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November 17, 2008

Comments

I love the gender switching in this post!

"If Jonah Goldberg can explain why she takes what I say..."

LOL! Well played, ma'am. Well played.

I was going to comment on Jonah's gender confusion, but I see you did it as skillfully and gracefully as I could have imagined. =)

"he said, she said"! Now you are really going to confuse old Jonah.

I don't think you hid a single expert in your argument. I think that what Jonah Goldberg is doing is this:
1. hilzoy believes in considering these things individually, on their merits: individual regulations for particular unique situations with reasons and drawbacks. She argues for or against particular regulations on this basis.
2. Who is she to do this?
3. Clearly she thinks she can go into this or that and check it all out and be an expert.
4. She's an expert.
5. She's an arrogant know-it-all expert.
She believes in the higher knowledge of so-called experts, accessible to them when they stare into their magic navels.
5. (These experts being liberals, since conservatives properly use a broad brush and do not truckle with this.)
#5 may be optional, but otherwise I think this is where your belief in "Experts" "came from."
Bleargh.

Or the same sequence without my screwing up the numbering. :o)

"smart people who read books and think about things" <==> "liberals"

Wasn't ObWi going to start ignoring NRO? Goldberg's point about "humility" isn't so bad, but Mr. Liberal Fascism swims in a sea of sewage all day every day, and it's tiresome to flick away chunks of intellectual dishonesty in the hope that something valuable emerges from the slime. I'm more interested in seeing you engage Wilkinson.

I'm detecting a hint of sarcasm in your response. On a completely unrelated note, it's amazing to me that we live in a world where Liberal Fascism is deemed a "provocative and well-researched" book by some. Apparently calling a stupid idea stupid, even when backing up your assertion with facts, is pretty much tantamount to fascism.

I think maybe it was the "Prince Hilzoy" story that threw him for a loop.

Well, your position was that by analysis of relevant facts and application of economic principles we can decide when and how government should intervene in the market. Since that analysis will presumably require competent and informed people (i.e., experts), I suppose I can see the connection Pantload is trying to make.

The "always" is, of course, totally disingenuous. Experts don't have to be right 100% of the time in order for expert analysis to be a net benefit to the economy as a whole.

Imagine there are 20 companies that are about to fail. Imagine further that the economically efficient result would be to let 10 fail and bail out the other 10. In such a circumstance, it would be better to have an expert come in to tell us which should fail and which shouldn't than to let all of them fail. Even if the expert makes a mistake and we end up bailing out 11, or 12, or 8, or 9 companies instead of 10, we're still better off than we would have been by simply refusing to consult the expert based on an ideological opposition to competent government.

"...what part of my argument led Jonah Goldberg to think..."

Isn't using "Jonah Goldberg" and "think" in the same context a bit of an oxymoron? It's obvious that he is less than interested in engaging Hilzoy's actual argument (probably because it can't be rebutted in a snarky one-liner) - so he makes up an irrelevant, OT point to argue instead.

And this is news?

Jonah Goldberg think? The question answers itself.

I'd certainly love to know what part of my argument led Jonah Goldberg to think....

That would have been a first for him.

Jonah Goldberg: still stupid.

I suppose it needs to be written, since that tottering reptile NRO still features him, but it does get a bit old after a while.

"I thought I was just making the point that most people who favor things like the bailout do so not because they are unaware of the virtues of markets, but because they think that there are cases in which these virtues are outweighed by some feature of the specific case at hand, and therefore that arguments that simply recite the general reasons why markets are good, rather than engaging with the details of the case at hand, are directed against straw men."

This is fine so far as it goes, but the problem is it doesn't apply to the GM case. So far I haven't heard the features of the specific case at hand which require departure from the market structure. I wasn't even wholly convinced in the bank bailout cases, where the argument is much stronger. The only case I have seen that even tries to deal with the details on a better than "oh no the sky is falling" level is the TNR article you linked which seems to have serious flaws. I talked about those flaws in the other comments but in summary he has a lot of thinly supported assumptions--all of which must be 100% true to make his case for a bailout good.

A) That the normal Chapter 11 will be unavailable. This he pretty much breezily speculates on, waving the 'financial crisis' and then skipping any further analysis.

B) That a bailout would be better than facilitating a Chapter 11 style bankruptcy. I really don't understand this. If the government could fund an enormous bailout, why not just fund the much smaller unwinding loans that he thinks make Chapter 11 impossible?

C) That a bailout would be GOOD because after 30 years of having a really crappy business model, GM has finally gotten its act together. This is the worst. I see evidence that GM has made SOME changes, but its choices as recently as 1 year ago (focus on SUV market to boost profits) make me very skeptical.

D) He admits that an Obama administration is very unlikely to deal with the problems of the UAW. And that strikes me as a problematic parenthetical. I'm not one who believes that the UAW solely caused the problems at the big 3. I believe that the problems were a joint venture in craziness by the UAW, the management, and the dealers (a much underappreciated third party with a byzantine structure of interlocking state rules to protect their local monopolies). The case hasn't been made anywhere that a bailout which deals with the management but not the UAW is likely to lead to GM being a success later. Hell, I'm not even convinced that the bailout will make the right changes to the management. What is being mooted right now in Congress doesn't seem to even do that.

So... shorter Goldberg:
"You think you guys are so smart, BUT YOU ARE NOT!"

My real objection with the interventionists isn't that they want to intervene in the market as much as they do, it's that they hide their ideological biases in words like "pragmatism" and mock their opponents as un-empirical ideologues.

Thus, Johan reveals the nut of the matter. He doesn't object to a GM bailout because he is against interventionism in general, he's against the bailout because he doesn't like the rhetoric structure of the interventionists' posts.

If only you'd been nicer and kinder and gentler to Johan's delicate feelings, he might have been swayed by your insights. But you used too many big words, so the Big 3 Automakers can just roast in hell for all he cares.

Thus, Johan has made the conversation about something bigger than jobs, bigger than ideological capitalism, bigger than government functionality. He has made this about the biggest thing he can think of, and that is his ego.

Bravo.

So... shorter Goldberg:
"You think you guys are so smart, BUT YOU ARE NOT!"

"--My real objection with the interventionists isn't that they want to intervene in the market as much as they do, it's that they hide their ideological biases in words like "pragmatism" and mock their opponents as un-empirical ideologues.--"

Thus, Johan reveals the nut of the matter. He doesn't object to a GM bailout because he is against interventionism in general, he's against the bailout because he doesn't like the rhetoric structure of the interventionists' posts.

If only you'd been nicer and kinder and gentler to Johan's delicate feelings, he might have been swayed by your insights. But you used too many big words, so the Big 3 Automakers can just roast in hell for all he cares.

Thus, Johan has made the conversation about something bigger than jobs, bigger than ideological capitalism, bigger than government functionality. He has made this about the biggest thing he can think of, and that is his ego.

Bravo.

Sorry to barge in with an OT post, but I think this news will be of interest to all in the blogging community.

Now back to your regularly scheduled programming......

Thanks -

Gak. Apologizes for the multiple posts.

I wrote that Will Wilkinson was wrong to think that a general recitation of the virtues of free markets was sufficient to show that bailing out Detroit was a bad idea,. . .

