Originally Posted by erinys
Okay, can I ask why we can rush right away to give yet another bank(Citigroup) 20 billion dollars, yet we dither around and make demands on three companies asking for 30 billion dollars? Specifically referring to the Congress-critters on this - as far as I know, none of them are raising any red flags over the damn bank loans that they are handing out like candy on Halloween. But the auto companies come and they all start hemming and hawing about how the companies can change this and the unions need to give in to corporate pressure. Oh, and then they'll think about it.

Actually, they are very different entities and because of that present very different risks to the economy. Citi, if it were to go bankrupt, would put at risk not only their own business and the loans they hold, but would be the breach of the dike that would unravel the whole financial system.

Remember that the current world financial system is very fragile and based on a great deal of interconnectedness and trust among players in the system. One major part of it fails and the pyramid of cards could fall in a heap.

Any or even all of the big 3 going into bankruptcy would be quite different. Placing a business into BK doesn't have the effect of stopping the business. some major corporations have operated in BK for years and years and have actually increased their business and strength over time during the process.

The loans to Citi give the government a substantial ownership and decision making interest in their operations. Doing the same for GM, as an example, would be much more problematic. Adding a government agency to the mix of figuring out how to pull the auto makers into profitability does not sound to me like a good idea. There are just too many fingers in the pie under that scenario and likely important decisions would be even harder to make.

That being said, loans with strings and specific requirements to auto makers may be warranted. I am concerned, as I think we all are, with the overall debt-building going on.

We have added $700B in the current bailout package, Obama is apparently going to ask for an additional $700B stimulus package, and it is likely that will not be the end of it.

Now if we could just rapidly scale back the defense budget, maybe we could find a way through all this.


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