Monday, November 24, 2008

Citigroup v. the Big Three: Why One But Not the Other

TW: I remain somewhat agnostic on the automaker bailout. I believe the choice between Chapter 11 bankruptcy and a "bailout" is a false one. My belief is that the Big Three will ultimately receive considerable federal aid in one form or the other either before or after bankruptcy or perhaps as part of a "pre-packaged" bankruptcy. Robert Reich surfaces again the question of how to reconcile "Wall Street" bailouts with Big Three bailouts, why one but perhaps not the other? I have yet to hear a good reconcilation.

From Robert Reich:
"...Citigroup is not much different from General Motors. It's a company that once made lots of money but, through a series of management blunders, is now losing money hand over fist. Just like the shareholders and creditors of GM, Citi's shareholders and creditors are taking a beating.

So why save Citi and not GM? It's not 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. I'm not arguing that GM should be bailed out; as I've noted elsewhere, GM's creditors, shareholders, executives, and workers should have to make substantial sacrifices before taxpayers should be expected to sacrifice as well...."
http://robertreich.blogspot.com/2008/11/why-citigroup-is-about-to-be-bailed-out.html

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