Americanly Yours

The American people and Congress may have rejected a bailout for the automakers, but in his infinite wisdom (and apparently infinite power, as I was unaware that a President could circumvent our Constitution and our laws to enact legislation without the consent of Congress), our President has thrown Chrysler and GM a lifeline by giving them $17.4 billion.   Remember, Chrysler is the same company whose owners would not contribute their own billions to save, so clearly this is another smart investment from the Federal Government.  Luckily, Ford has announced that it doesn’t need the money and will not be requesting any.  With this new bailout, the government now has the right to purchase stock in the two companies and place them under governmental supervision.

President Bush, thanks for Socialism!

The government that is supposed to represent you has taken your money through taxes on your hard work and is using this money–without your permission or even your approval–to purchase stock in two failing auto companies.

Do you still think Robin Hood was a great man?

This act completely violates the basic core principles of both Democracy and Capitalism.  The principles of Democracy are violated because the government is acting without the consent of the people, and is in fact acting opposite of the desires of the people.  The principles of Capitalism are violated because the government is taking ownership in two more American companies, placing factors of production directly under its control.

Does anyone really think that $17.4 billion can save the automakers?  This money is just an excuse for the government to put more money into the companies in the future to protect their initial investment.  In poker, you are called “pot committed” when you have a large enough amount of money in the pot to justify calling a bet that you know you will lose.  In the investing world, this is called throwing good money after bad money.  I thik the investors have it right this time.

Americanly Yours,

Phred Barnet

When I was young, I read the children’s book If You Give A Mouse A Cookie. You can find the book here, but the book starts off like this: “If you give a mouse a cookie, He’s going to ask for a glass of milk. When you give him the milk, he’ll probably ask you for a straw…” The mouse keeps on asking for more and more, using each previous request as the basis for why he should get another favor.

With people saying things like “Well, we bailed out AIG, it isn’t fair for us to not bail out GM,” I have been thinking about this book a lot lately. People have been using flawed logic by saying that because we bailed out one failing company, we ought to bail out the next failing company. It was wrong for us to bailout Bear Stearns, AIG, Citigroup, or any of the hundreds of other businesses that the government has bailed out and taken an ownership stake in. Just because we have committed several wrongs doesn’t mean that we need to abandon what is right and continue doing wrong. Think about someone who is on a diet, but splurges once and eats a piece of cake in a moment of weakness. Should that person then eat a cookie, a cheeseburger, and a plate of delicious Chicken Wings because they have already fallen off the wagon, or should they admit they made a mistake and return to their diet?

Our government made a huge mistake in bailing out Bear Stearns. This led to the government being asked to bail out more and more companies. Using the flawed logic that I described above, the government bailed out more and more companies, not wanting to be “unfair” to any company or industry. In doing so, our President and Congress were unfair to the American people who are to be saddled with the large debts created by the costs of the bailouts which we do not support.

It might not be as good of a children’s book as If You Give A Mouse A Cookie, but here is an excerpt from my new book entitled If You Give Bear Stearns A Bailout:

If you bailout Bear Stearns, they will ask you to bailout AIG. If you bailout AIG, they are going to ask you to bailout the rest of the financial industry. If you bailout the financial industry, they are going to ask you to bailout the auto industry. If you bailout the auto industry, they will ask you to bailout the airlines…

We should have told that “mouse” no.

Americanly Yours,

Phred Barnet

The American People do not want the auto industry to be bailed out. According to a poll conducted by CNN, 61% of Americans surveyed are absolutely against any federal bailout of the American auto industry. Additionally, the majority of voters in every single region of the country are opposed to these bailouts, including 53% of people in the Midwest (these are the people most likely to be affected by any auto industry bankruptcies). 70 percent of Democrats, 62 percent of Independents, and 55 percent of Democrats are opposed to these bailouts. Simply put, this is an issue on which there is an overwhelming amount of agreement. The American people do not want to see their money wasted on bailing out failing automakers.

Chrysler is a privately owned company which is 80% owned by Cerberus Capital Management and 20% owned by Diamler AG. Both of these companies have billions of dollars in cash on hand, yet the parent companies of Chrysler have refused to inject more of their own money into their failing subsidiary. If, as the automakers are claiming that they only need money to temporarily get them through an organization process, why wont the owners of these companies temporarily inject the money into the companies? Probably because they know that it is a bad investment and that they are not likely to receive their money back. If the owners of Chrysler are unwilling to put their own money into Chrysler, why should the American people be FORCED AGAINST OUR WILL into spending OUR money on a bailout? Additionally, the Ford family has billions of dollars in personal assets. If they want to save their company, maybe they should use their money.

Speaking of Ford, of the Big 3 Automakers, Ford is the only one not in horrible shape. Since taking over two years ago, CEO Alan Mulally has begun to implement a vast turn around plan called “The Way Forward.” This plan has been relatively successful, and has already resulted in billions of dollars in cost savings, and will continue to help the company. As a result, Ford is the only American automaker not in immediate risk of collapsing. According to company reports, Ford expects to turn a profit in 2011, while GM and Chrysler haven’t bothered to give the American public any timetable for when they will be able to return to profitability. Both GM and Chrysler are said to be within weeks of collapse, and GM has already hired a team of bankruptcy lawyers. By bailing out GM and Chrysler, the government could be hurting Ford’s prospects of recovery.

Congress, President Bush, and President-Elect Obama should respect the wishes of the American People and allow these automakers to fail—or succeed on their own.

Americanly yours,

Phred Barnet