Goldberg clearly didn't read your post very well. The references to Thatcher, kids and milk were sufficient to identify your gender. :)

(/sexist comments)

and that there is no general reason for favoring regulation over its absence

Having now read the earlier post and comments, I don't see much difference between your position and those favoring no regulation because both positions are premised on doing the most efficient thing unless some overriding concern exists. While you may not believe that the market typically produces the most efficient result (while the free marketers do) you should theoretically end up with the same conclusion vis-a-vis efficiency leaving only a policy decision re the overriding concerns.

However, your basic premise that one cannot resolve the "Detroit" problem with a simple recitation of free market economics is something I completely agree with.

Look back to 9/11 and the impact 0% financing had on the economy. A (going from memory here) high-20's percent increase in cash flow to GM produced a 6-7% increase in GDP.

I worked at a GM dealership in the past. There are so many considerations here I wouldn't know where to begin. On the one had are the negatives: GM's upper management comes from business school straight to Detroit without any (or minimal) contact with dealers. Dealer relations are not very good and GM has not responded to dealers' complaints about how the consumer market has changed and what is needed to keep dealerships alive. GM, while producing MUCH better cars than the 80's doesn't do so across the board. Some models are competitive with anything yet some are just silly (like the minivan makeover into . . . well, let's not go there). I recently got a ride from a recently retired Holden exec (Holden is a GM subsidiary) while in Australia. He described the different decision making structure at both organizations and couldn't believe the red tape in the U.S.

On the other hand, look at some of GM's successes, frex the Malibu. Production shuts down why? UAW. Japanese manufacturers have the luxury of flexibility in worker assignments looking mainly to ability where UAW ties GM's hands on seniority. Look at plant quality and union representation. Interesting results. Add in the $600 per car MORE that GM pays in health care than the Japanese and you see a big part of the problem (workers can retire at 48 after 30 years leaving the benefits on the books for years to come).

In any event, given the huge impact the U.S. auto industry has on the market, there are many other concerns than simple market economics. Looking forward to the standards that Congress has and wants to place on automakers and you see another part of the problem in terms of cash for R&D.

And, finally, while implicit in your posts, I think (as a non-economist) it helps to look at whether a failure truly is a "market failure." Frex, the compensation of executives is often pointed out as one of the darker sides of capitalism or "the market". I see it as a market failure. Cross-pollinated boards approve compensation without direct input from shareholders in any meaningful way. Not enough information reaching the owners=no true market. Not sure what the solution would be here (if you put it out in a paper ballot to shareholders probably no contract would be approved) but I'm sure there is a market-friendly one out there.

In the case of the automakers, much of the blame surely goes to simple market forces. But there is a lot of other considerations as well. In other words, if the only failures were market failures, the "pure market" argument might be more apropos.

Meh! I'm so happy! Thank you Russell. Today is a great day for the world, truly. The world is superb.

"If Jonah Goldberg can explain why she takes what I say to have anything to do with expertise"


I see what you did there!

The word Superb always makes me think of Empire Records.

In Jonah's defense, she has posted an update reflecting the gender mistake. So she is at least capable of understanding the difference between men and women. Or that they require different pronouns of gender distinction. Or something like that. Which is, obviously, central to his point that laissez-faire economics high school football rules.

What Zifnab said. It helps to use the right frame of reference.

In Goldberg's world "correct" decisions are always reflexive, not deliberative. Either you take the specific position handed down to you from the folks above you in your tribe's pecking order, or you do your best to apply the most recent ideological framework they've given you. Actually making independent decisions is only necessary when you're an undisputed leader giving orders to others, and the only reason you would ever "engage with the details of the case at hand" in the first place is if you are an "expert" -- like Jonah -- whose function is to come up with ways to apply the tribe's ideology to novel situations.

There's simply no place on Jonah's mental map where people disagree on merits with someone who's above them in the pecking order, or with the creation myth of the tribe. Just a blank spot labeled "here be dragons." Thus the complaint about liberals' lack of humility. By which he means what folks around here would probably call submission.

Reread with that in mind and it still won't make sense, but at least you'll be able to tell what he's actually trying to get at. Which is indeed, "You think you guys are so smart, BUT YOU ARE NOT!"

I'm totally not kidding about this (though I also doubt that hilzoy is genuinely baffled).

If only you'd been nicer and kinder and gentler to Johan's delicate feelings, he might have been swayed by your insights.

Am I the only one reminded of Jon Stewart as a delicate southern belle? (skip to 4:00)

I think this news will be of interest to all in the blogging community.

Meh.

Let me try to find a legitimate point in what Goldberg is saying.

Broadly speaking, there are two approaches the government can take when companies ask for bailouts:

1. Always refuse.
2. Look at each situation individually and decide based on the specifics.

The argument is that #1 is better than #2. This seems obviously wrong, but here is the reasoning.

When we are deciding whether to bail out a company, the negative consequences of bankruptcy are clear and immediate. The negative consequences of a bailout -- the possibility that the industry will be weakened far into the future, as well as the opportunity cost of the bailout funds -- are speculative and uncertain.

Because of this asymmetry, any particular bailout might appear to be the right move at the time when in retrospect it turns out to have done more harm than good. The Chrysler bailout of 1979 may fall into this category.

Imagine that over a long period of time, 30 companies ask the government for bailouts. Following path #2, the government agrees to bail out 15 of them. In 5 of these situations, the bailout works well, but the other 10 bailouts backfire as described above.

Goldberg thinks that something like this scenario obtains in real life. So, the government is better off with path #1.

In order for him to be wrong, we have to be pretty good at predicting whether or not a bailout will backfire. Indeed, I think we are pretty good, at least good enough that #2 is a better option than #1.

Goldberg would say I believe that "liberal experts are always qualified to make these decisions." He elides the distinction between blindly trusting the experts and evaluating for oneself the arguments and opinions of people who know a lot about the subject. (Not to mention the gratuitous "liberal" and the too-strong "always.") But, I think the point that we take ourselves to be "qualified to make these decisions" is right.

Or, the first paragraph of Leo's post.

Sebastian's 12:20 post illustrates the foolishness of Wilkinson/Goldberg. He actually addresses the issues raised by Cohn, rather than waving the Libertarian Book around and pretending it has all the answers.

I think it's unfortunate that we use the term "bailout" so imprecisely. My own opinion is that we should be figuring out how to reorganize the company financially. That's the point of Chapter 11, after all. (And BTW let's be clear that Chapter 11 is a government-established and managed procedure, so talk of "government bad" in that context is a little silly).

It may be that under current conditions, and considering the size of GM, normal Chapter 11 won't work, for lack of financing for one thing. If so it doesn't seem unreasonable to me for the government to step in, provide some financing, and essentially do a custom-tailored reorganization that provides continuity and eliminates some of the uncertainty that would surround a standard bankruptcy.

That all assumes that GM is capable, in its core operations, of being a profiatble company. I don't know if it can or not. To get there is going to take some serious change by both labor and management. I'd like to be more confident that they all understand that.

At the risk of biting the hand that feeds me, a secret part of me -- well, it's no secret now -- wishes the Big Three would not get a Big Bailout.

Working in the industry now for five years, I can see how GM, Ford and Chrysler would use the money the same way a meth addict uses what a methodone clinic gives him.

