Ken Lewis says that “two of the struggling Detroit automakers should combine and prove to the government they are worthy of a $25 billion rescue package.“ It’s statements like that, that make me worry about Bank of America pulling through this financial crisis. Mr. Lewis is proposing that two failing companies combine so that they can be an even bigger failing company? I am unable to comprehend how this is a good thing. US automakers have been in trouble for years. There’s a reason that foreign cars are the best sellers in this country.
I’m sure most people know that US automakers have fallen woefully behind. A bailout isn’t going to help very much, it will just slow down the inevitable. Some fundamental changes have to be made in the US auto industry. Megan McArdle gives a very good explanation of one problem that the auto industry needs to overcome in order to survive. Chris Yeh has another perspective on helping banks but letting automakers fail. Perhaps failing may be the best thing for the auto industry. Certainly, funding a failing industry that is unwilling to change should not be an option.
Speaking of funding failing companies, I’ve seen news blurbs about financial companies, such as GMAC, wanting to convert to banks. One thing that some of these companies have asked for is to be considered for part of the bailout package if they buy a struggling bank. In case you missed that, let me repeat. By buying a struggling bank or converting, certain financial companies want a piece of the bailout package.
Personally, if someone brought that proposal to me, I’d have them unceremoniously kicked out of the front door. People are already leery about the bailout package in general. Now these other companies want us to fund their poor investment choices or give them a handout because they want to become a bank? If they want to buy a poorly leveraged company, that’s their choice. But expecting US taxpayers to kick in is just wrong.
Frankly, just bringing that proposal to the table makes me leery of their business sense. Also, if you’ve decided to apply to become a bank after TARP was announced, you should be automatically excluded from receiving those funds. It’ll be interesting to see how all this plays out.
