It’s truly stunning that the Senate today failed to pass an assistance program for the auto industry.
I’ve tried not to be too vociferous about all of this, and I’ve written before about being in favor of a bridge loan to the automakers despite the railing of my capitalist friends, but this decision is truly mind-boggling!
It’s unarguable that our economy is extremely fragile. I think it’s equally clear . . . crystal . . . that it cannot withstand the catastrophic results of a failure within our largest manufacturing sector, which arguably supports  2.5 – 3 million jobs, without great harm to the economy in all of its incarnations . . . unemployment, consumer spending, etc.
The Senate has shown again how out of touch they are . . . why don’t they just ask around among their middle market business owners to see if any of them believe the economy is strong enough to withstand this aftershock? I know the answer . . . “we have asked around and our constituents aren’t in favor” . . .  but that doesn’t do it, because they’re elected to do the right thing NOT the popular thing, and they should have enough information to understand the fragility of our economy more than the voters.
A more Machiavellian interpretation might suggest that the Senate is drop-kicking this issue to the Obama administration and using the current TARP program as a cover for inaction. To sniffle over $15 billion while investing $350 billion in TARP in every way but the way in which the program was approved, is ludicrous. Take your choice – rescue Bear Stearns but not GM . . . or let Lehman Bros. die and also GM . . . and either way, the potential failure of GM will prove to be a monumental mistake. Here, for example, are what economists are saying about this possibility.
In another post, I’ll share more articles about the costs of a potential GM failure . . . extended unemployment benefits, takeover of pension liabilities by the Pension Benefit Guaranty Corporation, etc. Compare that tally to $15 billion and we’re talking about chump change!
I suspect that history will show that the failure of Lehman Bros. was the watershed for the extraordinary deceleration of our economy. The potential failure of GM will be the next ignominious benchmark when history is written about the weakest economy in our lifetimes.