Bailout Myopia

In late 2008, the financial system of the United States and subsequently, the world, received a nasty shock. Our credit markets froze due to the atrocious practices of financial institutions, including, but not limited to, risky “no doc” mortgages (subprime and otherwise), unregulated credit default swaps and heavy reliance on hedge funds and other financial instruments that the investors and financial heavyweights themselves did not understand.

So, here we are. The U.S. Congress, at the urging of the executive branch, passed a massive rescue plan for the banks and other financial institutions (called the “TARP”) with the exorbitant pricetag of $700 Billion.

Now, the domestic automobile manufacturers come asking for a bailout of their own – this one in excess of $30 Billion. First, let me be clear that I am not saying the TARP was a great idea. However, the financial problems were the doing of Wall Street and the financial companies. Those financial problems have downstream implications, including that financing virtually dried up for auto sales and for the auto manufacturers.

Of course the domestic auto manufacturers have made many mistakes over the years – delivering poor quality, building gas-guzzling cars, and most notably, giving away the farm to the unions back in the 1970s, resulting in staggering ‘legacy costs’ that foreign auto manufacturers do not experience.

But back to the bailout. How congress can bail out the financial institutions – who caused the mess in the first place – for $700 Billion but cannot help the auto industry – a downstream victim – with $30 Billion!? AIG was bailed out – twice – at a cost of $143 Billion. That was just one company! Yet congress is implying that the entire U.S. auto industry, one of the most important elements of our nation’s dwindling manufacturing base, isn’t worth less than a quarter of that amount?

I’m not saying we should bail out every company, or industry, that comes knocking. I’m just asking for some perspective. It seems that we’ve already committed to the $700 Billion TARP, so let’s just allocate a fraction of that fund to the auto industry! And, yes, we should get warrants or other collateral in the auto companies as well as the financial institutions for the government bailouts. Let’s just allow some logic into the process.

Steel Doors on Airplane Cockpits?

On September 11th, 2001 a horrible series of attacks was perpetrated against the United States of America and its citizens. That single day, now referred to simply as 9/11, changed the way America saw the world.

The attacks also drastically changed the way Americans travel and interact with people around the globe. Another huge change was the creation of the massive Department of Homeland Security and the Transportation Security Administration (TSA).

While there are many threats to U.S. security, the only attacks that were successfully carried out involved the hijacking of airliners. Of course, now we all expect to spend hours in line at the airport being checked, poked, prodded and questioned before boarding a plane. Gone are the days when a spouse or loved one could see you off at the gate or greet you in the boarding area.

As a nation we have spent literally billions on increased security, watch lists, screeners, sniffing machines and all manner of profiling as well as hired thousands of additional workers. Unfortunately, we still do not have steel doors on major airliner cockpits. Why?

The single most obvious effort to thwart attacks (of the only type which have actually succeeded) has been ignored. Billions of dollars, thousands of meetings and reports and more than seven years have passed. How have we missed the need to protect the pilots and limit access to cockpits?

Of course, no security method is completely foolproof. But we should at least take the clear and easy steps that we know will provide some real measure of protection: Mandate steel doors on all airline cockpits!