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April 1, 2009

There is a double standard in bailout funding

By Paul Karsh

There is a double standard in the way bailout money is disbursed. The manipulators of wealth are favored over the creators of wealth.


The Obama Administration's firing of Richard Waggoner as CEO of General Motors demonstrates once again the governing elite's double standard in its dealings with the auto industry as opposed to Wall Street. They continue to insist on micro-managing the auto companies in return for tens of billions of dollars in loans and credit lines, while essentially looking the other way as they give over hundreds of billions to support grossly overvalued speculative instruments. Any informed, critical thinker understands that the bonuses paid to individuals who crashed the economy, while certainly a target for righteous rage, are small change compared to hundreds of billions given to these institutions while allowing their executives and boards of directors to remain intact.

If anything, it should be the other way around. Compared to the banking and investment houses, the automakers have made good faith efforts to fix themselves. Ford has not asked for any bailout funds, but only for possible lines of credit to compensate for the financial seizure brought on by the banks' gross mismanagement of their affairs. Snide remarks about Fiat aside, Chrysler has at least sought out a savior. While GM's management is an easy target for criticism, there are knowledgeable individuals who say that Waggoner was at least moving in the right direction, albeit not quickly enough. The metaphor can be taken further. The auto companies employ substantial numbers of blue collar workers who actually create wealth by turning raw materials into useful goods. Their white collar technical workforce uses its skills to advance technology and bring the fruits of human ingenuity to bear to improve efficiencies in production and consumption. Yet the automakers are required to submit detailed plans for their recovery, and these plans have to be "approved" before they can be helped.

The banks and investment houses, on the other hand, appear to have made only minimal and nominal efforts to right their wrongs while demanding bailouts from the taxpayers. Under the best of circumstances, financial institutions serve the economy by deploying capital where they see a possibility or an expectation of being able to share in the wealth created by someone else's initiative and enterprise. In the present situation, they have not even done that. Instead, they have created speculative bubbles, generating imaginary wealth which vanishes when the bubbles burst. Now the cabal that commands our economy is trying to make its imaginary gains real by pulling a reverse bank heist. "Just give us the money and nobody gets hurt." An accounting of how bailout funds are spent, how these funds restore the flow of credit, or any of the demand for anything corresponding to the level of detail demanded of the auto company is either an afterthought or not present at all. Banks can go ahead and acquire foreign assets, continue to charge usurious interest on credit cards, pay extravagant bonuses, and otherwise ignore the interests of the people in favor of their own short-term, short-sighted, desires.

Years after the fall of the Soviet empire supposedly discredited the Marxist ideology, the American  leadership cabal acts to support Marx's assertion that "All history is the history of class struggle." Contracts that guarantee bonuses to executives who crash the economy are sacrosanct, while contracts between automakers and the UAW are subject to renegotiation, whether on the orders of auto executives or by the edict of Senators who proudly proclaim themselves the class enemy of ordinary people. The manipulators of wealth are bailed out with no questions asked while the creators of wealth are raked over the coals and micro-managed. So long as this bias persists, attempts to revive the economy are likely to be ineffectual. The financial system must be radically restructured to its proper place as the servant to those people and institutions that actually create wealth.

Authors Bio:
I am a sometime software quality assurance engineer who lives in Martinez, California. These days I amuse myself by playing harmonica. The harmonica is a wonderful musical instrument. It is easy to play, expressive, cheap, and portable. I always have my harmonica in my pocket. If there's ever a blues emergency I'm ready.

For many years I tried to get away with not thinking because it made my brain hurt. You might say, though, that the last eight years or so drove me to think. I participated in the 2004 and 2006 political campaigns, which was something I hadn't done since the halcyon days of Clean Gene McCarthy.

As I am currently out of work I do have too much time on my hands. As I do occasionally have an opinion about something and as I am told I write well the thought has crossed my mind to find a writer's group and turn myself in. Failing that, this Web site seems to be unusually hospitable to word slingers. We'll see what happens.