Now that bailout has become the government’s policy, which bank is next? Well, it won’t be a bank; it will be Ford.
Ford has been saying all along that Chapter 11 is not an option. Of course it isn’t. Ford has been lobbying for government money. The government has already committed itself to bailouts. Why not Ford?
This is the antithesis of what our system of economics is based upon. Nowadays, when a financial institution, or in this case a manufacturer, makes bad decisions and becomes insolvent, they turn to the government. The shareholders no longer have to be concerned with profits; the government will see to that. So now manufacturers along with banks will be supported by taxpayer dollars regardless of what decisions these boards of directors make. If this continues, there will be no need for boards to make good decisions. As for shareholders, the individuals who own the most stock are those who usually sit on the board. They can now be assured that the government will come to the rescue if their shares decline below a certain point.
There is no way to stop this trend other than getting rid of the elected officials who make policy. This is socialism, plain and simple. Not only will the government guaranty individuals of cradle to grave welfare, but now it will guaranty perpetual funding for large corporations.
But what happens if the local independent supermarket is having financial difficulty? Why just guaranty companies like Ford? Where does the government draw the line?
There is an adage that if you borrow $100 dollars from the bank, the bank owns you. But if you borrow $1,000,000 from the bank, you own the bank. It is the same for major corporations. If you employ 10 people, the government owns you. But if you employ 1,000,000 people, you own the government.
Professor Kupferman is an adjunct professor for Polytechnic Institute of NYU’s Executive MBA program.