Newt Gingrich, an articulate defender of conservative principles, complains about billionaires in the financial services industry getting federal money even though he says he would have reluctantly voted for TARP.
John McCain in the campaign was silent on Democratic support for Fannie Mae and Freddie Mac, which support significantly contributed to the financial crisis.
What has made these, and most, Republican leaders incapable of articulating a thoughtful points about the financial crisis?
Do they not understand the issues? Do they fear that won't get a proper airing of their views from a liberal-dominated media? Are they unable or unwilling to make the moral case for capitalism?
It is probably some combination of all of the above, and it has left the country bereft of a proper debate on the profound issues facing us.
Instead, we are told that the auto bailout has "tough" provisions that limit dividends and executive compensation. Here is a bit of news: the auto companies can't pay dividends anyway, and executive compensation levels aren't the problem - the above-market compensation paid to the auto workers is.
Democratic leaders say that all auto constituents will suffer losses, but the only way to see that happen in an economically-relevant way is for the bankruptcy process to run its course.
The bailout is ostensibly about making the Big Three viable, but if so, the Democrats wouldn't be hell-bent on dictating that they make fuel efficient cars and preventing them from opposing state efforts to regulate car emissions - since both efforts will reduce their profitability at a time when they are desperate for profits.
The bailout is supposedly about saving the U.S. auto industry, but since it is only GM and Chrysler who are looking for money as Ford is in much better condition, Ford's position would likely improve, probably significantly, if GM and Chrysler filed for bankruptcy. Demand for Ford cars would increase if buyers fled GM and Chrysler, increasing its ability to survive. No one dares mention that, since it undermines the case for a bailout.
Most importantly, no one is explaining why, if you oppose TARP, you must oppose the auto bailout. Nor is anyone explaining why, if you reluctantly support TARP, it still makes sense to oppose the auto bailout. So here it goes:
TARP is about preserving the financial system, which means protecting the creditors of banks. The banks' creditors are individuals with savings/checking accounts, business with similar accounts, and other financial institutions. If a bank fails, its creditors lose access to their money until the bankruptcy process resolves the matter, which for banks can take years to sort out given the vast size of their assets and liabilities. And the financial institutions whose money is frozen in a failed bank are now themselves at risk of failing, with their own set of creditors who suffer similar losses.
Ultimately, the net creditors are all of us. And this daisy chain of collapsing banks can take a recession and turn it into a depression, since the resulting contraction in money supply and credit availability means every industry and consumer is hobbled if not devastated in their ability to prosper. This is what turned the recession of 1929 into the Great Depression of the 1930's.
That can't be said of any other industry, due to the unique role that money and credit play in our economy. Period.
TARP is about preventing such a collapse. It is possible (although not certain) the use of the FDIC to insure deposits and other bank liabilities, combined with an aggressive merger effort to direct weak banks into the arms of strong ones, might have sufficed to get us through the crisis without the government directly investing money in the banks. Republicans in the House proposed this in the TARP debate but got little media attention.
But none of this is true for the auto companies. They have had profound problems for decades, losing market share and bleeding losses for so long that they are shells of their former greatness. There is no more value to be extracted by the UAW, nor to satisfy the environmental agenda of the left that forces them to make unprofitable smaller cars given their high costs.
The two biggest banks, Citigroup and JP Morgan, made $88 billion during 2005-2007. So there is hope that the government's investment in them will turn a profit, since they and other banks have a recent track record of strong profitability. This is simply not the case with GM and Ford, who lost $65 billion in the same period, a time of strong economic growth. They have deeply unprofitable business models that require extensive changes to rectify.
Bankruptcy is the place where such a restructuring can occur, due to the opportunity to change contract terms and reduce liabilities that bankruptcy law affords.
Thus, a government bailout defers the tough decisions, and will simply leave taxpayers with loses on their new auto investment and the economy poorer with the waste of resources.
Instead, we have the prospect of the nationalization of our auto industry, making a mockery of our founding principles, the economic system that has produced our unprecedented wealth, and the lesson America has shown to the world. The shining city on the hill that America has stood for now has a long line of supplicants stretching around the block looking for bailouts and subsidies.
Now we act like the semi-socialist states of Europe and elsewhere.
And to think people mocked the criticism that Barack Obama's tax plan is socialistic. The only thing to say in his defense is that the auto bailout makes his tax plan seem mild by comparison.
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