The Bailout funds may be used up before you can say $700 billion
When Congress approved the original bailout plan, they told former Treasury Secretary Hank Paulson that he could have $350 billion to do as he saw fit, but that they would have to approve release of the second $350 billion. As it turned out, the new administration gained control of the second installment of the bailout.
The Obama administration has requested the $50 to $100 billion be directed towards the foreclosure crisis. What exactly they plan to do with the funds is a mystery. No additional facts or strategy were forthcoming.
According to Politico.com, ‘Politico reported earlier this week that President Obama could be forced to seek more bailout money before the President’s Day recess in mid-February. ‘ Those in the know suggest that the new administration will be asking for an additional $50 billion.
This next $400 billion in bailout funds appears to be just the tip of the iceberg. Many experts predict that the Obama administration will be back before Congress with requests for much, much more.
The Big 3 automakers – poor sales, poorer decision
The early evidence suggests that the bailout of the Detroit automakers was nothing more than a short term fix to an escalating problem. It might be better to describe it as trying to catch a falling anchor covered in grease.
GM just received another $5 billion, as a second installment from the government. This coincided with the announcement that GM was no longer the leading auto manufacturer in the world, losing that title to Toyota. GM is still eligible for yet another $4 billion in bailout money if they can show the government that they have implemented plans to change their existing business model.
Are we heading towards a nationalized domestic auto industry? One forum writer suggested that it would only be a matter of time before the government offered ‘tax incentives to buy the cars that they produce.’ Before this all becomes a vacuum for taxpayer money, shouldn’t we just allow the bankruptcy process to take its natural course?
If the Big 3 fail, so does the supply chain
Others argue that the chain of companies that supply the Big 3 employs more people than the Big 3 does. The argument in favor of auto bailouts says that the supplier chain is on such shaky ground already that bankruptcies of the Detroit automakers would ‘exacerbate the current recession.’
The argument against a bankruptcy option says that the Big 3 owe suppliers nearly $3 billion currently. The suppliers are operating on a shoe string budget, with the lowest profit levels since 1992. The bailout would prevent a domino effect. When does it all end?
