Serious question.

[weaklingrecords]

Can anyone explain in tiny little words that I am able to comprehend why it is that the auto industry is getting the big phat finger from the Feds while the banking industry, the airline industry, the insurance industry, and the mortgage industry all got ridiculously sweet handouts? I mean, if the federal government is going to take over

Comments

[pixidala]

I'm not an expert, but I'll try.

The biggest issue that I've heard concerning the auto industry is that if one industrial company is bailed out by the government it sets precedent and opens the door for others to ask for assistance (and certainly the auto industry isn't the only manufacture in this country that is really hurting at the moment). There are politicians speaking up for industry (for example, Gov. Ted Strickland in Ohio asking Bush to declare a "financial disaster zone" after DHL decided to pack up and leave the state), but they are few and far between. The airline industry receiving federal assistance looks like government helping industry, but it's actually government helping keep transport options open (ie: the methods wherein people and goods can travel in and out of the U.S.) rather than the manufacture of aircraft (Boeing's not getting a big buy-out from the government). About the only time that there has been a government-saving measure towards industry is when a particular industry has been deemed critical to national security (this has been one of the few rulings that has saved the U.S. steel industry). Since consumer goods manufacture in the USA has been going downhill for 30+ years, I think many politicians (especially from states that have little history of industrialization, esp. South and West), see it as outside the current financial crisis, and therefore not a part of "this issue."

The other big thing in all of this is that the government is not insured by or invested in the American industry the way that they are in financial institutions like AIG, Freddie/Fannie, etc. If a huge financial corporation goes down in flames, that decreases the ability of the government to get cash quickly, work on credit, and be properly insured. Government endowments plunge, the currency grows weaker, the ability to get funding for federal projects (including wars) diminishes. In essence, if Wall Street crashes completely, it may in fact cripple the U.S. financial machine to such an extent that even the government will not have the liquidity or credit to function.

It could be also that the auto industry just doesn't have enough friends in the current administration. Of course, this will change as of January. I expect that a good bit of the current financial legislation may be repealed by the Obama administration.

[i_am_vidoq]

I thought this was also a good article in the WSJ (my employers get the NY Times, Washington Post, and WSJ at work so lucky me):

Detroit's Small Car Discount