No help or wrong help for Detroit?

Let's keep in mind that when you say government, you are really talking
about me, a taxpayer, and when you are talking about government money, you
are really talking about my money, paid via taxes. The government produces
no goods or services, they merely collect money from us to pay for things we
need and want, like defense, highways, and, yes, pork in too many cases.
Point is that when the gov't is running low on money, it can't simply print
more. I know that seems like a logical answer, but as anyone who has
studied Economics 101 will tell you, that just ain't gonna happen, homie.
All that can be done is to cut spending or raise taxes. Republicans like
the first option, Democrats lean on the latter.

The Chrysler bailout wasn't solely about money. It had a lot to do with the
fact that America as a whole did not want to see a near-monopoly in domestic
car manufacturing. AMC had left the scene years ago, and if Chrysler bit
the dust, that would have left just Ford and GM. These two are so close to
one another as it is that it is very hard to tell one from the other anyway.
Bottom line--having three competitors is better than two, and we can all
admit that, while Chrysler may not be the best car in the world, they are
certainly more innovative that Ford and GM combined. The Prowler, the
Viper, the PT Cruiser, 300M, etc. are definite examples of forward thinking
in the domestic market, and sales reflect that.

The government probably did back the bailout for Chrysler because, well,
honestly, who else could have? It was either that or no more Chrysler. In
hindsight, it was a good move and the market benefited by having now more
choices in domestic cars. Not only that, but prices are kept lower due to
the extra competition. Another point to consider was the huge tax base
revenue that would have been lost if Chrysler went under. The government
was not unaware of the large tax base created by Chrysler and the huge
revenues generated by taxpaying employees, either.

From my perspective, being a car enthusiast, I like competition. I like
choices. I love lower prices because of competition. I am not a domestic
vehicle purchaser, although I did buy a Lincoln Navigator for my dogs, but
as long as they are out there competing with all the other cars, I figure
that is a good thing for me.

As far as risk? There is always a risk. You can reduce it, but you cannot
eliminate it. This isn't a perfect world. There was never a guarantee that
buyers would buy Chryslers, but fortunately they did. Now, from what I can
see driving on the roads, it appears that Chrysler is at least as well off
as Ford and Chevy, or close to it. And, speaking as a taxpayer, we didn't
have to pony up any money. Chrysler did make it all back and made good on
the loan, so at the end of the day, everything turned out alright.

 

Hmmm...looks like I was slightly off on my previous post. I forgot about
the banks involvement, although if the government signs a "loan guarantee",
they are a co-signer, which would make them liable if the banks defaulted.
The notion that the banks would default may have been extremely thin, almost
non-existent, but the co-signer is still on the hook until the loan is paid
off, no matter who you co-sign for. I was pointing out that all the money
the government has is money they got from us, and any payouts they would
have made would have been with our money, since they don't have any money
themselves.

 

Keep in mind that, to Brent, words do not have precise meaning. That is
clear in almost every post he made here (and in many posts in the past).
Since to him words have no precise meaning, he gets to accuse anyone
of playing a semantics game if they challenge him on some of his
ridiculous statements. (Examples: Pretending that "loan guarantees" =
"bailing Chrysler out with taxpayer money", and "No risk means the
government was not needed".) He's like the people who see nothing wrong
in misleading the public by, with a straight face, describing the
proposed UAE port contract as the proposed "selling of our ports to
them". If you nail them on the dishonesty, you get accused of playing
semantics.

Bill Putney
(To reply by e-mail, replace the last letter of the alphabet in my
address with the letter 'x')

 

Yes indeed. The flaw is in your cognitive abilities, as it seems. See, if
a company has lots of assets but no cash, that's a problem, because if
they sell their assets (such as factories, production machinery, and so
forth) to raise cash, they no longer have the assets, and without the
assets, they cannot function. Assets *AND* cash are necessary.

There...now, that wasn't so hard for you to understand, was it?

 

The government typically floats treasury bonds to finance debt. They
don't have to cut spending or raise taxes...just float some bonds and
everything is peachy again.

 

If the corporation had free and clear title to so many assets they didn't
need the government as a co-signer.

 

I think I made that clear before. That's why the various terms are just
semantically different IMO.

 

When the borrower defaults it doesn't make much difference if you are the
lender or the cosigner in the end. It only makes a difference regarding
the pile of cash the loan comes from. Which is neither here nor there
regarding this thread's initial topic IMO.

 

Ok mr smarty pants that needs to be insulting, riddle me this. I have
good credit. If I am low on _cash_ I go to the bank and get a loan on my
assets. I don't need the US government or anyone else to co-sign my loan. My
good credit rating and my assets to secure the loan are enough.

