“Would you be willing to, I mean …”
On TV, Chris Dodd, the chair of the Senate banking committee, was stumbling as he got the big question out, to the heads of the three automakers assembled before him “accept as part of this deal, a government supervisory board over y…”
“Yes sir/yep/yes,” all three said, practically in unison. Dodd hadn’t even got the big demand out, the idea of more or less direct government oversight of the industry in exchange for the $35 billion they want in loans, tax breaks and lunch vouchers.
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Even Dodd was taken aback, having presumably expected the question to be a prelude to coming down hard. “Well — uh good,” he said. “Does someone else have a question?”
The automakers — GM, Ford, Chrysler — were ready to agree to it, because they would have agreed to anything. Wear a red nose on Tuesdays, answer the phone with the phrase “Dickalicious speaking!” for the next five years, give their kids’ kidneys … anything. They were desperate to close the deal.
The crowd at the diner — it’s a measure of the economic crisis that you can watch c-span senate subcommittee feed anywhere these days, were silent, chomping on cheaper sandwiches than they would have ordered a month ago.
“Jesus,” was all one guy uttered.
It’s fair to say that the mood in the US has turned, in the past weeks, from a sort of shrugged fatalism, an anti-Washington “waddaya gonna do?” to something approaching visible fear, as the economic body blows just keep on coming.
People had had various opinions about the proposed auto-bailout before the hearings for it edged ESPN off the screens — but no-one had really focused on the fact that the big three have been threatening to file for Chapter 11 bankruptcy before Christmas if some sort of relief wasn’t at hand. That really made folks sit up for one big reason.
Chapter 11 is designed to allow companies to go on trading while they go on trading, and restructure their debts. That’s fine for a bakery, or a book chain, but when you buy a car, you’re also buying a couple of years of warranty, and a guarantee that replacement parts will continue to be available. But if the company’s in chapter 11 it’s a big red sign that it may not be around when the wotsit goes in a coupla years, so why take the risk? It’s been observed by every commentator that people don’t buy cars from firms in chapter 11. Announce it for GM, and the company is on its way to disappearance.
Hardy laissez-faire souls have been issuing calls to let the big three sink — but they’re few and getting fewer, as people really start to think about what such a collapse would do to the industrial north-east, and then to the whole country. Detroit is already an urban ruin — holding a third of the population it had in 1960, and with whole deserted suburbs being reclaimed by nature. With a mass lay-off, it would pretty much collapse entirely, and dozens of smaller places through Michigan and Ohio wouldn’t be much better off. At this point the Chicago boys can talk creative destruction all they like — but people with the longer view can see that destructive destruction is the more likely outcome. That is, an economic problem will quickly become a political one, as people respond with crime and civil unrest.
The bailout hearings were pretty alarming in themselves. Mark Zandi, a Moody’s expert called to testify that the true cost of an effective big three bailout would be more like $75bn-$125bn — but then was shown to be working off false assumptions of the production figures of Chrysler and Ford. One committee member asked whether the companies could start making buses again, as if developing a whole new industry strategy could be done on the fly. It was madness.
But any amusement value in the proceeedings was crushed by Friday’s other news — that the economy had lost half a million jobs, making a total of 1.2 million for the last three months, an avalanche that shows no sign of petering out any time soon.
Indeed, it’s beginning to be noticeable out on the street in a big way.
“Are you going to invite your Republican colleagues?” I asked a lawyer friend I was meeting for a drink last week.
“Oh they’ve all been sacked,” she said.
Going into a Circuit City store — a major electronics chain — a day later (it’s also filed for chapter 11) was like walking into a Warsaw department store, circa 1975. Despite slashing prices to the bone, employees outnumbered customers by a ratio close to 2 to 1. Buying a thirty dollar charger, I had two floor staffers fighting a turf war over the purchase.
So it goes, with the bankruptcies and profit warnings — Starbucks, the Chicago Tribune, Sharper Image — in every sector, and even the traditional post-Thanksgiving ‘Black Friday’ sales day was down sharply (though the death toll was up to three — one trampled, two gunshot).
The one chain that usually benefits from such a slide is Wal-mart, because people trade down to it. The fact that Wal-mart is experiencing a lower turnover is a measure of where things are at, as are plummeting gas prices. People have simply stopped spending. They’re staying in, watching TV to avoid spending money. Economic life is slowly rusting up.
Speaking of rust, the big three got seventeen billion over the weekend — mainly to GM and Chrysler. Which may turn out to be the worst of both worlds — not enough to save them, but a waste of seventeen billion that could have gone elsewhere.
Yet with simultaneously two presidents and no president, the country seems stuck in those few moments before a car smash when it’s all started happening and there’s nothing you can do but watch it happen in slow motion. Will the airbag save us? Not likely — he’s moving to Dallas with Laura.