In one sense, I was surprised and impressed by Barack Obama’s auto bailout announcement this morning. He was, appropriately I think, fairly tough. From GM, he insisted that they fire their CEO and submit a tougher restructuring plan. From Chrysler, he insisted that they consummate a deal with Fiat and said flatly that they’d be allowed to go under if they didn’t. This is appropriate: a private investor wouldn’t treat Chrysler and GM identically, and there’s no reason the federal government should either.
Still, it’s hard not to do a double take at his actual words:
“We cannot, we must not, and we will not let our auto industry simply vanish. . . . It is a pillar of our economy that has held up the dreams of millions of our people. But we also cannot continue to excuse poor decisions. And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars. These companies — and this industry — must ultimately stand on their own, not as wards of the state.”
In the same way that GM is different from Chrysler, the banking industry is different from the auto industry. Still and all, don’t you wish that Obama were willing to treat bankers the same way he’s treating the carmakers? It’s pretty much impossible not to compare his tough words this morning with the conciliatory tone and even more conciliatory actions he’s taken with the financial industry.
As for the news that the stock market plunged on the news, spare me. Investors are idiots if they think this is bad news. A tougher restructuring plan is better in the long run for everyone but the auto industry’s bondholders, and I’ll bet that even most of them have either hedged their positions or else sold off their holdings at 70 cents on the dollar to speculators. Save your tears for someone else.