We are all scared to death watching dealerships close around us, frustrated by the lack of customers coming through the door -- angry at banks turning down an unusually high number of them that do want to buy -- and frightened to think how much worse in will be when the economy formally falls in recession.

Take away the current conditions, and November and December are two of the most challenging months of the year anyway. And now this.

There is a saying in the car business that you can't compete with Santa Claus. Now we can't compete with Scrooge, either.

So, we need the money. The economy at large needs us to get the money, so we can survive.

But what is the definition of "survival" here?

I can see where the Big Three -- desperately in need of cash flow, especially GM -- views the money it would get as lifeline to get through Decemember and January and February.

And then hope -- like I am hoping as a salesman -- that business picks up as it usually does in March, when the weather is warmer and customers come out. The selling season.

But what if business does not pick up in March?

What if we are deep in the throes of a recession, one that even spring weather can't thaw?

Or what if we aren't?

Will the U.S. automakers have learned anything from their latest brush with death?

Or the fool's gold of today's cheap gas return them to thinking that trucks and SUVs are still the ticket?

How crazy it was watching NFL football yesterday and seeing Ford unveil its latest version of the F150, just what we needed. Of course, Dodge has already been trumpeting its new and beefy (beefier) Ram.

Here at my dealership there is excitement over the imminent arrival of the new Camaro, which bears a striking resemblance to Chrysler's incarnation of the Challenger.

Pickup trucks and muscle cars -- Detroit at its finest.

To be fair, I still see a genuine thirst for full-size trucks, more so than the huge SUVs, which have been replaced in popularity by the so-called crossovers. And try getting a guy's -- or gal's -- attention at my desk when they see the poster nearby of the sexy, powerful-looking Camaro staring at them. Much more seductive than a Prius.

But there are more and more customers asking for hybrids -- try finding one of those on the pre-owned lot I call home. I even had a customer Friday for the first time asking if we had any of the Tahoe hybrids; much too soon to have them used.

I envy Toyota for having the foresight to come out with the Prius and, unlike Honda with its hybrids, hitting the jackpot with it. The Big Three has years and years of catching up to do.

Would they use the bailout money for such R&D?

Probably not.

Not when they are fighting for their month-to-month survival.

But they must change. And hopefully the money we ultimately get will give us a bridge to a better time and some ability to change with it.

So, in the end, I favor a bailout. Not giving Detroit one would be like refusing a starving neighbor you know a meal.

Not when Wall Street's life-or-death situation was greeted (in retrospect) with expediency.

It disgusts me to see President Bush come out so strongly against a bailout for Detroit when he used the bully pulpit and the Treasury Department to push Wall Street's.

Of course, Wall Street is a crowd he can relate to. Not me and my customers who live paycheck to paycheck.


@Sebastian and Bernard Yomtov, both excellent posts.

The idea that GM "must" be liquidated under current bankruptcy law, therefore the government only has one option, is flawed on its face. The govt can obviously create a "Big Three Special Fancy Bankruptcy Law (BTSFBL)" to suit this case.

Under the terms of the BTSFBL, Bernard's points apply about whether GM can be a going concern in the future.

It might be argued that this whole exercise constitutes a "bailout", but I also agree with Bernard's point that the term has become so imprecise that it has started to render it meaningless.

Absent any "thoughful" approach to the problem, I would advocate massive tax cuts and deregulation. :-)

I want to respond to one part of bc's excellent post:

I don't see much difference between your position and those favoring no regulation because both positions are premised on doing the most efficient thing unless some overriding concern exists. While you may not believe that the market typically produces the most efficient result (while the free marketers do) you should theoretically end up with the same conclusion vis-a-vis efficiency leaving only a policy decision re the overriding concerns.

I'd like this to be true, but ideology runs deep. Person A might say that we shouldn't have bailed out Chrysler because its bankruptcy would have served as a wakeup call to GM and Ford, and look at them now. Person B could respond, that's wishful thinking, and we know that the bailout prevented severe economic dislocation at the time.

Basically, the facts are unclear, and the main point of disagreement is the long-term consequences of bailing out vs. not bailing out GM, which none of us knows. In practice, people's ideology is going to affect what conclusion they reach about efficiency.

If only you'd been nicer and kinder and gentler to Johan's delicate feelings, he might have been swayed by your insights.

Rather like those Republicans who voted against the first Bailout Bill because Pelosi hurt their feelings. Yeesh.

================

For those more familiar with the UAW, did Saturn, as originally run, have the same problems as the rest of GM? My impression was that it didn't, but I don't know much about the inner workings, only that an experiment that seemed to work was junked as soon as possible.

======================

I envy Toyota for having the foresight to come out with the Prius and, unlike Honda with its hybrids, hitting the jackpot with it.

btfb, why do you think that is? Honda struck first with the Insight, which should have given it the lead. I compared the Prius to the Civic and prefered a car without the "gosh-wow" factors, but I'm not a typical car-buyer.

What do think Toyota did right and Honda did less right?

Thus, Johan has made the conversation about something bigger than jobs, bigger than ideological capitalism, bigger than government functionality. He has made this about the biggest thing he can think of, and that is his ego.

Actually, he's made it about one of the smallest things I can think of, and that's his ...

Drat. Can't do that joke here.

the "she" thing was outstanding. well played

What do think Toyota did right and Honda did less right?

the Prius looks less odd. the skirt around the rear end of the Insight is a little creepy.

"Free-markets" like "laissez-faire" are the biggest bunch of Orwellian bric a brac ever to three card monte the populace. Both have been long term fronts for corporate welfare states. The only free markets that have ever existed have been on the tribal band level. Even contraband whose price is somewhat determined by supply and demand is interfered with merely by its illegality and the power relationships (often parasitic and oppressive between suppliers, producers, and consumers) among the parties conducting it. Consevatives think they are principled, principled all the way to every economic break down in the US for well over a hundred years.

In practice, people's ideology is going to affect what conclusion they reach about efficiency.

You might add: people's values determine their definition of "efficiency".

Efficiency is the ratio of some good output over some costly input. Like any fraction, it must have the same units in both the numerator and denominator, or else it's meaningless. I know it's distasteful to reduce the anxieties of real people to a common unit like, say, dollars. But talking about "efficiency" without doing so is mere sophistry.

Different people have different anxieties. Some people fear government intervention in the same visceral way that other people fear hunger. Both groups could agree on the expected financial consequences of a "Detroit bailout" and still disagree about its "efficiency" -- because they attach different dollar values to ideology or hunger.

--TP

What do think Toyota did right and Honda did less right?

The Insight is a two-seater with a really tiny cargo hatch.

The Prius seats four fairly comfortably, and you can load a lot in the back.

The Prius is just a more useful vehicle.

And yeah, the skirt is weird looking.

The only free markets that have ever existed have been on the tribal band level.

Actually, I think the pin industry of Adam Smith's day might be a good example of a reasonably free market.

Thanks -

Sebastian wrote,

That a bailout would be better than facilitating a Chapter 11 style bankruptcy. I really don't understand this. If the government could fund an enormous bailout, why not just fund the much smaller unwinding loans that he thinks make Chapter 11 impossible?

I have a feeling the answer to this questions lies in derivatives and credit default swaps. And the effects would be similar to the effects of the Lehman bankruptcy. There may be more than $1 trillion worth of credit default swaps bet on GM alone (and $25 billion, while a lot, isn't $1 trillion).

