Saturday, November 22, 2008

Citigroup vs. General Motors

Citigroup is in trouble and Washington might step in and give them more financial aid from the bailout funds. They already received $25 billion in October.

Why are we helping them and not GM? Robert Reich (Secretary of Labor under Clinton) has the answer - kind of.
So why save Citi and not GM? It's not at all clear. In fact, there may be more reason to do the reverse. GM has a far greater impact on jobs and communities. Add parts suppliers and their employees, and the number of middle-class and blue-collar jobs dependent on GM is many multiples that of Citi. And the potential social costs of GM's demise, or even major shrinkage, is much larger than Citi's -- including everything from unemployment insurance to lost tax revenues to families suddenly without health insurance to entire communities whose infrastructure and housing may become nearly worthless. I'm not arguing that GM should be bailed out; as I've noted elsewhere, GM's creditors, shareholders, executives, and workers should have to make substantial sacrifices before taxpayers should be expected to sacrifice as well.

Nonetheless, Citi is about to be bailed out while GM is allowed to languish.
It all boils down to perception. Reich says the Treasury and the Fed believe their job is to keep "the financial economy "sound", by which they mean keeping Wall Street's own investors and creditors reasonably happy."

What about GM?
GM is simply a big, clunky old manufacturing company... GM is just ... jobs and communities.
And people with families and mortgages and medical bills, but we must keep investors and creditors happy at all costs. Jobs be damned.


Lew Scannon said...

GM has all those union employees, the people who fought to raise the standard of living for every person in this country, which may be why the financial people don't care if they fail. Better a banker should live like a king than a working man catch an even break in America today.

Lew Scannon said...

BTW, I just gave you an award over at my place. Come on over and pick it up.

abi said...

I agree with Lew and another commenter on an earlier post that the unions have a lot to do with the double standard here. I don't know what else explains it. The auto industry has a huge impact on the economy.

Kathy said...

Better a banker should live like a king than a working man catch an even break in America today. - Great line, Lew, and thanks for the award.

Abi, I agree that the unions have a lot to do with the double-standard, but education and class are playing roles too. For some reason, the act of working isn't enough to justify a decent paycheck with benefits anymore. The rules keep changing and now we're being told that only the highly educated or executive level jobs deserve the best income and perks.

At this rate, we'll soon be a country of plebians and patricians.