Auto Bailout Collapses, So What?

For a whole lot of obvious reasons, this is pretty much all anybody seems to be talking about today:

CNN: Auto bailout collapses in Senate

Deal to move forward on $14 billion stopgap measure falls short, possibly dooming GM and Chrysler to bankruptcy.
The future of the U.S. auto industry was in doubt Friday morning after a proposal for $14 billion in federal loans died in a late night Senate vote.
The Senate voted 52-35 to bring the measure for a vote -- short of the 60 votes needed to advance the legislation. The failure followed the collapse of negotiations between Senate Democrats and Republicans seeking a compromise that both parties, as well as the companies and the United Auto Workers union, could accept.

*sigh*

It's disappointing, but hardly surprising that so many people insist that a bailout of the Detroit Three is the key to saving their bacon.

Save them, so they can do what, exactly? So they can continue to piss away money and shareholder value?

Save them so they can keep making uncompetitive automobiles?

Honestly, restructuring under Chapter 11 is probably the best thing for the automakers in the long run.

Way back in in the depths of history, there was just as much doom, gloom, and boo-hooing about permitting airlines to go bankrupt.

Today, airlines seem to go in and out of court-ordered restructuring on a revolving schedule. Somehow, amazingly, air travel hasn't ground to a halt.

The fact is, the Detroit Three need to be destroyed in order to be saved.

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Truth Funnier Than Satire At Chrysler

The ersatz Big Three Bailout ad that I posted yesterday is droll, but not nearly as hysterically funny as the masthead on the splash page of one of Chrysler's websites:

Chrysler:

It's not a bailout to keep us from failing.

IT'S A LOAN TO HELP US SUCCEED

Oh, please. It's a little late for that, isn't it?

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Sympathy for the Devil: Henry Paulson's not such a bad guy, really.

There's been a lot of snarling in the blogosphere this past week about US Treasury Secretary Henry "Hank the Hammer" Paulson's cheeky attempt at an end run around the judicial and legislative branches in the initial language of the proposed bailout package. To wit:

Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

But let's put this in perspective. Paulson has only been in charge of the Treasury for twenty-seven months, and the mantle of public servant has likely not yet settled well on his shoulders.

Don't forget that Paulson has spent his entire adult life as a dealmaker. What's that line about taking the tiger out of the jungle? Negotiation 101 is that your initial offer should ask for the sun, the moon and the stars. Everyone from car salesmen to labour union negotiators to peddlers in the merchant's quarter of Marrakesh know this. Aim high: likely your counterparty or their lawyers will tell you to go to hell and reply with a counteroffer significantly lower than what you asked for. And if your counterparty is caught napping and doesn't read the fine print, well, high-fives all around, and the drinks are on you!

I don't honestly believe Paulson's initial plan included this clause out of desire to assume the title of the Antichrist, I think it's just second nature to him (and by extension his staff) to start the negotiations with the most outrageous, self-serving conditions imaginable. That's how deals get done: ask for $700 billion, a white Rolls Royce, green M&M's and a shetland pony. If that fails, settle for $700 billion.

Never mind what a total schmozzle this whole bailout proposal has been, and will continue to be, democracy lovers should take heart that Congress didn't just roll over for him. That implies that the system still works, sorta.

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