Of course, if GM goes bankrupt like Lehman, we will find out with exact certainty how much is owed on derivatives insurance ($365 billion after Lehman settled). I suppose the bankruptcy way would be more efficient than creating a whole new automaker bailout process, since I'm sure we already know who to call at AIG to tell that their third bailout check is in the mail and we have all the relevant addresses for sending out those checks. Won't even have to re-type the "Pay to the Order" part!

"Wasn't ObWi going to start ignoring NRO?"

The difference between hunting for things to respond to at NRO, and responding when you are directly addressed at NRO, strikes me as large.

I'm also going to throw in a quote from my sidebar, with an insert: "Before impugning an opponent's motives [inserts], even when they legitimately may be impugned, answer his arguments."
-- Sidney Hook

I think little of Jonah Goldberg, but why do people (who aren't in third grade) think comments consisting entirely of "ha ha, you're/she's stupid!" reflects well on themselves, no matter whom they are characterizing?

I mean, sure, maybe the person you're characterizing is an idiot, but you've just made clear that you're making the contribution of a 9-year-old.

Jonah is pure, undiluted GOP apologist. And dumb as a bag of hammers.

Jonah: The position Hilzoy seems to be taking is simply this: experts -- by which he means liberal experts...

Are there any other kind?

The Prius is just a more useful vehicle.

And yeah, the skirt is weird looking.

Amen. Didn't they study the EV-1?

Now if the Volt works out . . .

"What do think Toyota did right and Honda did less right?"

Speaking as one of the first Prius buyers: as far as i was concerned, it was the 4 seater thing. I mean: if someone was going to buy a 2 seater, it would be me. I'm single, and normally drive alone. But I thought: sometimes, one wants to give rides to more than one friend. Maybe an entire couple. And sometimes one wants to transport things in one's car. So I bought a Prius.

The Prius is just a more useful vehicle.

The Insight was sold from 2000 to 2006; the Prius started in 2001 and the Civic Hybrid in 2003. That meant that from 2001 to 2003, you had a choice of the dinky Insight or the spacious Prius. After 2003, you could get a Civic Hybrid, but by that time, the hybrid of choice would be the Prius.

So what Honda did wrong was not offer their 4-seater earlier. They allowed Toyata to get a 2 year head-start on the 4-seat hybrid market. Bad Honda, bad (but much, much better than the Big 3).

An interesting question upthread a bit:

For those more familiar with the UAW, did Saturn, as originally run, have the same problems as the rest of GM? My impression was that it didn't, but I don't know much about the inner workings, only that an experiment that seemed to work was junked as soon as possible.

Saturn, if I recall correctly, had a special arrangement with the UAW so that work rules were relaxed somewhat. GM hoped that Saturn could compete with the Japanese, and workforce cooperation was a big part of that. Remember all the commercials with the workers in Honda-like whie coveralls extolling this grand new experiment?

So what happened? Saturn built an enormous reservoir of good will with customers and workers alike, built pretty good little cars that were cheap, and it all hemhorraged money like crazy. GM responded by scrimping on product development, and that which seemed new and interesting in 1995 looked antediluvean by 2002. (A similar story to almost everything except body-on-frame SUVs at GM for the last thirty years, as it happens.)

Andrew weighs in:

A word to Hilzoy: as anyone who has tried to read his book will testify, Jonah isn't that bright, alas. He's aware of the broad contours of conservative thought but he has learned them by rote. And so any specific attempt to apply them specifically to a changing world can befuddle him into incoherence, or, more often, snarky recitation of bromides. Think Palin with a college degree that isn't about being a sportscaster. Which makes him qualified for the Supreme Court in the current GOP, but not exactly a sparring partner to equal Hilzoy.
Ka-ching!

Jonah is pure, undiluted GOP apologist. And dumb as a bag of hammers.

I'm insulted.

Remember all the commercials with the workers in Honda-like whie coveralls extolling this grand new experiment?

I surely do. The idea that the UAW wasn't some ghastly monster out to destroy the Big 3, but would make reasonable choices was a pretty cool concept. I wasn't in the market for a car at the time, but had I been, Saturn would have been the first stop.

it all hemhorraged money like crazy

Where, how and why would be relevant questions, I would think.

I think little of Jonah Goldberg, but why do people (who aren't in third grade) think comments consisting entirely of "ha ha, you're/she's stupid!" reflects well on themselves, no matter whom they are characterizing?

It is neither necessary nor rewarding to detail the stupidity in anything as transparently stupid as most of Jonah Goldberg's output. Does anyone who reads OW really need help in discerning that the item Hilzoy discusses is 100% name-calling with zero in the way of facts or logic?

but why do people (who aren't in third grade) think comments consisting entirely of "ha ha, you're/she's stupid!" reflects well on themselves, no matter whom they are characterizing?

Me, I'm not *trying* to reflect well on myself. I'm saying Goldberg's a dumbass.

but why do people (who aren't in third grade) think comments consisting entirely of "ha ha, you're/she's stupid!" reflects well on themselves, no matter whom they are characterizing?

Because conversation between human beings involves more than the exchange of intellectually novel statements. It also involves the creation and maintenance of shared consensus. If I didn't know anything about Goldberg, the fact that people I consider smart and fair-minded, like Anderson, hold him in open contempt would give me some useful information.

I don't see why this statement would reflect poorly on those making it. From what I can tell, Jonah is either very dim or very unethical. Charitably, I assume he is the former and not the later. So why should I think any less of someone for making true statements?

Perhaps a better question than the one you asked is: why do you feel the need to comment about simple assertions that Jonah is stupid without being bothered by hilzoy's she/he gender joke? Surely we all have on occasion mistakenly inferred or misremembered the gender of someone on the internet who had an ambiguous handle. Isn't drawing attention to such a simple and common mistake needlessly cruel, especially since the mistake has absolutely nothing to do with the issues at hand? Since you think Anderson's comments don't reflect well on him, did you find hilzoy's subtle digs at Jonah to reflect well on her? Do you see a meaningful difference between insulting someone directly and doing so in a more subtle manner?

"Does anyone who reads OW really need help in discerning that the item Hilzoy discusses is 100% name-calling with zero in the way of facts or logic?"

No. So why bother posting comments with no information content? "X is stoopid" is either obvious, or it isn't. You've just answered your own question, Mike.

I prefer to spend my time reading comments with actual content. Maybe it's just me.

"...why do you feel the need to comment about simple assertions that Jonah is stupid without being bothered by hilzoy's she/he gender joke?"

Because Hilzoy had a point.

"Isn't drawing attention to such a simple and common mistake needlessly cruel"

No.

Because Hilzoy had a point.

She did? I mean, I thought it was funny, but what exactly was the point? Please explain what substantiative content resulted from tweaking Jonah over his trivial bookkeeping mistake. Was the point that Jonah is too stupid to get small details right and thus can't be trusted in general? Or what?

"Isn't drawing attention to such a simple and common mistake needlessly cruel"

No

See, if I saw someone mock another writer for making a common spelling mistake, I'd think "what a jerk" because everyone makes such mistakes and doing so tells us nothing about a writer. I fail to see the difference between a trivial spelling mistake that people commonly make and a trivial failure to remember the gender of an oddly pseudonymed writer. Do you see a difference?

