When businesses talk socialism

From an article on the NYTimes.com about the automakers increasing the amount they're requesting by $14 Billion:

"But if the federal government balks at the automakers’ requests, that would mean the two companies probably would have no choice but to file for bankruptcy protection, because they are losing hundreds of millions of dollars each month.

And the car companies said on Tuesday that the cost of a bankruptcy reorganization, with the government providing financing to help it through that process, would be far greater than their latest loan requests. Without such help, the companies would have to liquidate, creating staggering new job losses."

It makes my ears stand up when business managers start making arguments against/for a decision citing social reasons. The automakers here are making appeals in favour of govt help citing "greater costs" in a bankruptcy proceeding, where the "cost" refers to jobs lost! Since when have businesses evaluated decisions based on jobs lost/created? The argument these buggers should have been making should have been about which operation will make them profitable faster and the little I know of the US Auto unions and their huge benefits, job cuts seem to be just the antidote that is required.

Instead, the automakers are trying to put pressure on the govt, through the general public which hears these "arguments".  The only reason I can think of is that in the immediate future, it is easier for the executives to deal with the govt than it would be to go through the bankruptcy proceedings. With Uncle Sam playing Father Christmas, what else is to be expected but everyone asking for alms without which they would collapse.

The mess called "U.S Housing Bailout"

From IHT.com:

"NEW YORK: The long-awaited U.S. housing bailout was finally unveiled Wednesday.

At a speech in Phoenix, Arizona, a signature real estate boomtown gone bust, President Barack Obama explained his plan to reduce foreclosures.

The key to understanding the plan is to remember that there are two very different groups of homeowners who are at risk of foreclosure.

The first group is made up of people who cannot afford their mortgages and have fallen behind on their monthly payments. Many took out loans they were never going to be able to afford, while others have since lost their jobs. About three million U.S. households - and rising - fall into this category. Without help, they will lose their homes.

The second group is far larger. It is made up of the 14 million households that can afford their monthly payments but whose homes are worth less than the value of their mortgages. In real estate parlance, they are underwater. If they want to stay in their homes, they will have no trouble doing so. But some may choose to walk away voluntarily, rather than continuing to make payments on an investment that may never pay off."

They govt is currently looking at favouring the first group, the article goes on to say. Irrespective of which group the govt favours, what is getting lost in the arguments is the group which is losing out when govt passes this helping hand around - the group of people who made sensible economic decisions. This stimulus is now going to create a situation, where you stand to benefit if you'd made a really really bad decision about buying your house! It would make good economic sense for more of the second group people to try and get themselves seen as belonging to the first group, or to just start walking away from the loans. The more worse off you can show yourself to be, the greater your chance of qualifying for a helping hand. It is actually a motivation for people, even those that are doing okay for themselves, to not work as hard on their jobs, and instead work on getting themselves qualified for the bounty being handed out - a much easier route than working their way out of this mess.

I absolutely dislike the proposal for the habits it is promoting - politicians helping people with their consumer debt. This will give rise to the scenario where hard working, frugal people, see their spendthrift neighbours having lived lavishly in credit for the past few years, and now when their way of living backfires, Uncle Sam comes and gives them a helping hand, while the hardworkers continue to toil without respite. On the contrary, it is the hardworking Mr.Frugal, who is paying with his taxes for the house loan of his neighbour Mr. Spendthrift. This is injustice.