Does Shirt Collar Color Matter In Bailouts?
STEVE INSKEEP, host:
Next we're going to ask why one industry has been bailed out and another, at least so far, has not. Congressman Barney Frank was a central figure in shaping the financial industry bailout. He spoke with us last week as he tried unsuccessfully to move forward on a bailout for the auto industry. He wanted to save them from bankruptcy.
Representative BARNEY FRANK (Democrat, Massachusetts; Chairman, House Financial Services Committee): Let's not have a white-collar/blue-collar bias in our public policy. You know, those who say, hey, go bankrupt so you can cut back on what the unions have won - the unions have already made some concessions. I don't want to set a precedent that bankruptcy now is a way in which you undo what gains unions have been able to hold onto.
INSKEEP: That statement by Barney Frank raises a lot more questions, which we're going to explore with Nariman Behravesh. He's chief economist at IHS Global Insight, an economic research and forecasting firm. Welcome to the program.
Dr. NARIMAN BEHRAVESH (Chief Economist, IHS Global Insight): Thank you, Steve.
INSKEEP: OK. Is it a white-collar/blue-collar bias that Wall Street gets bailed out more easily?
Dr. BEHRAVESH: I think that's a little bit of an exaggeration. I mean, if GM or Chrysler do go under, a lot of white-collar jobs will be lost as well. And nobody's saying that we should allow the whole U.S. auto manufacturing industry to go under. I mean those people who are suggesting that GM or Chrysler should file bankruptcy are really focused more on Detroit rather than the overall auto manufacturing sectors which include a lot of other parts of the United States. So it's a little disingenuous just to frame this as white-collar/blue-collar. It's a little too populist for my liking.
INSKEEP: But why would it be that Wall Street is getting bailed out clearly more easily than the automakers can right now?
Dr. BEHRAVESH: I think that's a very good point. But I just have to say that the financial sector is more integral to the economy than the auto sector. It's not - I'm not suggesting the auto sector is not important, but finance is the lifeblood of the U.S. economy. So if one or more financial institutions go under, it freezes up the banking system, as happened, by the way, when Lehman Brothers was allowed to go under. I mean, we saw what the consequence of that was immediately.
INSKEEP: Although, let me ask about another argument that Congressman Barney Frank made in that piece of tape. What about the argument that essentially some of his fellow lawmakers want to push the automakers into bankruptcy, because they would be delighted to see the union contracts canceled and damage the unions for their own ideological reasons?
Dr. BEHRAVESH: I think while that may be some people's agenda, the bigger concern is the Big Three have had a lot of trouble making cars that the American public wants these days. Detroit has not played its cards very well and has been losing market share to the so-called transplants, you know, the Toyotas and Hondas that are manufacturing cars in the United States. The transplants have done a much better job in understanding what the American public wants.
INSKEEP: Because you talk about the way that Detroit plays its cards, let me ask about the cards that they have shown. They have been criticized for coming to Washington asking for money, but not really having a plan. And in fact the auto executives were mocked on "Saturday Night Live" where some actors playing auto executives described their, quote, unquote, "plan" this way.
(Soundbite of TV show "Saturday Night Live")
Unidentified Actor: Assuming we receive the 25 billion in aid sometime this weekend, on January 1, 2009, we will request another 25 billion. Then on June 15, we will ask for 50 billion. Then, provided there's a rebound in new car sales, on December 15, 100 billion.
INSKEEP: OK, that's the joke from "Saturday Night Live." It is an easy laugh, Nariman Behravesh. But I do want to ask. Isn't it true that the financial industry essentially hasn't had a plan either? They got the money committed, and now they've been improvising, or the government has, on how to spend it.
Dr. BEHRAVESH: A fair criticism. But that begs the question, though, what are the auto manufacturers going to do with this 25 billion? Give it to the manufacturers or take that 25 billion and give it as tax breaks for U.S. consumers to buy U.S.-manufactured green cars - in other words, you know, fuel-efficient cars. That might actually be a better way to use 25 billion than just kind of throw it at Wall Street, one more bailout, as it were.
INSKEEP: Nariman Behravesh is author of the book "Spin-Free Economics." Thanks.
Dr. BEHRAVESH: My pleasure.