$350 Billion for Citigroup – Not a Penny for the Auto Industry!

November 24, 2008


The double standard and hypocrisy in Washington simply defies belief!  When the domestic auto industry, upon which one out of every ten jobs in America is directly or indirectly dependent, needs a helping hand – a mere $25 billion – to survive the financial crisis, they are forced to appear before Congress for three days of hearings and are berated, belittled, mocked and sent home without a penny – with nothing more than a demand for a “turn-around plan.” 

Then along comes Citigroup.  Without a single congressional hearing or a request for any kind of plan, the government lavishes them with $350 billion!  ($25 billion already given to them, followed by $306 billion to back up their bad debts and another $20 billion injected in the form of capital.)  Not a peep of protest about Citigroup’s corporate jets or excessive executive compensation.  No turn-around plan.  Nothing.  

Add this to the AIG bailout and you have a total of $500 billion for just two companies, twenty times what the entire domestic auto industry has requested.  Yet the government won’t provide a penny to help them.  Obviously, the Big Three would have been much better off going to Citigroup and asking for the money.  Why should Citigroup deny them?  They can pass out money like candy and the government will be there to bail them out, no questions asked! 

The anti-manufacturing bias of the U.S. government is clear.  They force trade policies down our throats designed to destroy our manufacturing base, mock us as “protectionists” when we complain, and subject us to public humiliation when we ask for a little help.  On the other hand, they bow down before the financial industry as though they were gods, regardless of how badly the industry is mismanaged, completely ignoring the fact that they are 100% responsible for the global economic melt-down.

What is the “plan” that Congress wants to see from the auto industry?  The following three-step plan would surely do the trick:

  1. Donate as much money to congressional election campaigns as financial companies have.
  2. Double donations in the following elections.
  3. Double them again.

I’m sure that’d do the trick.

Sell-Off of American Assets to Finance the Trade Deficit

November 28, 2007

Here’s just one small example of how American assets are sold off to finance the trade deficit:


Abu Dhabi’s state investment fund has come to Citigroup’s “rescue” with an infusion of $7.5 billion for which, in return, Abu Dhabi acquires 4.9% ownership of Citigroup (on top of whatever ownership they already have).  Everyone is happy that another rug has been found under which the trade deficit problem can be swept.  No one questions what will happen when there are no more American assets to sell off.  

The relationship between this deal and the trade deficit may not be apparent, but it works like this.  (1) Americans spend money on foreign goods.  (2) The flow of dollars into and out of the U.S. has to balance.  Therefore, there must be a corresponding inflow of cash from foreign countries to finance the trade deficit.  (3)  Those countries then invest the dollars they’ve received for their exports in stocks and bonds in the U.S.  In this case, Abu Dhabi chose to buy part of Citigroup.

The relationship can be viewed from another more subtle perspective.  (1) With the loss of manufacturing jobs, worker compensation and household finances have been in a 3-decades-long decline.  (2) The average American family now finds that it must resort to loan terms it can’t really afford in order to purchase an average home.  (3)  Such families then default on the loans.  The banks then run short on cash and have to raise money.  (4) Foreign entities then step in with money and obtain partial ownership in return. 

No one asks the question “What happens when America has nothing left to sell?”  No one knows, but it’s conceivable that, at that point, the global economy will grind to a halt.  Certainly, as that point is approached, it will become ever more difficult for institutions to find financing because American assets will become more worthless and foreign investors will want higher returns.  It kind of sounds like the “credit crunch” and the falling dollar situation that we find ourselves in right now, doesn’t it?

The only long-term solution to this situation is that America must find a way to balance trade.  A tariff structure indexed to population density is the only way to accomplish that.