Posted by: MichaelW on Friday, December 05, 2008 I think I've discovered why the dead are leaving Detroit at such a rapid pace. The guardian of the gate to the underworld has gone to Washington begging for table scraps. This week, America's "Big 3" automakers again visited Congress, 34 Billion gallon hat in hand, seeking federal bailout money. The Big Three automakers appealed to Congress for billions in emergency aid Thursday by touting overhauls to their business models, but skeptical lawmakers may be looking to impose even more-severe changes — possibly including a corporate merger — as part of the deal.As dubious as the Wall Street bailout was, this request for corporate welfare is even more consternating. At least with the financial rescue orchestrated by the Fed there was a plausible argument that some mixture of questionable government policy, greedy loan originators, irresponsible rating agencies, and care-free counterparty insurers combined to create a poisonous elixir too powerful to be swallowed by the whole economy alone. Even if one does not agree with how the elixir's ingredients of blame are apportioned, there is little doubt that allowing the poison to run its course could have been (will be?) catastrophic to the economy at large. In the case of the automakers, however, the fault clearly lies with them. Either produce cars people want at a price they will agree to or go out of business. That's how markets have always worked absent interference, and that's how it should work here as well. It's true that the Big 3 are hampered by sclerotic UAW contracts that raise their labor costs far above what non-unionized plants in America incur. But, again, that's the nature of the beast. Either find a way to deal with it or get out of the game. A majority of Americans seem to get the point above: The CNN/Opinion Research Corp. poll, conducted by telephone on Dec. 1-2 with nearly 1,100 people, showed that 61% of those surveyed oppose government assistance for the major U.S. automakers.I wonder how many more Americans would oppose the bailout if they knew who they were really being asked to rescue. The case of Chrysler is particularly galling. That ailing company is owned by one of the richest hedge funds in the world, Cerberus Capital, and is home to more than a few Washington insiders, such as former VP Dan Quayle, and former Treasury Secretary John Snow, who was elected chairman of the company in 2006. How many Americans think handing over their hard-earned money to political bigwigs and multi-millionaires is unfair? I'm willing to bet it's a lot higher than 70%. Indeed, how high would the number climb if people knew how much money Cerberus claims to make each year? From it's own website: Cerberus holds controlling or significant minority interests in companies around the world. In aggregate, these companies currently generate over $100 billion in annual revenues.Certainly the hedge fund does not receive all of that revenue, but it earns a healthy enough portion of it to commit $7 to $16 Billion of it to save it's own subsidiary. Chrysler now is seeking a $7-billion bridge loan from the federal government to keep its business going, as well as an $8.5-billion loan from the U.S. Department of Energy to help make more fuel-efficient vehicles.Sen. Bob Corker (R-TN) has been thinking along the same lines and questioning why Cerberus refuses to use its own money to bailout the carmaking company it owns. Corker spent much of his time sparring with Nardelli over the privately-held company asking for taxpayer help.Strangely enough, begging Washington for money runs counter to Chairman John Snow's own prescription for Chrysler. Just last Summer, Snow stated: Private investment is no magic elixir, but in certain cases like Chrysler, we believe it offers simply the best hope for restoring competitiveness to sectors of the U.S. economy that need it most. And stronger, growing companies are the best way I know of to provide job security, increase employment, raise living standards – and keep America’s economy strong.Oh what a difference a year makes.
Cerberus Capital is named for the three-headed hell-hound assigned to guard the gates of Hades. In Greek and Roman mythology, the spirits of the dead could pass on to the underworld, but Cerberus stopped them from leaving and kept the living out. Hercules (Heracles), as the last of his twelve labors, was tasked with capturing the beast without weapons. Upon successfully doing so and presenting his prize to Eurystheus, "[t]he terrified king trembling with fear, asked Heracles to take the monstrous beast back to the underworld, and if he did he would free the hero of his labors." Most fittingly in these circumstances, Cerberus also appears in Dante's Divine Comedy as guardian of the gluttons confined to the Third Circle of Hell. Who will play Hercules this time? Who will send this hound back to guard its gluttons and will Congress then release us from our labors on its behalf? If polls are to be believed, then the American people have no qualms about leaving beast to tend to the dead. Perhaps our leaders will show a smidgen of the same fortitude. |
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