that get to go to High School or college are those who 'know people'? Are you suggesting the corporations and small businesses only hire people they already know? Are you suggesting that as long as you know someone you don't have to be any good at what you do? That only the already-rich can succeed? And you can't think of one example to the contrary? How about BO? Did he 'know people' or succeed under his own merits? :)


    If I was on the GM board of directors I would have voted endlessly to get rid of the management team at GM. I'm not talking about who SHOULD have been removed, but rather if we have the right to do so? Should the government be making these decisions? How about who gets bonuses and who doesn't? Or whether companies should or shouldn't merge? Doesn't this seem like a power grab to you?

    You say you'd rather see the auto industry bailed out... but I'm wondering if you fundamentally agree or disagree that companies should succeed or fail under their own accord. That if you fundamentally think that the free market is a good thing, or whether you think it is better for the government to bail everyone out that isn't doing well. (to save jobs you know)

    I think it's easy. It's easy to say, yeah, give them money... I don't want any pain in the short term. And its much harder to say, no, let them fail. It's going to hurt for a little while, but in the end, we'll have better, stronger, more efficient businesses offering better jobs and a stronger economy. It's hard to ignore the things that sting now and wait for the payback... but this time, like most, the harder way is definitely the better way.
     
  21. freeny macrumors 68020

    freeny

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    #21
    what he said
     
  22. fivepoint thread starter macrumors 65816

    fivepoint

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    #22
    Excellent points. It's important for people to realize that none of this is free. It's not like it's a decision between lost jobs and no lost jobs. It's a decision between:

    A) Bailout: Fewer lost jobs in the short term, TRILLIONS of dollars in debt incuring interest annually, coming inflation, and most likely eventually failing companies which cause more damage and heartache and wealth lost.

    B) Nothing: More lost jobs in the short term, no extra debt, no additional inflation, and pain that we understand and can measure today, faster recovery.
     
  23. leekohler macrumors G5

    leekohler

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    #23
    1. People who go to college and high school merely have a ticket to the party. It doesn't guarantee them jobs.

    2. Most small businesses and corporations are much more comfortable hiring people they know, or someone in the company knows. Bigwigs take care of their friends, and their friends' kids. You can call me crazy, but I see it all the time.

    3. Yes, I'm suggesting that many people in upper management aren't very good and knew someone to get there. Notice I said many, not all.

    4, As far as contrary examples, no- I can't think of any. And I'm sure that Obama also knew people. He's bright, but I doubt it was all merit-based. It's how most things in this country work.




    If we're giving a company our tax dollars, we have a say in how that company in run. They can always refuse the money. I don't know what is difficult to understand about this.

    A mix of both is better. Pure capitalism or pure socialism obviously don't work.

    Do you have proof of this assertion?
     
  24. fivepoint thread starter macrumors 65816

    fivepoint

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    #24
    Economists who's work I read and virtually any free market economist... they all place the majority of the blame on the Fed Reserve who artificially manipulated interest rates with the hopes of increasing housing demand and spurring an ownership society.

    There are those who try and blame the free market, but that is ridiculous. Greed played a roll, but it's not like all of a sudden people got greedy, or all of a sudden people started looking for loopholes. The only thing that has changed is how much the government has begun interfering with the system and determining on their own how to manipulate supply and demand and how certain products/services are valued.

    With an artificially low interest rate, and governmental policies which promoted loosening of loan policies resulted in too many loans being given to people who couldn't afford them, to many houses being built, and a credit driven society vs. our old savings driven society which reduces our ability to cope with economic downturns. When people say that the solution to our economic problems is people saving less and spending more, you know things are backwards!
     
  25. NT1440 macrumors G4

    NT1440

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    #25
    You don't think that anyone who is labelled a "free market economist" isn't going to try to pin the blame on something other than the free market?

    To the italicised: Of course it didnt SUDDENLY happen, business thus far has built steadily upon greed and loopholes for years and its finally falling apart.

    Listen, I dont want complete government control over business, I just want some damn regulations in place so that this kind of crap doesn't happen again. We've seen that the unregulated free market is a joke, its so easily manipulated that eventually it will just keep going in cycles like this. I just dont want greed, corruption, and loopholes being the standard way to run a business anymore, but thats how its pretty much always been.
     

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