Left of Sound

squashed:

huskerred:

jeffmiller:

think-progress:

Why we should be glad we didn’t let Detroit go bankrupt (like Mitt Romney wanted).

Perhaps the average person thinks that declaring bankruptcy means that you go out of business.  But informed people know that this is wrong.  Bankruptcy can be a method by which a company sheds itself of costly liabilities in an effort to become healthy.  Almost all of the airlines have gone through bankruptcy, and by any measure, they are all better for it.

When Romney (and the rest of us) were suggesting that the auto industry declare bankruptcy, we were suggesting that the automobile industry use the same renegotiation procedures utilized by countless other companies that have returned to profitability.  In other words, we were suggesting that creditors (who chose to deal with the auto industry) take the hit instead of taxpayers (who did not choose to deal with the automobile industry).  We were suggesting bankruptcy as a way to save the industry, not kill it.

All of those sales, jobs, etc., in the graphic above—all of them might have been had if the auto companies had gone through bankruptcy.  And it’s not unreasonable to suggest that the industry might have been better off in the long run if they had gone through bankruptcy.  

Whoever made the graphic above probably knows that the average person thinks that declaring “bankruptcy” means going out of business.  They probably also know that this is wrong, but they still made the graphic anyway.  And the shame of this is that it teaches politicians the worst lesson possible … namely, to lie and pander, rather than talk openly and honestly about real solutions to real problems.

What Jeff said.

No! Not what Jeff said.

First, for people who hate cars, Michigan, and/or America, “Detroit” is shorthand for the “Big Three” car companies: Ford, General Motors, Chrysler. While they collectively employ far fewer people than they used to, the auto industry and its associated financing and supply chains make up something like 10% of the economy. (Think of the percentage of income people use to make a car payment. Now multiply that by everybody.)

The value of the car companies is tied up in its supply chains, autoworkers, and so on. Say you’re building a car and the jerk that’s supposed to deliver the little needle that goes into the speedometer is running behind. You can’t finish the car. You have to shut down the assembly line, send a lot of workers home, and so on. And, considering that that needle is made in Mexico but the pin connected to it was made in China and you’re assembling the whole thing in Dearborn, getting everything together is very, very difficult. You can’t simply disassemble and reassemble a company like General Motors.

Worse yet, you’re trying to do this on a razor thin margin. So is the company supplying the speedometer needles. (We’ll call it Delphi.) Delphi supplies a number of manufacturers, including non-domestic manufacturers like Toyota. So if Chrysler goes under, Delphi gets disrupted. Delphi probably goes under. Toyota is screwed too. And, since it’s 2009, the economy is already in free-fall. So we’re looking at a complete catastrophe. Bottom line? If any of the Big Three had disintegrated in 2009, it would have been an economic catastrophe. An restructuring bankruptcy would be fine—but a liquidation bankruptcy would be a disaster. (In legal terms: Chapter 11, good. Chapter 7, terrible.)

As it turns out, both GM and Chrysler went through bankruptcy. (Ford neither went through bankruptcy nor received bailout money—though the availability of the money probably affected credit rates.) Part of the bailout happened before that. Much of it was financing available during bankruptcy. They did a remarkably quick Chapter 11 and returned to profitability extremely quickly. In order to operate during a Chapter 11 bankruptcy, you need funding. Remember how it was 2009? Private funding wasn’t in the offering. The bailout didn’t prevent bankruptcy. It prevented systemic collapse.

The creditors took a hit. The stockholders got wiped out. But the Romney solution would have resulted in guys who’d worked their entire lives suddenly seeing their pensions evaporate at the same time as their already distressed communities collapsed into chaos. Romney is kind of heartless.

Obviously I’m reblogging this for Squashed’s response. When hearing/reading about the auto bailout and whatnot, it becomes very apparent that people who didn’t understand it or why this administration helped them out have absolutely ZERO working knowledge of the auto industry and just how far-reaching it really is. This goes WAY beyond just these three companies and the people working there (which, in itself, is a pretty overwhelming number), and I’m glad there’s a measured intelligent response out there.

miklem:

The State of the Union 2012 speech will be enhanced online.

That is how it is supposed to be. Future FTW.

I find this a great use of the interwebz

(via daveholmes)

motherjones:

This happens a lot.

I like to think Obama’s hanging on to a framed copy of this

is this real life?!