So, what's with this? The Bush Administration and the Federal Reserve Board are willing to spend trillions on bailing out financial institutions, but won't bail out the auto-makers. Senators and Representatives are demanding a detailed plan from the auto industry on how it would spend any Federal money, yet, as far as we can tell, neither the Treasury Department or the Federal Reserve are demanding the same thing from companies like AIG, which reportedly got 150 billion or Citigroup, which apparently is getting 20 billion.
Representatives and Senators from Michigan are calling this policy of billions for banks, but nothing for manufactuers a "double standard" and it is hard to argue with them. Further, while businesses rant and rail against the United Auto Workers and assert that worker greed is responsible for the automakers' problems, not a word is said about the fact that these financial institutions are all going under and none of them are unionized.
Representatives and Senators from Michigan are calling this policy of billions for banks, but nothing for manufactuers a "double standard" and it is hard to argue with them. Further, while businesses rant and rail against the United Auto Workers and assert that worker greed is responsible for the automakers' problems, not a word is said about the fact that these financial institutions are all going under and none of them are unionized.
Robert Reich, former Secretary of Labor under Clinton, in an article posted on Talking Points Memo, said that the reason why banks are getting bailed out is that the people who run Treasury and the Federal Reserve Board come from the financial services sector of our economy. This is how Reich puts it in his article:
Nonetheless, Citi is about to be bailed out while GM is allowed to languish. That's because Wall Street's self-serving view of the unique role of financial institutions is mirrored in the two agencies that run the American economy -- the Treasury and the Fed. Their job, as they see it, is to keep the financial economy "sound," by which they mean keeping Wall Street's own investors and creditors reasonably happy.
As Reich points out, however, manufactuers support local communities all across this nation. This is a quote from Reich's article:
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.
We question whether Paulson understands the importance of manufactuers to the rest of the economy. Senator Levin from Michigan said on Monday that he plans to ask Paulson to outline the effect on the country if GM goes under. If Levin gets a response from Paulson, it will be interesting to see what he says.
