Monday, October 27, 2008

Attack of the Bailout Behemoth

We've already heard that the insurance and automotive industries are nosing up to the trough for money money money from Uncle Sam — meaning Us. The US slot is payin' big time, and the bigger you are, the bigger you get!

The Christian Science Monitor has a nice little survey of the Mighty Morphin' Money Machine.

Now, the US (unlike the British) has included NO requirement that banks actually dole out the money they get. As many have noted, Goldman Sachs et al. could just sit on that pile of dough until hell freezes over — or until it's Bonus Time in Bloombergburg.

What the insurance industry or the car makers will do if they get on the gravy train is anybody's guess. But we can safely say it won't involve cutting insurance rates, lowering car prices, or guaranteeing a better product (e.g., affordable hybrid autos).

Back in the 80s the US car makers moaned and moaned and moaned — "boo hoo boo hoo, if only we could get a little breathing space from the Japanese, we could improve our cars and become more competitive". The Japanese gave in to the sob story, voluntarily restricted exports to the US.

What did Our Glorious Car Makers do? They raised prices.

The Shape of Things to Come.


Broken Securities Industry Still Has $20 Billion to Pay Bonuses. Bloomberg, 27 October 2008.
Five straight quarters of losses and a 70 percent slide in its stock this year haven't stopped Merrill Lynch & Co. from allocating about $6.7 billion to pay bonuses.

Goldman Sachs Group Inc. and Morgan Stanley, both still on track for profitable years, have set aside about $13 billion for bonuses after three quarters, down 28 percent from a year ago. Even some employees at Lehman Brothers Holdings Inc., which declared the biggest bankruptcy in U.S. history last month, will get the same bonus they received a year ago.

Merrill Brokers May Get Big Bonuses to Stay
. New York Times, 24 October 2008

Car makers may be next up for bailout. CNN, 27 October 2008


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