"Please explain what substantiative content resulted from tweaking Jonah over his trivial bookkeeping mistake."

The point is that it's a) easy to find out the gender of many people, including Hilzoy; and b) even easier to write without using a gendered pronoun if one has any doubt.

The number of times I've erroneously written the wrong pronoun via assumption regarding someone on the internet is possibly twice.

And the harm in tweaking for cause is non-existent. I think Jonah Goldberg will survive the wound.

Turb: I thought it was fair game because it is, actually, really easy to write without making assumptions about people's gender. (I should know; I do it a lot.) All it takes is having the thought: wait, do I know that this 'hilzoy' is a guy?

So why bother posting comments with no information content?

In this case, for their entertainment value. (And if you think they had none, well, everybody's a critic.)

And if I wasn't clear, the purpose of tweaking someone for making gender assumptions is to get them to stop doing it.

I thought it was fair game because it is, actually, really easy to write without making assumptions about people's gender. (I should know; I do it a lot.)

Well, I'm sure there are great many things that you find easy that are perhaps not so easy to the average person here, let alone someone with Jonah's, um, limited abilities. I'm not sure I'd want to be judged harshly for failing to successfully do anything that you find easy....

All it takes is having the thought: wait, do I know that this 'hilzoy' is a guy?

One explanation for Jonah's mistake is that he just assumed you were male. Another explanation is that he at one time knew that you were female but got confused when writing this piece. That sort of thing happens to me not infrequently, so I try to be charitable to writers regarding such trivial flaws, especially when they don't affect the argument. I'm not sure why you would assume that explanation 1 was true while explanation 2 was false.

I could be wrong, but I have the sense that most people would have thought better about deploying the same joke when responding to someone they respected or at least agreed with. Now that's fine with me since I see nothing wrong with mocking stupid people whose stupidity causes real harm, but I can't reconcile that notion with Gary's strange reaction to people directly calling Jonah stupid. It seems to me that subtle insults should not be privileged over merely unsubtle insults.

Again, I thought your comment was funny and I have no problem with it. I'm just trying to figure out why Gary appears to dislike one form of mockery while not seeing any problem with a slight variation. I get curious when I see such differences in perception.

The point is that it's a) easy to find out the gender of many people, including Hilzoy;

I don't know how I would determine hilzoy's gender if I hadn't read hilzoy's postings for the last few year. And you are assuming that Jonah did not simply make make a mistake. Perhaps most of the prose you read is sufficiently defect-free to convince you that people don't make small mistakes when writing.

and b) even easier to write without using a gendered pronoun if one has any doubt.

Again, it is difficult to do this when one recalls but recalls incorrectly.

The number of times I've erroneously written the wrong pronoun via assumption regarding someone on the internet is possibly twice.

I don't see how this is relevant.

And the harm in tweaking for cause is non-existent. I think Jonah Goldberg will survive the wound.

I'm sure he will. I don't think I said anything about harm to Jonah, did I? I've asked you to explain why it reflects poorly on commenters to write that Jonah is stupid. I'd still like to know your thoughts on that.

And if I wasn't clear, the purpose of tweaking someone for making gender assumptions is to get them to stop doing it.

In my experience, indirect passive games like this are rarely effective. They might be fun, and I think that's justification enough, but it seems silly to pretend like they'll be likely to alter behavior. If altering behavior is important, it is worth the time and dignity to be direct.


I fail to see the difference between a trivial spelling mistake that people commonly make and a trivial failure to remember the gender of an oddly pseudonymed writer. Do you see a difference?

Turbulence,

This is very much an IMHO sort of thing so take it with a grain of salt, but I see gender mixup as a more serious mistake than a spelling error because it reveals a lack of familiarity with the broader set of writings of the author whose post is being criticized. I've found that in most cases I have a pretty good idea (not 100%, but better than a coin flip) as to the gender of writers whose work I've perused at length, just because they tend to drop gender identity clues from time to time in the normal course of writing from a personal viewpoint.

Now I don't expect that another writer necessarily should be familiar with someone's body of work before they can be permitted the temerity of dissenting from some point made in one particular comment, but it does add a little something to their credibility in my eyes if they are working from some context other than just the precise posting which they are responding to. That Jonah goofed up on gender was a clue to me that this is probably not the case here.

And I do have higher standards on this score for professional writers than I do for some random dofus on the internet, so I do score a few points off when a pro. makes a mistake like this. Not just for Jonah, but for any professional writer.

YMMV of course.

Going back to Sebastian's post, I think one of the problems with going the normal Chapter 11 route is that due to the current state of the credit market, it is unlikely that GM would be able to continue as a going concern. Under normal conditions a company in Chapter 11 would be able to obtain credit, but at this particular moment that may not be the case.

No. So why bother posting comments with no information content?

I'm not a big fan of the "He's sooo dumb" school of commenting myself, but isn't complaining about such comments itself decreasing the information/no information ratio in the comments? And now my commenting on your complaint has further decreased that ratio...

It seems to me that subtle insults should not be privileged over merely unsubtle insults.

Why not? I appreciate elegance in writing and in music and in software. Why shouldn't I appreciate elegance in this (very minor) insult?

I'm not generally a fan of insult-slinging, but I did get a kick out of this wry bit of tweaking. As Gary said, Jonah Goldberg will survive.

(All JG had to do was click that handy little "About" link in the upper left corner. He would have learned hilzoy's gender in the second sentence.

And while we're on the subject, I really wish that English had gender-neutral pronouns. I don't always find gender-neutral writing as easy as hilzoy does.)

Why not? I appreciate elegance in writing and in music and in software. Why shouldn't I appreciate elegance in this (very minor) insult?

I was imprecise. I meant morally privileged rather than privileged in general. In other words, feel free to find the subtle dig more amusing or intellectually satisfying than the direct insult. But don't pretend that one is morally superior to the other.

That assumes of course that the reason Gary thinks direct insults reflect poorly on their authors has something to do with morality. I'm still not sure why such comments reflect so poorly.

(All JG had to do was click that handy little "About" link in the upper left corner. He would have learned hilzoy's gender in the second sentence.

There are 295 distinct links on the front page. I think it would be fair to see that the arrangement is...cluttered and that information is not necessarily obvious even if you know what you're looking for. And many people read hilzoy on the Washington Monthly's blog where there does not appear to be similar information. And again, this all assumes that man just didn't make a trivial mistake, an assumption for which no justification has been offered.

Gary's Sidney Hook quote is a good one. I'm afraid, though, that it's an illustration of why I dislike comments like Goldberg's so much. There just isn't an argument there to be answered. There's something that appears at first sight to be an argument shaped object, but it is in fact just made out of paper mache and sarcasm.

Is there an argument lurking in there somewhere? Perhaps, but it's not one the author wrote; it's one the reader has to reconstruct. If there was an argument, it would probably be something like the one that dj wrote: an argument about the cases in which it's wise to use a simple heuristic instead of seemingly more sophisticated decision procedures. That argument would have something to do with human cognitive biases and something to do with Bayesian probability, and it would be chock full of empirical evidence explaining the cases where this sort of idea does and doesn't apply. An argument like that might be interesting, and a very charitable reading of Goldberg might lead you to think that he wanted to say something along those lines. But he didn't. Instead he just snarked.

