The auto bailout crashed and burned this evening, so look out for a wild day on Wall Street tomorrow. It seems strange that the Government gave Wall Street banks $350 billion, with another $350 billion on the way, with little oversight or preconditions, but the Big Three automakers had to go through a weeks long proctology exam to get $14 billion, and still Congress said no. It does not make intuitive sense to me.
The bailout died in the Senate, as the House passed a bailout today. The lead Senator against the bailout was Alabama's Richard Shelby. I don't know much about him, but hearing him talk he does not seem like the brightest light in the Senate, especially on financial matters. He is a career politician, starting his political career nearly forty years ago in 1970. He nearly scuttled the financial bailout earlier in the Fall. Alabama has three large manufacturing plants - Mercedes, Honda and Hyundai - and you can bet these played a large part in his opposition to the bailout.
I am still ambivalent on the idea of an auto industry bailout. Bailing out every troubled industry is an untenable position for the Government. But I am also aware of the wide employment base, especially in the Midwest, dependent on the auto industry. The potential of putting this many people out of work is scary, and the repercussions will be felt throughout the country. No one will buy cars, not even Richard Shelby's Alabama-made Mercedes, Hondas or Hyundais.
Update: Looks like the bailout will happen under the TARP, which is probably where it should have been in the first place. I was harsh on Senator Shelby above, but Senator Corker from Tennessee was key in scuttling the deal. Tennessee, like Alabama, has a large foreign auto manufacturing base. It should be noted that I think it's great that foreign auto firms manufacture here in the United States. It blurs the lines between what is a foreign and domestic auto maker.