Coming to the Rescue
By Teamsters General President Jim Hoffa
Published By The Detroit News On December 8, 2010
In recent weeks, we’ve learned the right way and the wrong way to bail out struggling industries.
The government’s rescue of the auto industry looks like a success. Though only GM and Chrysler got government help, Ford benefited because it relies on the same network of suppliers. Now the Big 3 are profitable, moving into the electric car future and putting Americans back to work. Taxpayers are being repaid and there are 50,000 more automotive jobs here now than there were a year ago.
On the other hand, the Fed’s bailout of the world’s financial services industry – including the Republic of Korea and the Arab Banking Corp. of Bahrain – is outrageous. The Fed kept the world economy going, but it didn’t solve the structural problems that nearly collapsed the economy. American taxpayers are rightly furious that they propped up failing institutions whose CEOs are taking home more cash than ever before.
But it would be wrong to oppose all government intervention because of the Federal Reserve’s poor judgment. There are lessons to be learned from the rescues of these two unstable industries. In the case of the auto industry, the government forced companies to restructure so they could create jobs for the future economy. Capital was redirected and management was held responsible for meeting specific goals.
That’s exactly what the Federal Reserve did not do when it loaned trillions of dollars to failing banks. Last week the Fed had to reveal the ugly details of the secret emergency loans it made from 2007-10. Central bankers made no-strings-attached loans to investment firms, corporations and 35 foreign banks – but got nothing in return. The banks are still profiting from speculative trading, not investments in growing businesses. And the banks’ CEOs were rewarded for their incompetence.
Independent Vermont Sen. Bernie Sanders was responsible for forcing the Federal Reserve to disclose who it loaned money to. Sanders said taxpayers who loaned banks billions of dollars at a half-percent interest were repaid with credit cards that carry 25 percent interest rates. Financial institutions are sitting on top of huge amounts of cash, he said, but small businesses all over this country can’t get affordable loans in order to create jobs.
In contrast, the government put conditions on its investment in GM. It fired top managers and hired new ones. GM was forced to improve the quality of its cars and redirect investment. The government pressured the company to retool for the future by requiring it to adopt higher CAFÉ standards.
The rescue wasn’t perfect. The UAW workers sacrificed too many jobs and Midwest communities suffered from too many plant closings. The automakers should have been forced to reach explicit goals for keeping and creating jobs in America.
Still, GM has emerged from bankruptcy to a stock offering that earned the Treasury $10 billion. It’s investing $2 billion in Michigan and creating 2,250 new jobs to produce the Chevy Volt. Ford is bringing back 2,000 jobs from overseas. Chrysler and GM are each adding 1,000 new engineers and technical employees. The Economic Policy Institute estimates the auto rescue saved up to 3.3 billion jobs and will save taxpayers up to $515 billion over the long run.
That’s a rescue the Teamsters can get behind.
To read archived articles from General President Hoffa, click here.