It's a good rule of thumb that you should answer an opponent's arguments before dismissing him as laughable. But when you have to make your opponent's arguments for him, before even thinking about answering them -- well, in that case I think we can be forgiven for thinking that the first couple of steps aren't worth the effort, and and that we may as well just skip to the third.

Regarding tainted milk: The assumption that government regulation or nothing are the only alternatives is false. In a free market the need for regulation would be met by private companies that give their seal of approval or not, and people can avoid those products not so approved. Underwriters Laboratories (UL) or the Good Housekeeping Seal of Approval are old examples. Private organizations that certify organic, dolphin safe, fair trade etc. products also exist now. The existence of a Government Seal of Approval distorts markets for this service, and frequently lulls the people into complacency, even though government agencies don't have the same incentives for doing a good job as the private sector.

Regarding auto bailout: If the Big 3 are only in need of a bridge loan to better times why isn't private money attracted to the opportunity? The government's economic decisions are invariably tainted by political considerations, even though these considerations are disguised as helping the country as a whole. And although there are innocent victims in some cases, auto workers are not. The uncompetitive nature of the big three has a lot to do with union contracts that ignored the long term health of the auto companies. For that they deserve much of the blame.

One more kick to the dead horse:

Some people are wrongheaded but still worth engaging respectfully.

Some people are just dumbasses.

I think it's unethical to treat dumbasses as if they were worth engaging respectfully. It flatters them and encourages them in their dumbassery; it sends the wrong signal to third parties who may wrongly infer that the engager-respectfully does not consider the person to be a dumbass; it implies that dumbassery is to be tolerated.

In short, contempt has a useful ethical and social function, and is not to be deprecated for its lack of entertainment value.

Do yourself (and everyone else) a favor regarding Jonah Goldberg. Ignore him. He offers nothing except his own desire for attention. You may be surprised how refreshing this kind of simple discipline can be.

Jeff posted: "btfb, why do you think that is? Honda struck first with the Insight, which should have given it the lead. I compared the Prius to the Civic and prefered a car without the 'gosh-wow' factors, but I'm not a typical car-buyer.

What do think Toyota did right and Honda did less right?"

I don't usually do hit-and-run posts. But I had to do some paperwork and then leave early Monday for Family Night at my son's school -- they did a cool Jeopardy-style contest (students vs. parents) on Delaware history.

cleek, russell and hilzoy all made points I agree with.

cleek: "the Prius looks less odd. the skirt around the rear end of the Insight is a little creepy."

russell: "The Insight is a two-seater with a really tiny cargo hatch. The Prius seats four fairly comfortably, and you can load a lot in the back. The Prius is just a more useful vehicle."

hilzoy: "Speaking as one of the first Prius buyers: as far as i was concerned, it was the 4 seater thing. I mean: if someone was going to buy a 2 seater, it would be me."

Toyota was able to combine utility with a car that looks good. It did something that the Big Three has trouble doing, making a car that appeals to both men and women. The Prius is a car that, say, hilzoy could find cute and I might find zippy.

The point is, it was able to reach a level of mainstream popularity that is crucial to an automaker's mass-production business plan.

By the way, I always thought the Prius was helped, to some degree, by all of the good free publicity it gets. It seems like every episode of "Curb Your Enthusiasm" features Larry David going somewhere in his.

Chevy has had great success with its restyled Malibu. All of the consumer and car guides have rated it highly on style, safety and gas efficiency. It is a vehicle that appeals to both men and women. And it is a vehicle that has made GM very proud.

So it is beyond me why they simply don't put the Malibu on the fast-track to being available as a true-blue hybrid.

Of course, if you look at bc's link, the Volt's appearance is basically that of a sleek, moderned-out Malibu. It looks stunning.

Technology is the issue with GM, which is having trouble figuring out how to mass-produce the Volt's battery.

Hence, the link's "Targeted for 2010" -- which could be pushed back if the kinks aren't worked out.

The worst thing that can happen to a new-vehicle rollout is rolling it out with bugs; if they're significant, that car is cooked.

The fact that the Volt won't be in dealer showrooms until 2010 at the earliest shows how far GM is behind Toyota and Honda in the hybrid arena.

I might have a Prius on my pre-owned lot before there is a Volt across the street in the new-car showroom.

GM has only itself to blame. Sure, customers still wants trucks and SUVs. But in its greed and single-focusedness, that's all GM sunk its money in for a long, long time, almost taking the attitude that the Prius and the like was a fad, even when gas hit $3 a gallon.

Not until gas hit $4 a gallon -- which proved to be the point at which the American public as a whole recognized the need for good gas mileage and other options -- did GM seem take the whole thing seriously.

I mean, given the size and stature of a company like General Motors, good management should be able to keep selling its cash cows -- trucks and SUVs -- while still placing an emphasis on developing an appealing hybrid and other smaller traditional cars. But the history of the Big Three is to always revert to its old big-car habits.

There is good reason for this. Chevy's small-car lineup -- the Aveo, Cobalt and even the Malibu -- have small profit margins. Markup averages about $800 on these cars, whereas trucks and SUVs have markup ranging from $1,500 to $3,500.

Not working for Toyota, I do not know what spread they have from invoice to list on a Prius but I imagine it is more than $800 given the cost on these cars is greater than our domestics (another reason they haven't gone completely mainstream; meaning your traditional 4-cylinder cars play a huge part in lessening our depending on oil).

Profitability on GM cars is a big issue because, by some estimates, $1,500 is built into the cost of each automobile to cover legacy costs such as health care for its union employees -- whereas Toyota and Honda don't face that obstacle.

Luckily, I work at a dealership whose flagship is Chevy but also has a growing Hyundai nameplate. Until the credit crisis, it was flourishing and offers some of the best fuel-efficent cars out there in the Accent, Elantra and Sonata, with the industry's best warranty.

When I came to work here five years ago, I never imagined driving a Japanese car or, in the case of Hyundai, Korean. But seeing its quality first hand -- and, frankly, Hyundai cars (not SUVs) offer more bang for your buck than their Chevy counterparts -- our family car is now a 2006 Azera (although it would be the smaller Sonata if I knew back in May 2007, when business was booming, how much $150 less in payment would mean in November 2008; nevertheless, the wife loves it, and so do I on those rare ocassions I get to drive it and not my 1992 F150 that cost $5,000 three years ago).

I am surprised Hyundai does not have a hybrid. But with their car lineup so appealing in terms of affordability and gas mileage they aren't in need of one as much as Chevy.

And whereas Hyundai cars have ridiculously low markups -- no more than $500 on an Accent or Elantra -- they also don't deal with legacy costs that plague the Big Three.

There have been mentions here that a special form of bankruptcy would be better than a bailout for the Big Three. I agree.

First, it would force Detroit to change and sharpen its ways to be competitive for the long haul.

Second, it would send a strong message to the UAW that its unreasonable demands have put its workers' very jobs in peril.

Bailout or bankruptcy -- something needs to be done, and soon. I don't think we can wait until President-elect Obama takes office in January, not unless we want GM or Ford to fail and millions more to join the already growing list of the unemployed.

btfb: it is really, really interesting to hear your take on GM.

