Those who lived through theyears of the Great Depression of the 1930's remember them well. They were the soup lines. Millions of Americans were out of work, poor, and without food. The historical photographs showed the anguish and suffering as people just tried to survive.
Today, we have something akin to those soup lines. Now those lines are made up of major financial institutions and corporations of America. All standing in line before the U.S. Treasury Department with their tin cups in hand looking for a mere few billion dollars to tide their businesses over during times of trouble. The shock waves that were sent out from the sub-prime mortgage mess are bringing some of corporate America to its knees.
In many cases, the corporations that looking for the handouts are in trouble because of bad business decisions and practices and weak management. Many, like the auto industry, have been in trouble for years. The auto industry, from Chrysler to Ford and to General Motors, is now teetering on the brink of non-existence. Circuit City may never recover as competition from the likes of Best Buy and even Wal-Mart may have finally sealed its coffin. American Express, just this morning, wants their share of keep-me-afloat money from the American taxpayers. Freddie Mac and Fannie May have their heads in their hands. Then, there's the bailout of all bailouts, the insurer, AIG.
AIG is the best example of complete management stupidity. First, they took nearly a 1/3 of a trillion dollars in taxpayer money to save their butts against their previously bad business decisions. Further, they got more taxpayer benefits because they were able to benefit from the lower interest rates that had been created when those rates were slashed by our Federal Reserve Bank. Instead of being humbled and greatly embarrassed by their own stupidity in almost losing their company, they decided to look the gift horse, us, in the mouth and laugh by spending hundreds of millions of dollars in junkets to some of the most lavish resorts in the world. I guess sea air, salt water, tanned bodies, and golf are more conducive to clear thinking than the laborious and smog-filled conditions of their home base in New York. Obviously, they must think that, as long as the government is footing the bill, no hard work is necessary.
Then, of course, there's the General Motors' example of corporate governance. They apparently are burning cash at a rate of more than a billion dollars per month. They now say they will be completely out of money by the middle of next year. So, why then, just three weeks ago, were they looking for a handout from you and I so they could buyout either all or part of Chrysler. What are they smoking over at GM? Only a madman would add another failing business to their already substantial repertoire of failing businesses. It would seem to me you would want to shed yourself of unprofitable businesses and not take on more!
I think the taxpayers are owed a better handling of this mess. I think that, if companies need taxpayer funding to survive, they should agree to certain conditions. First and foremost, an interim CEO should be appointed by our Treasury Department. There should be no golden parachutes or fat severance packages for the outgoing CEO. These people are already wealthy enough and totally undeserving of anything else from a company that they helped run into the ground. A new Board of Directors should be immediately elected by a special interim proxy vote by all shareholders. The list of names for the new Board should be twice as large as needed and developed from heads of companies that are currently financially sound. The debt that is incurred from taxpayer loans should have priority of repayment once the company becomes profitable. Further, the government should have repayment priority over all other lenders should the company continue to fail and have to file for bancruptcy.
If there are no severe conditions placed on companies for the welfare they are getting, then the list of companies who need financial help will just get longer and longer. A federal bailout should be a serious situation and a company must weigh the consequences of their actions.