Obviously, Chrysler corporation had more than a cash flow problem, if it
was just being cash poor and asset rich, a bank would have loaned them
money secured by the assets and their good history of paying back loans.
Obviously there is a flaw somewhere if they needed a cosigner. (the
federal government of the USA)

 

Good. Now you can quit blathering about "bailouts" that never happened and
"semantic games" that aren't happening, either.

I'm sure for the sorts of loans you've gotten in the past, that's been so.
Do be sure and let us know how it goes when you ask for a
$3,047,590,660 loan without any co-signers (that's the amount of the
Chrysler loans translated into 2005 dollars).

 

Cute way to try and make into something else by translating the amount.

You and the rest of the chrysler crew in brand loyalty fashion are
arguing that the assets where there to cover the loan. If the assets are
there to secure the loan it doesn't matter if the loan is $10 or
$10,000,000,000 provided the assets can be foreclosed upon and sold for
the outstanding balance.

Obviously there was considerable doubt if chrysler could a) pay back the
loan, b) that their assets could be sold for enough to cover it.

 

Ok mr smarty pants that needs to be insulting, riddle me this. I have
good credit. If I am low on _cash_ I go to the bank and get a loan on my
assets. I don't need the US government or anyone else to co-sign my loan. My
good credit rating and my assets to secure the loan are enough.
[/QUOTE]

Ah, but you see there's something different between you and Chrysler
at that time.

The bank isn't loaning you money on the value of your CURRENT assets.
They are loaning you money based on the value of your FUTURE assets.
As long as you alive and healthy, and of working age and not just about
ready to retire, the bank is viewing your warm body as being able to produce
in the future, and that production is worth something. You don't need the
banks's money
to go dig a ditch, and that ditch digging is worth something to someone,
which
makes it worth something to the bank.

With the Chrysler loans, the only future assets were the ability to sell
cars. The
banks (and most people) didn't believe Chrysler could do this at that time,
and
theres no guarentee that if you give a company a pile of money that they are
instantly going to be able to go out and sell a whole bunch of product. The
bank wasn't so much worried about Chryslers credit rating, after all it
wasn't
like if the company got money in the future that they would be able to run
away
from the banks. Nor were they concerned much with Chrysler's current
assets - because there's no guarentee those assets would be available in the
future when the time came to pay back the money. That is why they needed
the US Governments guarentee.

No they wouldn't. Business credit is a totally different animal than
personal
credit. When a bank contemplates a loan to a business they don't concern
themselves that much with the businesses credit history, in fact they don't
care even if the business is deeply in debt. All they care about is if the
future
value of the business is going to be more than the money that is owed to
the bank. If it is, and if the bank wants it's money, the business isn't
going to
be able to get out of paying the money back, simply because it is impossible
to conduct business without the aid of a bank - the bank always has a big
bat they can hold over the business.

Individuals, by contrast, can get a big fat loan and then suddenly decide
they
are going to quit their job and go get a job that pays under the table, and
they are going to do cash only, and so on. It's a lot harder for a bank to
get it's claws into an individual if that individual is determined to keep
money away from the bank.

Ted

 

Only if your assets are unencumbered.

Only if the assets were unencumbered.

 

wolfpuppy wrote: "There was never a guarantee that buyers would buy
Chryslers, but fortunately they did. Now, from what I can
see driving on the roads, it appears that Chrysler is at least as well off
as Ford and Chevy, or close to it. And, speaking as a taxpayer, we didn't
have to pony up any money. Chrysler did make it all back and made good on
the loan, so at the end of the day, everything turned out alright."

When the government help Chrysler, they also bought Chrysler products and
not other manufactures under a mandate to help the business. Yes, the
public did start buying Chrysler products also.


Sarge

 

You may need the government to back your loan if you need to borrow the
amount of money needed to float a major car manufacturing company!

 

Excellent, Daniel. You nailed it right on this time.

 

A point of interest being missed here is that while the assets are, indeed,
worth money, they can't really be sold off, as it were, to pay off the loan
as they are needed to make more cars, which is what Chrysler does, in order
to create cash to pay off the loan. They have millions of dollars in
manufacturing machines and fixtures, but if they didn't have them to make
their cars, ie cash flow, then it's a moot argument.

Daniel had it right. Assets like this are only as good as the good faith
the government felt Chrysler had. And as I stated in an earlier post, there
was the aspect of keeping competition in the domestic car business at three
instead of two. That part was, and is, important too.

Another point...and I could be wrong on this, but I'm not entirely sure the
banks would have been so quick to loan this money to Chrysler if the
government was not willing to back them.

 

It makes a difference. If the initial borrower defaults, the co-signer is
required by law to pick up the payments. That's what the co-signer agreed
to in the loan contract, and is absolutely enforceable.

 

jcr wrote:

....

Certainly you know that the word 'unencumbered' has no meaning, and
therefore it's use in any discussion/argument is pure semantics!!!

Bill Putney
(To reply by e-mail, replace the last letter of the alphabet in my
address with the letter 'x')