Will the bailout road ever end?

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By Robert E. Beckner

Congress has been running around in circles since it handed $700 billion in bailout money to one man, Henry Paulson. The proposal was originally supposed to prop up the crumbling mortgage market that was in a crisis mode, but when he didn’t move funds timely to the banks, they started to buy up other banks and increase dividends to their investors, give employee raises and executives bonuses, instead of loaning the money out to citizens they were supposed to help. There were no strings attached to the funds so it was legal what the banks were doing.

So Paulson decides to change tactics and bring into the fold the credit cards, auto loans and college loans, all in crisis, to get critics off his back over the banks and the Congress’s list of taxpayer-financed handouts. Then the big three auto companies flew in on their private jets, with their tin cups in hand, wanting another $25 billion in addition to the money Congress had given them a couple of months earlier. They are only the first of many companies that are lining up for bailouts if the auto industry gets what it wants.

What is exactly involved in the auto bailout? The first sign was when Chrysler and GM secretly discussed merging and then couldn’t find anyone to finance the deal. But they knew the Democrats had made many promises to the auto industry and the unions to get their votes on election day, so they felt they were “owed” a bailout. President Bush said no, but the Democratic candidate said he would approve it on Jan. 20, 2009.

There is no doubt that the big three are in peril, especially GM due to its own fault. The first $25 billion was to have been used to help the industry develop more fuel-efficient vehicles. Ford and GM already had electric (hybrid) vehicles, Ford sells its new Fusion hybrid overseas but not in the U.S. and GM’s Fit could be sold most any day but it is being held back.

The reason Congress took a hard line was a good one. For years the auto industry refused and ignored all the warning signs that its business plan was headed for disaster. They fought pressure to make cars more fuel efficient. They dragged their feet on alternate fuels or electric cars, they just kept turning out bigger and bigger SUVs – gas guzzlers that they claim the public wants. They never mentioned their profit on the bigger vehicles was the real reason to stick to them.

Now U.S. manufacturers are stuck with cars no one wants to buy, and they are saddled with outmoded factories. There is a history here of former giant companies such as Pan Am, ITT and Montgomery Ward that all faded away, only to be replaced by other giants.

It could be that three of the 35,000 GM creditors might force the company into involuntary bankruptcy. If one or more of these three automotive manufacturers are not permitted to go bankrupt now, they never will be. The bailout is all about saving politically powerful corporations.

If the auto industry gets the additional $25 billion now, it will only be followed by billions more. It would also set a precedent for every politically connected corporation in America to follow suit for a bailout.

Robert E. Beckner lives in Majestic Oaks with his wife, Sarah. He is a retired private investigator and insurance adjuster. He has also been a photographer and served with the Military Police in the Marine Corps.