Congressman Barney Frank talked recently about the proposed bailout on 60 Minutes; when Leslie Stahl asked if he thought the Bailout would simply prop up failed companies, he provided an illuminating response:
“No. We’re not propping up companies. That’s your mistake,” he tells Stahl, who had asked him about taxpayer money going to prop up companies that had made bad decisions. “We’re propping up individuals. The world doesn’t consist of companies. The world is people. The country is people.” When Stahl points out that Frank is then talking about welfare, he responds, “Yeah, I’m for welfare. You’re not? Are you for letting people starve?” Some argued that bankruptcy was the way for Detroit to work out its troubles and reformulate their businesses. Frank is against that as well because it also hurts the individual. “There’s only one thing you can do in bankruptcy: break your word, break your deals,” says Frank. “It allows you to say to the small businesses who have been catering lunches for you…the workers, ‘Sorry, we’re not paying you,'” he tells Stahl [Emph Added].
Frank’s statement illustrates one of the major problems many people in the country have with the proposed bailout; there is much talk about helping people, but minimal informed thought on how the big three can use the bailout money to become competitive, profitable corporations again. Ultimately, all three automakers will have to close plants, shed jobs, and renegotiate contracts, including with their labor force, if they are ever going to be competitive in the global economy. And it is interesting to hear the Congressman criticize the bankruptcy process; Congress helped draft our current bankruptcy laws, after all. . .
Of course, the President may just use the $700 billion bad bank slush fund anyway to bailout the automakers anyway, making this an academic argument. . .