The government is trying to play hardball with the Chrysler creditors, asking them to accept 15 cents on the dollar when they're likely to get more in a liquidation. That's not a haircut; it's more like what they do to you the first day of boot camp.
The sweetener? There is none. The banks are supposed to make this touching gesture out of the goodness of their hearts. If they can still find them down in the vault where they put those useless organs away for safekeeping thirty years ago.
This seems . . . odd. Of course, the four biggest creditors are banks who accepted TARP money: Goldman Sachs, JP Morgan, Citigroup, and Morgan Stanley. But the government has apparently, so far, not attempted to use that stick to make demands. The article hints that this is a surprising act of forebearance, but of course two of those banks are already rushing to give the money back, and the government presumably does not want to encourage more banks to follow suit.
Andrew Samwick says that "socialism is starting to seem a more and more apt word to describe what our government is doing:
I don't care a whit about sparing these firms from the consequences of their decisions. I do care about the power grab by the executive and legislative branches of government that their dilapidated condition is enabling.
People complain that the word "socialist" is being inappropriately used to demonize attempts at restoring economic growth. That may be true in many cases, but how is the label not valid here? Government officials are making decisions about how to direct the means of production. And they are doing so without prior authorization or agreement and with the goal of sustaining employment in undproductive pursuits. What else would you call it? Some days it seems like the only things missing from this picture of collectivism are the the guns pointed at the citizens and the widespread starvation. But I suppose we are still at the beginning of this process.
But that doesn't seem quite apt. The government isn't actually forcing companies to give Chrysler resources; they're asking. And not very impressively, either. Presumably they'd like to be more socialist, but lacking the power, they're reduced to making strident demands and lame appeals to the bankers' better natures. It's like watching a newbie substitute teacher try to bring first period arithmetic to order.
It's especially poignant because very few people outside of the labor movement think that costing shareholders $7 billion in order to continue making cars that don't sell well is much of a public service.
I don't expect that the government has much more hope than that first grade teacher. But they have to go through the motions.
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