Speaking Jose…


An 800 Word Rant on the Auto Bailout
November 13, 2008, 11:58 pm
Filed under: Events, politics | Tags: , , , ,

Two and a half years. That’s how long I’ve been working on my MBA so far (its a part time program). Spent the last two years learning how to read a balance sheet, how to calculate net present value and internal rate of return, how to talk to creative employees versus analytical employees. I might as well have gone to Culinary School. The free market ideology is getting its butt kicked (with help from a Republican President no less!) and everyone seems to be getting in line for the payout.

Here’s my beef with the bailout for automotive companies, its not that they shouldnt get one. We already threw out the concept of government interfering with financial markets a few months and $700 Billion dollars ago. Washington D.C. has already set a precedent and for better or for worse, they will likely do a bailout. Whats really ticking me off is that no one seems to really be upset about this (minus some libertarians) and that no one in Detroit seems to be asking “Do we deserve a bailout?”

Bailouts should be reserved for extraordinary circumstances outside of a company or industry’s control. The airlines were bailed out after September 11 because of the harm caused to the industry from outside, non-economic forces. Fannie and Freddie did not get into trouble because of some unexpected outside force, they started down that path because of bad management and a government that turned a blind eye to the situation until it was standing in front of them screaming like a 5 year old throwing a tantrum at Toys-R-Us. Similarly, the majority of banks and the insurance giants got into trouble by using risky business practices and not being able to rectify their activities in time before it was too late.

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