Driving a Dumb Bargain

By Keith R. Schmitz

How numb are we to the financial bailout?

The Bush administration has handed out $350 billion in emergency money to help out financial organizations in peril and to save our economy from supposedly going over the cliff.

Now what? The AP has inquired into where the money has gone -- something probably not done by our government to date -- and are hearing from the banks...nothing.

But we shouldn't be surprised. Regulation by the Bush administration of practically anything over these past eight years has been non-existent. Yes we can't.

$350 billion. It took the Bush administration about three years to painstakingly blow that much money in Iraq.

But here's the really amusing part.

Outrage II. The Big Three hat in hand approach Congress ask for dough to carry them over their financial troubles. True, these operations could have been better managed but what ran them on the shoals? Tight credit.

Why? Brought to you by...the financial meltdown -- perpetrated by the banks and financial houses propped up by the huge bailout. Your money as the local TV stations like to point out.

The circle will not be unbroken.

Here's where the irony thickens. Congress fell all over itself to help out the fat cats who produce essentially nothing and get rewarded billions for their so-called work.

The American auto industry -- and their unions -- get hauled up on the dissecting table with demands that every dime gets an accounting. These operations manufacturer something. We as a country have been falling behind in that category over the past few years as many of you know.

Blasted the most was the "bloated" union wages. Jim Cramer on Hardball has just pointed out that the pay given out to any one off the heads of the Wall Street firms is as much as a whole factory full of union laborers.

And we fretted after 9/11 that irony was dead.

Collateral Damage

By Keith R. Schmitz

Excellent piece by John Torinus in the JS Biz section about the harm caused by the attacks on the auto bailout package by southern Republicans in the Senate.

In their attempts to swing a knife at the car company unions, the caucus of Confederates will gash open the suppliers who feed parts, subassemblies and services into the auto industry.

Torinus reminds us who the real victims of scuttling the bailout will be:

Vendors produce about 70% of the parts that go into a new car, and they are almost always better managed than the automakers. In many cases, automakers outsourced parts to get away from the union and management problems of the car assemblers.

Companies such as Strattec and Johnson Controls are among the leanest and best manufacturers in the world. They are good enough to supply Asian and American car companies.

Yet top-quality vendors will suffer the most collateral damage from a meltdown in Detroit, a crisis caused in large part by mismanagement on Wall Street and in Washington, D.C., of the financial and housing industries. The same politicians wearing angel wings in the debate over the future of the auto industry were presiding when the financial crisis was being created.

It should be emphasized that many of the suppliers radiate beyond Detroit and a good number of them are here in Wisconsin. The car makers go into backruptcy and these fine companies will see pennies on the dollar for goods and services bought over the past months, blowing holes in the already fragile finances of these companies. The fresh start for Detroit would be fatal wounds for their suppliers.

This is yet another example how divorced many conservative, so-called "business-friendly," politicians are from not just from reality in general but business reality in particular.

You Deserve a Break Today

Bu Keith R. Schmitz

From the Washington Post by way of the dailybeast.com:

The government has not yet aided struggling homeowners directly, but the Fed is considering relief for credit card holders. The Washington Post reports the Fed will vote on Thursday "on sweeping reform of the credit card industry that would ban practices such as retroactively increasing interest rates at will and charging late fees when consumers are not given a reasonable amount of time to make payments." The proposal includes a ban on raising the interest rates on credit card debt unless the customer was more than 30 days late in paying the minimum. If the Fed approves, it will be, say consumer advocates, the biggest overhaul of the credit card industry in decades. "It covers a lot of issues and is really unprecedented in its scope," said the CEO of the American Bankers Association. "You add them all up, it's going to mark the beginning of a new market."

About time isn't it?

The amazing thing is that despite the free hand the credit card industry and banks had to literally rape card holders and their sky-high profit margins they enjoyed through financial and political power, the government had come in and rescue them. Government saves the butt of capitalism again, though the current one had much to do with the predicament.

And these perps walked away with a lot more than will be saddled on Detroit. What an amazing testimony to malfeasance and their enablers in government.

Yes, there were people who lived beyond their means using plastic and some personal responsibility is in order. But then there is the fact that about half folks racking up credit card debt was brought on by financial pressures fueled by health care costs. When their income wasn't enough these people turned to their cards to try to make it through on just basic living expenses. Not a good strategy but for many of them their only strategy.

These "Masters of the Universe" as coined by Tom Wolfe in "Bonfire of the Vanities" proved they more than anybody lack both professional and personal responsibility and have more than earned any regulations this Congress and administration can hammer out for them.