More on the Prius: I decided that I was going to buy my first ever new car back in the spring of 2000. I was going to move to Baltimore, so there was something to be said for leaving my old car in CA and buying one in MD (which I didn't end up doing, but never mind); someone had just had a blowout next to me on the freeway and slammed me and my car into the center divider, so there was also something to be said for driving around in a dented car for a few months and keeping the insurance money; plus, the Prius was coming out.

I had watched the rollout of the EV, and as best I could tell, Toyota was doing everything that GM had failed to do right. I never drove an EV, but my impression was that it was a not too great car that one had to pay a really large premium to drive. Plus, one had to figure out the whole charging thing.

The great thing about the Prius, by contrast, was that it was a perfectly fine car, requiring no figuring out ("how do I charge an electric car? what if I run out of electricity on the highway? etc."): you just put gas in like any other car, only much less often. And when I got mine, it was under $20,000, so it cost more than a comparable non-hybrid, but not that much more. (And it was such a nice surprise when I discovered that MD waived the sales tax. ;) ) It was a no-sacrifice hybrid.

Plus, Toyota addressed the one question I had about it: will people know how to fix it? They gave us this "we will pick you up anywhere and fix your car for free" plan, so there were no worries on that score.

Which is all to say: the decision to buy a Prius was as painless as it could possibly be. No learning curve, no big dramas, just a car that gets 40-50mpg.

The only problem was the waiting. (And I got the second Prius in the mid-Atlantic region.)

"In short, contempt has a useful ethical and social function, and is not to be deprecated for its lack of entertainment value."

Whereas I find contempt entirely unentertaining unless it has entertainment value. Elegant and funny contempt, or educational and informative contempt, is a different matter than mere content-free sneers which bores.

Boring writing is always to be deprecated.

Thanks, hilzoy.

Here is the GM mindset: A couple years after I started in the business working in the new Chevy department, they made a big deal about it's Silverado "hybrid."

Just think about that for a moment. Back in 2006, truck buyers weren't exactly a hybrid demographic to go after -- or so I would think.

But Chevy loves its trucks, and makes a superb one.

So we had the first Silverado hybrid on the lot in Delaware. Problem was, it was a tough sell and not one that could be explained easily, as you note, is the case with the Prius.

It was based on having a generator in the bed, that would juice its special battery. Of course, the typical person who favors a pickup isn't likely to keep a generator in his or her truck. Rather, the idea was this would be a great sell to contractors and the like; presumably, they have generators.

Problem is, a businessman isn't likely to pay the high premium that was on this truck and have to worry about the potential headaches of a first-of-its-kind limited-production vehicle.

It turned out to be a novelty on our lot. I remember showing the local fire chief this hybrid Silverado and, like everyone else, he was intrigued but nothing more.

This was the first and only hybrid Silverado our inventory manager ordered. It stayed on our lot for over a year before a customer -- who seemed enamored with the idea of owning a conversation piece -- bought it at a very good price since, by then, the dealership was willing to sell what became a distracting headache for a loss.

I think of that stupid Silverado hybrid and all of the time and money GM spent on that and how it could have spent that same time and money on a Prius-like hybrid that might be on showroom floors now.

I was told by management that GM's thinking was they'd let Honda and Toyota have the hybrid car market and they'd do what they do best -- go after the truck market. Brilliant.

A much better idea was technology that hit showroom floors in 2007, first with the Impala, then the Tahoe and now the Silverado.

They called it "displacement on demand" -- although that term had to be switched (I just use the much simpler "instant fuel economy") after it was discovered another automaker, I believe it was Chrysler, was already using such language.

Basically, these 8-cylinder vehicles transform into 4-cylinder vehicles, shutting four off, whenever you drive at a regular speed for any length of time -- it can be as short as a quarter mile, and you can be going 30 mph or even 60 mph. It's pretty cool driving a big Tahoe and, if you turn on the special setting, see the big SUV go from 8 cylinders to 4 and watch the dial tell you what kind of instant gas mileage you are getting. Suddenly, you go from getting 12 mpg to some insane number like 36 mpg.

Now this strikes me as a good idea.

Of course, this technology isn't on a base Impala, Tahoe or Silverado and, therefore, not affordable to most buyers.

But like any option that is more of a necessity than a luxury -- side airbags being an example -- I'd suspect such equipped vehicles will come down in price over time, another reason to keep GM alive; jobs being No. 1.

P.S. And as you were pleasantly surprised by the tax break on your Prius, why not offer such a break on folks who buy one of these vehicles? I mean, in the search for ways to lessen our dependence on oil, I think it can only help if we widen the spectrum; that would be one more inducement for a buyer to pay the extra money for a more fuel-effecient Tahoe or Silverado.

"I think of that stupid Silverado hybrid and all of the time and money GM spent on that and how it could have spent that same time and money on a Prius-like hybrid that might be on showroom floors now."

To digress slightly, away from cars: a few years ago, while I could still work, and before I eventually went from Employee of the Month to being fired for taking too much sick time, I, lacking better options and needing immediate work, worked at a CompUSA for most of a year, and I watched as, before my eyes, they made corporate decision after decision that bore all the marks of ideas that would drive them out of business.

For instance:

1) eliminating the department/job category in the stores of the people whose job it was to make sure all the shelves were properly price-marked and everything on them was arranged properly and visibly, and firing all the people who did that, and adding the responsibility for doing that to the sales floor people, who had no time to do it, so it became very difficult to find items with their prices marked properly, or at all.

2) Switching the sales employees from a decent, for that kind of job, salary with a small commission, to an appalling salary and having to make almost all your money on commission, but you can't get a commission unless the customer buys a minimum of 3 separate items, thus forcing all the sales people to desperately try to get customers to buy three things, even if it was two pencils and an item, as their top priority. The salary switch also caused a lot of people who knew computers to quit, resulting in a lot of the new sales force having little clue about what they were selling, as well as little time to talk to customers.

3) Deciding that since Circuit City and Best Buy were the main competition, that the best response was to compete back by opening a new department, taking up a big part of the store, devoted to selling tvs and stereos and non-computer home electronics. But who goes to CompUSA to buy a tv or stereo?

But I'm sure management was very surprised when they were forced to go out of business. Geniuses.

For the record, I confess to making a fatal error in judgment in agreeing with calls for letting General Motors suffer bankruptcy.

In my desire and haste to see the automaker -- and, just as importantly, the UAW -- forced into making real changes that will someday make it more viable and profitable, I foolishly thought bankruptcy, even some very special form of bankruptcy, would be an option.

It isn't.

Unless failure is an option.

After giving the subject the considered thought I should have in the first place, it is easy to see how bankruptcy would doom GM to failure.

I would not want to buy a new car or truck no matter how much I wanted it, no matter how much the price was slashed, if I knew the maker of that automobile was in bankruptcy. Would you?

An automaker is not like an airline, where you fly their plane -- perhaps savoring the special low rates bankruptcy caused them to charge -- land and go about your business.

When you buy a car, you see it every day in your driveway. You touch it every day. You are obligated to pay for it every month for, usually, five or six years.

You are shelling out thousands of dollars over this time -- $15,000; $25,000; $35,000; $45,000. Most people are making their second biggest purchase outside of buying a home.

You want faith in the company you are buying that product from. You want to know it will be there tomorrow.

