Roubini: Bail Out the Automakers, But Only on These Conditions...

[girl gone mad]

Congress should approve a bailout of the U.S. auto industry because the "collateral damage" of their failure would be "very severe," says Nouriel Roubini, economics professor at NYU Stern School and chairman of RGE Monitor.

"We're spending $2 trillion to bail out financial institutions," the economist notes. "What's the fairness of not giving say $50 billion of low interest loans to automakers to help them restructure?

But Roubini is no ally of the auto industry CEOs currently making their case in Congress. He says any government aid must be "highly conditional" and only occur after a prepackaged bankruptcy that includes:

* Replacement of current management
* Concessions from both the UAW and automakers
* A wipeout of existing equity and debt-holders
* Temporary nationalization of the auto industry

The appointment of a "car czar" is clearly a touch subject but Roubini says those worried about moral hazard and issues like free enterprise are fighting the last war.

"There's already massive amounts of government intervention in the economy, we've that bridge," he says. "The question now is, what are we doing to do right? If it takes an auto czar to really structure these firms, so be it."

http://tinyurl.com/5e87rq

[DJ13]

1. Temporary nationalization of the auto industry

Hey, it worked for Russia for 50 years.........




"Itz da new Vette, and you VIL like it!"

[Dover]

2. It would also have to address the concerns of world trading partners.

Because the bailout can be seen as the equivalent of a subsidy, and might be illegal.
At least the broader global impact of any decision needs to be taken into consideration as well.

Also the UAW/Automakers HAVE recently negotiated concessions, however they don't necessarily
satisfy the automakers...particularly regarding pensions, etc. So what are acceptable
concessions? Are we to have wages and conditions that are in keeping with those of the Third World in order to remain competitive? Is that an answer? Or should all boats globally be lifted?

[Warpy]

3. Temporary nationalization with a specific sunset could work

if only to clean house and change the management culture completely, but wiping out equities will wipe out an awful lot of retirees out there.

A better plan would be to keep the equity structure, freeze trading, and gradually re privatize the company as the bailout got paid back. Once the company was private and profitable, the equities could be traded again.

I'm very much against nationalizing manufacturing because I don't think it works well at all. Government bureaucracy does all right with services, but they're almost as resistant to change as the inbred, entrenched management at the big 3 has been. Manufacturing is one of the areas where capitalism seems to work best.

(and no, I don't have major holdings, just a minor holding through one fund. I do know retired auto workers who depend on that stock to supplement their pension and Social Security.)

[Robert Oak]

4. Nationalization

We could buy all three for half of the $34 billion actually. My issue is even though we know the big three, esp. GM management has royally screwed up, Good God, do we really want Congress or this administration running them either?

I could be ok with employee sharing, and something else, but this government?

[marketcrazy1]

5. rumor going around

that CHINA and south Korea may devalue their currency 30 to 35 percent by year end.. just a rumor but if true U.S. manufacturing ( whats left of it ) is DEAD!! and the BIG 3 are FINISHED!!