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December 17, 2008

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I am all in favor of federal assistance to the Detroit auotmakers.

But let's not forget, that what we'd prefer to happen for Detroit is what we'd prefer to happen in all of the business world, golbally; that private financing, not government financing, fuel the growth of business. With all of the attendant risks, encouraging the world's economies to make efficient investments and movement of capital.

When the TARP legislation was crafted, I recall that it was Senator Chris Dodd (D-CT) who led the way, albeit with Secretary Paulson at his side. I no more like those loans than I do any Detroit loans. But we should all recall that without functioning capital markets, there's no auto industry, there's no washing machine industry, there's no journalism industry, there's no hot dog industry and so fo course there's no apple pie or baseball industry, either. It is inevitable that choices need to be made about government bailouts.

The common, and deceitful, presumption in much of Detriot is that GOP Senators from southern states wanted to wreck the Detroit Three for the gain of the transplant automakers in their states. No one wants to wreck the Detroit Three. No sensible person, that is. But surely even Michiganians might have some sympathy for Senators who were asked to vote for bailout money to support corporations who pay their wrokers better than what workers doing the same job get in their home states.

And if anyone quickly suggests that Wall Street workers are in many cases paid quite handsomely, I understand that complaint. But of course, the Wall Street/TARP legislation had nothing to do with "preserving Wall Street jobs." I suspect, that if (hypothetically) the financial sector could have been protected, but every job on Wall Street would have been destroyed, the Congress would have quickly and decisively taken that action.

Not so with the auto bailout. In the auto case, we have the UAW specifically bargaining over their "share" of any painful restructuring. Unlike Wall Street "workers," the auto workers have powerful Congressional friends who share beliefs similar to Rep. Barney Frank, who thinks that the auto companies exist solely as a kind of life support system for unionized auto workers.

There is one other significant difference between the Treasury's approach to Wall Street and Detroit. On Wall Street, failed companies like Bear Stearns were allowed to fail and be liquidated. If Detroit were to be treated the same, one might argue that Treasury should just liquidate, say, Chrysler, and work on the rest of the industry.

I am not advocating anything other than federal help for Detroit. I think President Bush is wise to move in with TARP funding in this case. My only purpose here is to check the unfair presumption that current problems are the fault of GOP Senators.

By the way, the Senate cloture vote never had the votes of a full 99-member body (the one seat left by Obama is excluded), and there were not 40 Republicans voting against cloture. There were 10 Republican Senators who voted for the Congressional bailout. And, there were four Senate Democrats who joined Republicans and voted NO on the bailout. Voting "No" on the Democrat side were Harry Reid of Nevada, Blanche Lincoln of Arkansas, and the two Montana Democrats, Max Baucus and Jon Tester.

Of course there is no logical foundation for a rejection of the loan to the Big3 given the bailout of Wall Street..

What is more relevant is why the amount of the loan is so small in contrast to the Wall Street bailout..

There is no basis to get cheap with Blue Collar workers ..Yes we must terminate the CEO"s of Ford, GM , Chrysler...

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