Sunday, December 7, 2008

Bailout or green car mandate?

In the tugging and heaving over bailout of the big three automakers, the greens have blinked. Last night Nancy Pelosi announced that the $25 billion already authorized for Detroit can be used to keep the automakers afloat. Apparently this money was supposed to be used to make "green" automobiles, not to pay suppliers, make payroll, pay off debts, the sort of thing money is needed for. Seems like Nancy only just now has figured out that jobs are the only reason to subsidize the car companies. We don't care about green cars, we do care about workers getting laid off.
The big three CEO's were on TV Friday. They didn't make all that much sense to this taxpayer. Plus the Congressmen did most of the talking. Several things did come thru. Apparently the car dealers have to pay the factory for the cars on their lots. They call this "floorplanning". Dealers borrow the necessary money from the finance arms (GMAC etc) of the automakers. And then customers borrow from the same place to pay for the cars. GMAC got stupid last year and lost a bundle of money playing in the sub prime mortgage market. All three of the car company finance operations are running out of money to loan to car buyers and car dealers to buy cars. It might be reasonable to call these finance operations "banks" and give them the same access to the Federal Reserve money as conventional banks get.

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