You want to know that 3-year, 36,000-mile bumper-to-bumper warranty -- 5-year, 100,000-mile powertrain -- means something.

Bankruptcy would likely spell the end of GM.

If AIG was Too Big To Fail, General Motors certainly falls in the same category and, sadly, despite -- or because of -- all of its errors and stupid decisions, needs a government handout.

Of course . . .

If GM does fail, it won't be because the Bush Administration or the current Congress refused to give it a bailout -- in this case, it would really be a bridge loan to better times.

Ultimately, GM would fail because of GM, because of misguided business practices I described in my Silverado story and Gary described in his CompUSA story.

Still, the cost of letting General Motors fail would be too big for what is a already a very fragile economy, whether the affected job loss would be one million, two million or three million -- either of those figures would be devastating.

When we talk about how "unreasonable" unions are, could we please have some context? Take five minutes for this: http://www.washingtonpost.com/wp-srv/nation/interactives/healingfields/

But I'm sure management was very surprised when they were forced to go out of business. Geniuses.

From my experience that is pretty much standard practice at large companies.

I once had the pleasure of working for a large retail chain with distant managers who were fond of dictating policies without regard to the actual consequences. I remember in particular one Dilbertesque sequence in which the company:

1 - Instituted a customer unfriendly policy regarding the conditions under which we would accept returned merchandise for credit.

2 - Used metrics to monitor the degree to which the floor staff were enforcing said policy, with punitive measures for staff who exceeded an allowed number of returns per month.

3 - Required that exceptions be approved personally by the store general manager.

Of course it took almost no time at all for the customers to figure out that if they complained loudly and long enough to get the general manager involved, they could get their returns approved regardless. The net effect was:

- angry pissed off customers.
- general managers automatically approving every exception request which came to them regardless of merit, just to save time.
- floor staff seeing their authority and dignity undermined by being required to enforce a policy which the customers knew full well would not be backed up by management, and then being flogged in their performance reviews for trying to do the impossible and failing.
- no net decrease in returns processed (and hence no cost savings to the company), thus the whole episode was for naught.

As they say on the internet - Epic Fail.

That company went bankrupt and was liquidated about a year after I departed.

I'm trying to make a link

Back when I wrote my Nov 17 at 3:37 pm comment in response to Sebastian, I was trying to get at something regarding the automakers and CDS exposure and the continuing bailouts of AIG. This is something which is much more completely explained in this new anti-Tim Geithner post at Barry Ritholz's Big Picture.

For example, I thought there were only $1 trillion in CDS on the Big Three/GM, but this post makes it clear that the amount is much more substantial:

You see, there are trillions of dollars in outstanding CDS contracts for the Big Three automakers, their suppliers and financing vehicles. A filing by GM is not only going to put the real economy into cardiac arrest but will also start a chain reaction meltdown in the CDS markets as other automakers, vendors and finance units like GMAC are also sucked into the quicksand of bankruptcy. You knew when the vendor insurers pulled back from GM a few weeks ago that the jig was up.

However, I was really trying to make the point that bailing them out now would be cheaper than giving AIG the money to pay out it's CDS exposure after forcing GM into bankruptcy. It's pay now, or pay more to AIG later (remember Lehman?). Happily the author of the post explains it better than I did:

Few observers outside Wall Street understand that the hundreds of billions of dollars pumped into AIG by the Fed of NY and Treasury, funds used to keep the creditors from a default, has been used to fund the payout at face value of credit default swap contracts or “CDS,” insurance written by AIG against senior traunches of collateralized debt obligations or “CDOs.” The Paulson/Geithner model for dealing with troubled financial institutions such as AIG with net unfunded obligations to pay CDS contracts seems to be to simply provide the needed liquidity and hope for the best. Fed and AIG officials have even been attempting to purchase the CDOs insured by AIG in an attempt to tear up the CDS contracts. But these efforts only focus on a small part of AIG’s CDS book.

The Paulson/Geithner bailout model as manifest by the AIG situation is untenable and illustrates why President-elect Obama badly needs a new face at Treasury.

Meaning if GM goes into bankruptcy the government will, under it's current model of protecting the "too big to fail" ponzi scheme of speculative CDSs, have to give AIG billions to pay out completely on all the insurance it wrote to the gamblers who have bought protection for their GM/Ford bets. Yeah, that surely makes much more sense than a direct automaker bailout. I mean it makes so much more sense to force AIG into bankruptcy and tell the speculative holders of CDS protection to take a hike. If you don't own the underlying asset, then why are you entitled to have insurance on it anyway?

I could go on ranting, but since the thread is dead, it's getting really self-indulgent on my part. So I'll end by saying it's a really good article that I think reports important information about an under-reported aspect of the automaker bailout vs automaker bankruptcy discussions and I hope you'll read it.

Back when I wrote my Nov 17 at 3:37 pm comment in response to Sebastian, I was trying to get at something regarding the automakers and CDS exposure and the continuing bailouts of AIG. This is something which is much more completely explained in this new anti-Tim Geithner post at Barry Ritholz's Big Picture.

For example, I thought there were only $1 trillion in CDS on the Big Three/GM, but this post makes it clear that the amount is much more substantial:

You see, there are trillions of dollars in outstanding CDS contracts for the Big Three automakers, their suppliers and financing vehicles. A filing by GM is not only going to put the real economy into cardiac arrest but will also start a chain reaction meltdown in the CDS markets as other automakers, vendors and finance units like GMAC are also sucked into the quicksand of bankruptcy. You knew when the vendor insurers pulled back from GM a few weeks ago that the jig was up.

However, I was really trying to make the point that bailing them out now would be cheaper than giving AIG the money to pay out it's CDS exposure after forcing GM into bankruptcy. It's pay now, or pay more to AIG later (remember Lehman?). Happily the author of the post explains it better than I did:

Few observers outside Wall Street understand that the hundreds of billions of dollars pumped into AIG by the Fed of NY and Treasury, funds used to keep the creditors from a default, has been used to fund the payout at face value of credit default swap contracts or “CDS,” insurance written by AIG against senior traunches of collateralized debt obligations or “CDOs.” The Paulson/Geithner model for dealing with troubled financial institutions such as AIG with net unfunded obligations to pay CDS contracts seems to be to simply provide the needed liquidity and hope for the best. Fed and AIG officials have even been attempting to purchase the CDOs insured by AIG in an attempt to tear up the CDS contracts. But these efforts only focus on a small part of AIG’s CDS book.

The Paulson/Geithner bailout model as manifest by the AIG situation is untenable and illustrates why President-elect Obama badly needs a new face at Treasury.

Meaning if GM goes into bankruptcy the government will, under it's current model of protecting the "too big to fail" ponzi scheme of speculative CDSs, have to give AIG billions to pay out completely on all the insurance it wrote to the gamblers who have bought protection for their GM/Ford bets. Yeah, that surely makes much more sense than a direct automaker bailout. I mean it makes so much more sense to force AIG into bankruptcy and tell the speculative holders of CDS protection to take a hike. If you don't own the underlying asset, then why are you entitled to have insurance on it anyway?

I could go on ranting, but since the thread is dead, it's getting really self-indulgent on my part. So I'll end by saying it's a really good article that I think reports important information about an under-reported aspect of the automaker bailout vs automaker bankruptcy discussions and I hope you'll read it.

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