When the heads of the Big Three went to Washington to ask Congress for $25 billion to save their companies, one congressman asked, What will you do, personally, to make a bailout a success?
The president of Chrysler said he would work for a dollar a year.
The congressman looked at the presidents of GM and Ford; one made $15 million and the other $20 million last year. He asked if they would work for $1 a year too.
No way on earth, they said.
The president of Chrysler needs help and offered to sacrifice to get it. The presidents of GM and Ford want us to give them $25 billion – and pay their salaries while they spend it.
The other big bailout in the news this morning is Citigroup; earlier this month they got $25 billion and now they need more – so they want the government to agree to pay their losses.
And the government is willing – but there’s one problem. The government wants preferred stock in exchange while, instead, Citigroup wants to give it warrants.
Why? Stock dilutes the value of other investors’ (which includes Citigroup’s managers and directors) shares. Warrants don’t.
What more do we need to know? Actions speak louder than words.
We ought to 1) Help Chrysler; 2) Let the presidents of GM and Ford go on to earning their salaries on their own (without one cent of taxpayers’ money); and 3) Tell Citigroup’s managers they can protect the price of their shares on their own too.
Looked at in this light economics is simple.
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