Should the government bail out corporations that have severe financial problems?

[EmperorNapoleon]

The government stepping in to bail out a private corporation is effectively playing favorites. The government has decided to aid in a very special way one corporation while not aiding the competitors. This does not support Capitalism, as capitalism would allow the corporations to live and die based on their own economic strength. I do not believe I would call this socialism, but it certainly is not allowing a free market to work effectively.

I think that is a good general rule, but it doesn’t work when we have economic circumstances in which entire industries are at risk. Unless you are willing to concede that heavy government regulation should be implemented to mitigate the risk of such colossal failures and to prevent companies from becoming “too big to fail.” The naked truth about capitalist free market systems is that they inevitably implode if left to their own devices.

 

[Lainie_Rullo]

This perhaps shows a substantial defect in the organizational structure of American companies. . .

I have worked mostly at smaller companies with revenues of about 25M. Companies this size and smaller are much better at watching their dollars than the conglomerates I have had the extreme misfortune to work at.

Once the pebble starts rolling down the hill, no one has an incentive to step in front of it and say, 'No. This is a mistake that is costing us money." I could tell you horror stories about wasted money. I’ll tell you one.

My bosses decided that I was too slow in issuing refund checks. I am VERY thorough and accurate, and others who were working the reports before me were making inexcusable errors which I had to correct, until I was told that a mistake had to be over $1000 for me to waste time on it. Can you imagine? Of course, I ignored them because in my soul I believe that every penny has to be accounted for, and I didn’t work just for my bosses, but shareholders and my colleagues. Allowing that much money to fall through the cracks will hurt everyone involved.

I would never invest in an American corporation.

 

[Lainie_Rullo]

How could it possibly be ‘socialism’ when the state supports capitalists? To me that sounds like a capitalist state doing what capitalists states do - serving the interests of the national capital.

Socialism is about workers control of production, it’s only in the United States that ‘socialism’ means “whatever the state does”.

Yes.

 

[dockboggs]

I disagree with that, in the US, the Govt has no business ‘bailing out’ ANY privately owned company, no matter how large they are. If that company is so close to failing, then that is the fault of the company, not the taxpayers, and thus, the taxpayers money should not be going to prop up or contribute to rebuilding a failing company.

Our society is capitalistic, many large companies use this argument on their behalf when fighting new regulations and laws, but when that same company finds itself failing and about to crumble, suddenly, they change their tune 180 degrees and think they should be helped LOL

Companies in a capitalistic system come and go, many of them succeed, many fail and disappear, this is the nature of the system, Its best to let them fail and it will lead to other companies taking their place and the leaders of those companies should have learned from other companies mistakes and hopefully run their company in a way, that they will not need to be bailed out.

I think this is a well reasoned argument. How businesses are run is crucial to their success. / failure

I thought it was very wrong that we bailed out the auto companies we did, if they were in as bad a shape as they claimed, then that is THEIR fault, Maybe they should have first looked at how the company was being ran, why people were not buying their cars anymore, etc. I would bet if Chevrolet had crumbled and disappeared, a new auto company would have come out of the ashes, or multiple new auto companies, and whether or not they would be successful or not would depend on how their businesses were ran and if the public wanted to buy their cars…its that simple.

Too big to fail, makes no sense to me, if they managed to get that big and all the sudden, they were on the verge of crumbling, then whose fault is that? Maybe it had something to do with the ridiculous prices on new cars and trucks!! I looked at a friends new 2014 Chevrolet 3500 4x4, this thing was over $65,000…for a pickup truck!!! How in the world does a car company justify that kind of price/markup? LOL You could buy a brand new medium duty truck for that amount!!

 

[InigoMontoya]

Ford didn’t ask for any bailout money and a lot of people respect them because on that one thing.

The autos managed their money like the city of Detroit. They didn’t plan well for the future. People wanted to act like the high-paying union, auto jobs were going to be here forever. Our cities didn’t work to diversify their economies away from manufacturing and Michigan bled jobs during the 2000’s. You have no idea how much some people want to pretend that it’s still the early 1960’s and that things were still booming and they could afford to pay $100K for a janitor and the old job banks. (If you don’t believe me, you can search and find the stories in the Detroit News and Detroit Free Press).

The world changed and they didn’t want to change w/it.

So, my vote is for “Hell No!”

Businesses need to fail if they are badly managed and don’t want to deal with new economic realities.

You’re aware that the very chief executive of Ford has gone on about how Ford was essentially just lucky and that they don’t deserve exceptional praise for their unique position during the bailouts. They leveraged the blue oval to such an extent just prior to the bust that they were flush with cash to withstand the recession and completely revitalize the company. By being leveraged as they were with bondholders, they couldn’t file bankruptcy and remain a company. That they also benefited vastly from the bailouts and accompanying government incentives.

While certainly there’s been some mismanagement and mistakes, I really don’t see how you’re comparing the financial acumen of some companies which are pillars of our economy with the worst failed city in our country.

The auto jobs are still present, although they’ve been reduced due to manufacturing efficiencies and arguably by the greater force of… other states buying them through massive state-government subsidies.

I’m fairly well aware of the Metro-Detroit region, it’s a remarkably diverse and vibrant region. The thing is though, that when any region has an industry as incredibly large as the auto industry, it’s essentially impossible to truly diversify from it. Why would you divest from your golden egg?

As for the reported six figure janitors, please point out which UAW contract had the job description of a janitor with that salary. Have any earned six figures with overtime and bonuses? Most likely there’s been a few, but what you can’t discredit an individual for being overpaid when they’re working 7/16’s year round at the request of others.

So you’re stating that businesses need to fail if they don’t respond to economic realities? I’m honestly inclined to agree. However the economic reality is that every other auto manufacturer around the world is heavily subsidized or has been bailed out by their respective governments. Shockingly, even the government of the US has subsidized foreign auto companies. Taking into account that reality, the absurdity of the economic crash, and the vital nature they play to our economy… I still can’t see how it wasn’t a wise choice. If we want to stand our ground on the rhetoric of government staying out of business… it’s a joke to start off with those companies when we’re massively subsidizing and bailing out GE, Walmart, Boeing, all of Wall Street, etc.