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Big 3 CEO’s Take Private Jets to Beg for Bailout
Some disturbing happenings in Washington today as the CEO’s of GM, Ford and Chrysler made their appearances after flying to the capital in their posh luxury private jets to beg for $25 billion of our taxpayer money to avoid going into bankruptcy.
According to ABCNews, GM’s Wagoner’s flight cost an estimated $20,000 roundtrip from Detroit to DC. When asked during the testimony by a Congressman whether they considered downgrading to first class, or would be willing to sell their jets, the three of them just sat motionless.
“This is a slap in the face of taxpayers,” said Tom Schatz, President of Citizens Against Government Waste. “To come to Washington on a corporate jet, and asking for a hand out is outrageous.”
Looking at the video clip, I think a bigger slap is Ford’s CEO Mulally getting off the plane and into a Lexus LS!
Ford CEO Mulally arrives at Dulles and gets into a Lexus!
Personally, I think the government should let the three try to survive on their own. If they had built good quality cars that Americans want to buy, and not overpromised by negotiating absurd deals with the unions (who’d rather see the companies go bankrupt than give any concessions – another story in itself), then they might not be in as deep a hole as they are now. Bankruptcy may be a good thing – giving them a chance to get out of some these legacy costs. Heck, it worked for the airline industry, it can work for auto as well.
What do you think about the bailout for the auto industry?
A Closer Look at the History of Foreclosures
Photo by respres
It doesn’t take long, usually a 5-minute walk in your neighborhood will do, to see that the foreclosure bug is reaching and infecting people everywhere. Last year there were 1.3 million homes receiving foreclosure-related notices.
Foreclosure: “the process by which a promise to repay a loan or debt secured by a deed of trust is enforced against real property. At the conclusion of foreclosure proceedings, the real property is sold to repay the debt or loan at a public auction called a foreclosure or trustee’s sale.” – www.consumer-action.org
The word “foreclosure”, and it’s meaning are becoming much more colloquial these days, and I thought it might be interesting to do a little research and find out when they started, if they have been as bad as they are now, and what lesson’s could be learned from looking at the history of foreclosures.
The first occurrence of mass foreclosures I could find was during the first major American depression or “Panic” of 1819. It was largely due to the rippling economic effects of the war of 1812. Because of falling prices in cotton, banks were forced to tighten their credit, and this resulted in farms going into foreclosure.
Foreclosures also surged during the second largest American depression, which happened in 1837. Again sparked by cotton prices. The rapid speculation of land, and problems associated with a variety of currencies in circulation, caused a number of New York brokerage firms to fail. Also causing at least one bank president to commit suicide, and real estate prices to crumble.
During the Great Depression of the 1930’s, large portions of foreclosures were farms. 1000’s of farmers could no longer pay their bills because of lower demand on food and lower profits. But foreclosures were also hitting the average American home – some estimates say that nearly half of all U.S. urban home mortgages where delinquent as of January 1st, 1934.
Today (as of December 2007), the foreclosure rate had hit 2.2 million (up 75% from 2006). This is a staggering number, but looking back at the history of foreclosures, and seeing the tremendous downfall, and valleys of the U.S. Economy gives me hope that our current foreclosure crises really isn’t that bad. Time will only tell when this economic crises will start to rebound, and although it helps to look at the history of foreclosures, it does seem to hit home when I walk around the neighborhood and see so many fore-sale signs.
The Real Repercussions of a Failed Auto Industry
Ever wonder what would really happen if GM or Ford went out of business? All the talk recently of the government bailing out the American auto industry has just gotten me more frustrated with our government and it’s bailouts. What happened to good ol’ fashioned business? Where you had to make money to succeed, and if you didn’t you failed, and had to do something else. Lately, as the government has rescued business after business, it just makes me wonder how free is our market? I’ve thought, wow, I should work for Ford, or Fannie Mae or AIG, because apparently those jobs are government backed – pretty sweet.
So I decided to do a little research, and figure out what would really be the repercussions of a failed auto industry, to find out if it was really that bad. Let’s look at hypothetical scenario in which GM (the largest automaker at risk) declared bankruptcy and went out of business.
- Job Loss: First, GM would have to layoff almost all of their work force. In addition to those lost jobs, all the smaller companies that feed off the car manufacturer would also be in jeopardy. The Center for Automotive Research estimates that combined, this could be a loss of 2.5 million jobs.
- Unemployment Rate Rises: Last month, the unemployment rate rose to 6.5% adding 240,000 lost jobs to the U.S. Census, which was the highest it’s been since 1991. Compare that with a potential 2.5 million jobs lost if just GM where to go out of business.
- Economy Shrinks: The trickle down effect of having so many jobs lost is pretty large. Almost every facet of American economy would feel the hit. Because less people have jobs, and hence money to spend, there would be:
- Increased closings of small and mid-sized business. Pretty much all the small auto repair shops, car dealerships, and car part stores would feel a massive hit, and probably if not completely go out of business, have to cut down drastically.
- Increased Foreclosures, because more people would have lost their jobs, and their ability to pay their mortgage, there would be even more foreclosures and bank owned properties, which would drive the already dwindling real estate market down.
- Less money collected on income taxes, and property taxes. With less money going back into the economy, there would be less money going towards taxes. That means less revenue for the government, increased national and state debt, and less money for public services like police, firemen, teachers, etc.
So whether you’re for or against the auto industry bailout, one thing is for sure, the effects would be dire. What’s your opinion? Should the government step in and save the auto industry, or let the free market have it’s way? Let us know in the comments.
European Union Officially In Recession, Is The U.S. Next?
Today, the Wall Street Journal reported that the European Union is officially in recession. The EU, which makes up 15 countries in Europe, just completed their 2nd straight quarter of GDP decline, which officially puts them in a recession under the economic definition. This is the first time that the currency area of the euro-zone had two consecutive contracting outputs sense it began in 1999.
Specifically, Ireland, Germany, and Italy, some of the largest EU members have fallen into recession. The news could spark increased interest rate cuts, and could even affect the US.
Since the US and Europe are so heavily linked in the western world, and some might argue that the credit crunch in the US is much stronger than that in Europe, it would be hard to see how this couldn’t be a precursor to what’s to come in the US.
European politicians had insisted the currency area would be relatively unaffected by the credit crunch, which they saw as chiefly a U.S. problem. However, the euro zone has preceded the U.S. in entering a recession.
So far, the response of the European governments has not been as substantial as the US or Chinese, and hopefully that has been enough to fight off what has happened to our friends on the other side of the Atlantic.
What Is The Definition Of A Recession, And Are We In One?
After reading today that the unemployment rate had grown to a 14 year high of 6.5 percent the words “Recession” and “Depression” came to mind. I had a friend tell me recently that his definition of recession and depression was this:
“If you’re losing money consistently on your investments, we are in a recession. If you lose your job, we are in a depression.”
It seems that with the huge surge of foreclosures and the real estate slump, any job in and around construction and home improvement would be in jeopardy already. Throw in a slumping economy where people just don’t buy as much as they used to, and it doesn’t take a genius to figure out that many jobs will be lost.
So to read that the unemployment rate is on the rise caught my attention. Are we heading for a depression? And, if so, are we currently in a recession? This caused me to do a little research to find out if we are in fact in a recession. I read on so many articles that say we are “heading for a recession”. But honestly, it feels like we are already in a recession. So, are we in a recession?