Bailing out the Auto Industry? I hear Starbucks is having trouble!

bucketThere seems to be a rush to bail out, yet, another industry.  Banks, Insurance companies, Fannie and Freddie and now, the “Big Three” auto makers.  How can this be “good” for our country and economy?

The mortgage industry applauded the bailout of the GSE’s (government sponsored enterprises) Fannie Mae and Freddie Mac.  They were already quasi-government agencies with directors and CEOs appointed by Congress (for better or worse!).  Unlike the insurance industry, no other company – government run or private – does what they do.  Unlike the auto industry, no other company – domestic or foreign – keeps our banks fluid and the housing market flowing.  Without Fannie and Freddie the wholesale banks, which buy the mortgages originated by mortgage brokers, would have no more money to fund the new loans.  Fannie and Freddie were put in place by the federal government to keep the market fluid. 

The Federal Government determined, over fifty years ago, that fluidity in the housing market was the key to keeping Americans buying their homes.  This strategy has worked for our country for the past several decades and has given this generation unprecedented opportunity to own a house (or two) when our grandparents seldom owned property and certainly did not buy without a 25%-30% down-payment. 

Fannie and Freddie (whether there should still be two of them is a topic for another day!) have played a key role in the “ownership society” announced by President Bush nearly 8 years ago prior to this recent unprecedented growth in home ownership among all Americans – including minorities, women and young people.  No one else has done or could do for our economy what Fannie and Freddie have done in giving Americans ownership, equity, property and a vested interested in a community.

circuit-city2So, many are now saying, “let’s take all hurting industries to the Feds and let them bail them out, too!”  Insurance companies (AIG is back for a SECOND round?!?), Wall Street Banks, the Auto Industry…. Why stop there?  Circuit City just announced the closing of 155 stores and that they will ask for Chapter 11 protection from their creditors as they reorganize and attempt to restructure their debt.  We’re losing our Circuit City (only 4 months old!) in the city where I live. 

Other retail chains are hurting, as well.  Starbucks was in the news earlier this week for posting a worse than expected earnings report.  Starbucks recently forced the closing of a Saxby’s coffee shop in our starbucks-cup-21humble city when they built theirs one block away from the newly finished Saxby’s.  Is the over-priced coffee industry hurting and should the Feds step in a bail out the Grande’s, Latte’s and Espresso’s of the world because many teen-aged multi-pierced, messy-haired servers and “Espresso-Masters” will be displaced?  I tend to believe that, as John McCain took a beating for saying, the fundamentals of the US economy will work themselves out – in the insurance industry, the banking industry, the auto industry and, need I say,  the gourmet coffee industry.  We must let the free market do its work and not let the Feds try to convince us that they know how to run a business and to micro manage these selected industries and our economy.

Is the mortgage industry really that different?  YES.  When it comes to competition and product availability, the secondary market of the mortgage industry is very different.  Fannie and Freddie play a role that no other private or foreign company or agency play and that is why it is not inconsistent to support the limited propping up of Fannie and Freddie (already quasi-government agencies) and be opposed to the Federal government picking and choosing which private company or industry to bail out.  Unions have made the US auto industry what they are today – unresponsive to market changes, overpriced, less efficient, dependent on foreign fuel, and not environmentally friendly.  The US auto industry must change at their core or they deserve to fade into the history books along with their union-thug bed-fellows.

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One Response to Bailing out the Auto Industry? I hear Starbucks is having trouble!

  1. […] Obama administrations at stimulating the housing industry, it seems, at first glance, that this auto industry bail-out program might be having some positive affect on another ailing US industry.  At least the players are […]

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