The auto industry is paying the price for the apparent inability of the banking bailout to do much for the ailing economy. Big banks have been accused of hording the initial round of the $700 billion bailout, while peripheral industries like the insurance companies have sought to buy into the government handout by buying struggling financial institutions.
The New York Times' David Sanger cuts to the heart of President-elect Barack Obama's plan to place restrictions on any aid to the Big Three automakers. It's called nationalization.
Sanger points out that not since President Harry Truman attempted to nationalize the striking steel industry in 1952 has the idea been seriously contemplated.
Truman's attempt at nationalizing the steel industry was highly unpopular and was attributed, in part, to whispers from Sen. Joseph McCarthy (R-WI) that he was soft on communists during the height of the Korean War. The New York Daily News' front page even blared, "Truman Does A Hitler." The U.S. Supreme Court eventually overturned Truman's steel-nationalization executive order two months later, but outrage over the legality of Truman's reach of presidential power lingered.
Discussion of the steel workers strike was rampant around The Commonwealth Club in the summer of 1952. The Commonwealth, the then-weekly newsletter of the club, was teeming with references specifically to price controls issued by the Wage Stabilization Board and by Truman's own choice for the Democratic nomination, Averill Harriman.
In a speech given at the club on May 19, 1952, a defiant Harriman defended Truman's stance toward the striking steel industry. "We can't leave it to the steel industry to tell us how much steel the country needs," said Harriman, who would eventually lose the nomination to Adlai Stevenson, "We can't leave it to industry and business to plan the future of the economy."
At least in part, Harriman's rationale sounds similar to feeling toward automakers that Obama and the Democratic leadership in Congress have expressed: We don't trust you.
The possible deal laid out before the Big Three bears this sentiment, calling for extraordinary government oversight of the industry. Here are a few of the bill's recommendations:
- Naming of a "car czar" to rein in the industry's financial dealings.
- The power to access financial records.
- Ability to approve any transaction over $25 million.
- Denies payment of stockholder dividends while emergency loans are outstanding.
Possibly fearful of too much government intervention, Ford announced that it was not in such dire straits after all and bowed out of any bailout. Thanks, but no thanks, at least, for now.
As the Times article points out, how long until foreign car companies with factories in the states begin to cry political nepotism? I have a Nissan built in Tennessee that runs like a dream. My dad has a Chevy made in Michigan that runs like a nightmare. Which company is to be rewarded for their work?