Monday, November 17, 2008


Dean Baker, Prospect - Market Place radio presented a comment by University of Maryland economist Peter Morici on the bailout of the Detroit auto makers. Mr. Morici said that the auto companies will face bankruptcy, the only question is whether it is now or three years from now.

While this is presumably meant as an argument against the bailout, it misses the main argument as to why a bailout is needed. The economies of Michigan and Ohio are still heavily dependent on the Big Three. If these companies go under at the moment, it will mean that a whole group of suppliers suddenly incur large losses due to the money owed to them by the Big Three, which they will not receive, as well as their lost orders. This will lead to a large second wave of bankruptcies as many suppliers go under. In addition, state and local governments will see plunging tax revenue.

While this process will be extremely painful for the region at any time, it will be devastating in the middle of the current recession. The federal government would have to step in with large amounts of money so that governments in the region can continue to provide essential services and to support the unemployed workers. In two or three years we can reasonably hope that the economies of the region have rebounded enough so that they could withstand a bankruptcy, if it occurred.

Portland Press Herald, ME - Child care centers that have kept waiting lists for years are now advertising to fill openings. Some centers are struggling to make ends meet, as costs rise and enrollments decline. A few have shut their doors. The stalling economy has begun to take a toll on Maine's child care providers, as parents lose jobs or look for ways to cut expenses. . . Freid Moses said the USM centers have openings for the first time in years. Some of the parents shopping for care, she said, are coming from centers that recently closed, including the YMCA in Portland and On Our Planet in Cape Elizabeth. . . There is no data in Maine or nationally that shows how many children are in child care. But providers around the country say the trend toward fewer children in child care is clear.

Mara Der Hovanesian, Business Week - Dozens of former brokers and wholesalers say the trading of sexual favors was so common that it came to be expected. . . Investment bubbles always spawn excesses, and housing was no exception. The abuses went far beyond sexual dalliances. Court documents and interviews with scores of industry players suggest that wholesalers also offered bribes to fellow employees, fabricated documents, and coached brokers on how to break the rules. And they weren't alone. Brokers, who work directly with borrowers, altered and shredded documents. Underwriters, the bank employees who actually approve mortgage loans, also skirted boundaries, demanding secret payments from wholesalers to green-light loans they knew to be fraudulent. Some employees who reported misdeeds were harassed or fired. Federal and state prosecutors are picking through the industry's wreckage in search of criminal activity.


At November 18, 2008 8:01 AM, Anonymous Anonymous said...

It's a funny thing, not even much more than a week ago Bloomberg News Asia section was reporting that General Motors Corp., the biggest overseas automaker in China, is in talks with a local partner to increase its stake in a venture that produces vans and light trucks under the Wuling brand.

The U.S. automaker is seeking to buy additional shares in SAIC-GM-Wuling Automobile Co., Hu Maoyuan, chairman of SAIC Motor Corp., said yesterday in an interview in Tianjin. SAIC is the majority shareholder of the venture with 50.1 percent, GM owns 34 percent and Liuzhou Wuling Motors Co. holds the rest.

GM is seeking to boost market share in the world's fastest- growing major economy, where the venture based in southern Guangxi province accounts for about half its local sales.

>From the 1970's on, GM has led the migration of industrial infrastructure to foreign soil.
>GM in the early 1980's began the wave of massive domestic plant closings and shifting production to the newly established foreign and 'off shore' sites.
>Mandated by Congress in the 1970's to increase fuel efficiencies by the early 1990's, GM instead chose to developed and market high profit margin SUV's and HUMMERs-- in response, the newly elected Clinton administration proceeded to relax the CAFE standards, thus letting the Big Three off the hook.

The actions of the other US majors read much the same way.
We've even been through something of this scenario before. Let us not forget the Chrysler bailout.

I say, let the Big Three liquidate some of their vast assets invested in China, Australia, the UK, Europe, Brazil, and Mexico.
It makes no sense having formerly working class American tax payers subsidize the continued erosion of their livelihoods.


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