Business

Published — December 12, 2008 Updated — May 19, 2014 at 12:19 pm ET

Considering the differences between two billion-dollar bailouts

Introduction

The auto industry bailout has stalled in the Senate, putting the fate of Detroit’s Big Three and their employees in the hands of the White House. Why did this bailout — or bridge loan, depending who you ask — fail, when the bank bailout succeeded?

Maybe because the public and the legislators they elect are wary of another bailout with a price tag in the billions. That’s not an unreasonable stance, given the recent questions about the implementation of the bank bailout. Last week, the Government Accountability Office questioned Treasury’s oversight of the Troubled Asset Relief Plan (TARP), saying that the department must do more to ensure that banks are actually lending the funds they’ve gotten through the bailout.

The Congressional Oversight Panel monitoring the bailout has also raised questions: 10 of them, in fact. Among the 10 questions outlined in the panel’s first report, released Wednesday, are:

  • “What is Treasury’s Strategy?”
  • “Is the Public Receiving a Fair Deal?”
  • “What is Treasury Doing to Help the American Family?”

Given that the oversight panel doesn’t seem to know the answers to those key questions, it makes sense that legislators aren’t rushing into another industry rescue plan.

But it’s important to understand that a $700 billion bailout and a $14 billion bailout are two very different things, although few (if any) news reports have taken the time to explain the difference.

If the $700 billion bank bailout was paid back at the rate of $1 per second, it would take more than 22,000 years to pay it off. Which makes the $14 billion bailout for the automakers seem like a bargain — it would take a mere 445 years to pay back at the same rate.

Some other differences between the two blockbuster bailouts:

The oversight panel’s report notes that “Congress has told the auto industry to reform its current practices before it could be considered for taxpayer aid,” and asks whether the Treasury Department has required banks receiving aid to “present a viable business plan,” “replace failed executives and/or directors,” or “undertake internal reforms to prevent future crises.”

“So far as I can tell . . . there don’t seem to be any restrictions on any of the banking practices,” said Elizabeth Warren, the Harvard University law professor chairing the oversight panel, speaking on National Public Radio’s Fresh Air.

So while the auto industry executives have been pushed to issue a mea culpa, take $1 salaries, present detailed plans for their industry’s future, and eschew plane travel, similar reforms have not been imposed on financial institutions — despite the fact that the auto industry is seeking far, far less money than the banks have already gotten.

Read more in Business

Share this article

Join the conversation

Show Comments

6
Leave a Reply

avatar
6 Comment threads
0 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
6 Comment authors
install itunes on windows 7Bob FrankstonLinda GordonET69Jello Beyonce Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
sam fetters
Guest
sam fetters

What do AT&T, Verizon and Crown Castle International Corp have in common? The largest institutional shareholders of each includes firms like: Vanguard, BlackRock, State Street (the “Big Three”), Invesco, Fidelity (FMR), JP Morgan, Wellington Management, Geode, T Rowe Price, Bank of America, and other of the largest money-management and investment firms, whom operate collaboratively (even comprising the largest shareholders of each other), forming virtual monopolies amongst the largest “competing” corporations, in most every single industry, via large share holdings. (source = http://investors.morningstar.com/ownership/shareholders-major.html?t=CCI) These are the same firms whom also largely own the third largest telecom, T-Mobile. The own the largest… Read more »

Jello Beyonce
Guest
Jello Beyonce

I’ve a theory that the supposed “Trade Wars” and “sanctions” and political/military strife going on between the U.S., China, Russia, etc. are merely distractions, serving to divert attention away from the growing authoritarianism and Oligarchic control spreading across the globe. “Nationalism” is being used as a propagandist covert means of continued increasing Globalism. As this article states: “A Russian woman stood up to speak at one of these public meetings, and she said that when she lived in Russia, the government slam dunked her and she had no say,” King said. “Now she lives in the United States of America,… Read more »

ET69
Guest
ET69

Marx was right about capitalism . Capital gets more and more concentrated in fewer and fewer hands. There is no way out of this greed. We need socialism!

Linda Gordon
Guest
Linda Gordon

5g is a kill grid. The depployment of this weapon is an act of terroism genocide and ecocide. The marketers need to be jailed as terrorists.

Bob Frankston
Guest

The real issue with 5G is that it’s an attempt to roll back the Internet and return to the telecom of the 1970s when the phone company controlled all.

install itunes on windows 7
Guest

I have read the post and it is really helpful as I have got to know about the 5G wireless cities which are accepting the technology and other cities which are rejecting it.