First appeared in print in The Rhinoceros Times, Greensboro, NC
Something extraordinary happened to me today. Somebody actually asked me for my opinion.
You have to understand how rare this is. Because I have so many chances to sound off about -- well, about everything -- it's not as if there's an opinion shortage anywhere near me.
I don't look at strangers and think, "Wow, I bet those people need my opinion. Look at them. Clearly they don't have any opinions of their own. Or at least not as good as the opinions I happen to have with me. And since I have more than I actually need, I think I'll share."
Though, come to think of it, that generous attitude would be in keeping with Christmas.
When someone asked me today, "When are you going to write about the bailouts?" it's possible that they were being generous and giving a gift to me. Maybe they were thinking, "Look at that poor man. He's got so many unexpressed opinions he's bloating! I'll ask him for one, and relieve the pressure."
This is going to be short and sweet.
The first bailout -- hundreds of billions of dollars to shore up American banks and mortgage holders -- was absolutely essential. The rash of foreclosures on inappropriate loans was caused by stupid decisions -- most of them well-intentioned but all of them foreseeably disastrous -- but when a bank-run-style panic starts in America, the economy of the whole world depends on quick and decisive action to restore faith in the credit of the American financial system.
In effect, the government (temporarily, I hope) nationalized a lot of banks -- but the government was actually buying something which, because it was bought, is now much more likely to retain its value. As with the savings-and-loan bailout of two decades ago, we may actually make a profit from the rescue.
In other words, this wasn't money down the toilet. This was saving our collective bacon.
And when I hear people say that it makes them mad for us to have to bail out the fat-cat executives who made these stupid decisions, I have a simple answer: We weren't bailing them out, we were bailing out -- or plugging the leaks in -- the boat that we're all floating in.
If we hadn't done that bailout, it would have cost us all far more than the money we fronted, and could have been, economically speaking, the end of the world as we know it. No exaggeration.
Besides, the execs were not solely to blame. As with the savings-and-loan debacle, the government changed the rules for reasons that seemed good at the time, the execs played by those new rules, and the result was disaster.
What we need is for government institutions to be fiscally conservative and not change, for political reasons, rules that have been proven to work.
The auto company bailout is a completely different situation. Here, the American car companies are paying for union contracts made years ago -- remember, the car companies deal with a union that had a closed-shop monopoly on car-making labor for many years.
Those union contracts add a couple of thousand to the cost of every American car -- or, in other words, when you choose between a Toyota and a Chevy with the same asking price, the American car is $2,000 crappier than the Japanese car.
At the same time, the auto companies have bloated up with middle and top management that is paid to be stupid. Innovation is virtually nonexistent because there are simply too many layers of approvals from people afraid to commit to anything new -- the same reason Hollywood turns out so many bad sequels.
And the choice isn't between bailing them out or having the American auto industry disappear and throw everybody out of work. No, the only way the creditors can be repaid is if the auto companies keep making cars -- but better ones that cost less to make and are more worth buying.
That means that the bailout that's needed is a chapter 11 bankruptcy and not a dime from the government until after the courts have given the car companies relief and then force them to strip down their management and renegotiate all their union deals, including the pensions.
If you don't believe me, listen to Mitt Romney, the guy who made a few billion dollars by saving bankrupt companies and making them function again.
The financial bailout saved the world -- and may turn out to make a profit for us all. A good investment.
Auto company bailout? Bad idea, if it leaves the same management and union contracts in place. With a government bailout, we're forced to pay them to make cars we don't want to buy. They should get our money only when they make better cars and we voluntarily buy them.
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