Too Big to Fail?

Posted by empedocles 5 years, 3 months ago to Business
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Should all business be allowed to fail? Would you have allowed AIG or GM to fail?


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    Posted by  $  jbrenner 5 years, 3 months ago
    My parents' GM bonds were allowed to fail ($225 in bankruptcy proceedings + a threatening letter for $100000 in bonds). If that happens, then GM's employees should have gotten no better a deal than that. Bankruptcy law says that preferred bondholders like my parents get the first out of the bankruptcy proceedings, except Obama violated not only that law, but my parents as well.
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    • Posted by  $  Your_Name_Goes_Here 5 years, 3 months ago
      I'm very sorry to hear that! Not to add insult to injury, but our Dear Leader essentially took the monies that were rightfully and contractually owed to your parents and other bond holders and reassigned it to the unions, who now own a very significant stake in GM.
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      • Posted by  $  jbrenner 5 years, 3 months ago
        Tell me about it. My parents were financially raped. My parents and I should have kept the threatening letter. You would have expected something like it from the Soviet Union.
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    • Posted by dbhalling 5 years, 3 months ago
      It's called theft, but it was for the greater good. Altruists of all strips believe the greater good is valid justification of theft, they just disagree over who should be the beneficiary.
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  • Posted by  $  Solver 5 years, 3 months ago
    It is not about allowing it to fail. It is about preventing them from failing, by initiating the threats of force and violating individual rights at a massive scale.
    Bailing out failure this way leads, and did lead, to increased failures down the road.
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  • Posted by Robbie53024 5 years, 3 months ago
    This is a false choice. If they had "failed" and allowed to go bankrupt, the assets would have been purchased by another entity which would have used same to re-initiate the activity. Thus, "failure" would merely be a change of ownership.
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    • Posted by  $  edweaver 5 years, 3 months ago
      I am not sure that this is a false choice. We will never know the answer because they were bailed out. Had they been forced toward bankruptcy they have had the necessary power to force union concessions. There likely would have still some losses to bond holders but it may have been resolved without total loss. As I said we will never know, well at least not until it happens again because they did not get the ship back on the correct course.
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  • Posted by Kariekberg 5 years, 3 months ago
    Yes, this is how business is supposed to work. If you are failing, you figure out what is wrong and change it, not sit on your rear and wait for the government to bail out your poor process.
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  • Posted by  $  Susanne 5 years, 3 months ago
    Yep. If they have bad management and make poor decisions (look at one of the other carmakers decades ago - Studebaker - that died of mismanagement) they should close their doors and let someone else reboot in their place - or not.

    Sure, if I was an idiot CEO and ran a company that either made and/or engineered a notably poor product, or made supremely bad management decisions (or worse, allowed others to make them for me) or a financial company that engaged in practices that were known to both sink us into the morass of insolvency or cheat our customers so blatantly (while singing them a sweet sweet song of advertising schlock) then I'd also be the dishonest looter type that would want a sugar daddy to come in, slap my hand as if I were 3 years old, and say "Here you are, sweetie, daddy Biggov (Russian? Nyet!) and Auntie Mae will make it all right, we'll let you have a mulligan" and pour undeserved money glommed and stolen from the American Taxpayer...

    Pligging Disgusting behavior, both by industry (as if the industrialists were Wesley Mouch and Orrin Boyle) and the power seeking government looking to own our Industries a'la the USSR and, for the most part, China.

    We're not talking small business loans and the like - we're talking about using *our* treasure, talent, and time to support s#!t workmanship and mooch-based thievery.

    Let them crash and burn. Maybe the entire "system" will come back a bit more honest, a bit more resilient, and a lot less dependent.
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  • Posted by RonC 5 years, 3 months ago
    Moral Consequence! The problem with chrony capitalism is it takes failure out of the process and allows mediocre to rise to the top.

    Had AIG, GM, and Goldman-Sacks been allowed to fail their assets would have been sold at market price to the second tier players in their field. Those successful 2nd tier companies would have brought the methods and systems to the marketplace that made them successful. With a wink and a nod the chronies bring us the same failed systems they rose to power with. In this case, it makes certain the possibility of similar failure in the future. Competition always refines. Sometimes refining requires creative destruction.

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  • Posted by  $  blarman 5 years, 3 months ago
    Yes. ALL businesses should be allowed to grow or die according to their policy decisions and how well they fulfill their customers' expectations in the market.

    Think about WHY these companies failed in the first place. It was because the government took upon itself liability that should have fallen to the business. With that kind of safety net, there was no threat of bankruptcy to check the managerial decisions to purchase bad loans en mass.

    I blame government for causing the problem in the first place. They create the problem first by deciding they need to regulate industry and micro-manage it, but we have a long litany of things the government has screwed up when it has tried them because they have very little impetus to succeed and zero risk if they fail.
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  • Posted by rjkford 5 years, 3 months ago
    Government bailouts are the death knell of Free Enterprise. When select groups, that favor any administration, are withheld from the fallout( UAW etc) now Capitalism is the victim. I've been with Ford dealerships since 1974 and am proud of the way a family controlled company handled this last crisis. Many of you have pointed out that if they had gone down, someone else, with a better business plan would have filled the gap. You are correct. There would be some pain, but it would let the next company be wary of bad decisions, for they would know that it's "do or die". The situation is similar to the illegal alien problem. As long as they get a "bailout" they will keep coming. Who is John Galt? We are John Galt! See you all on Sept 12!
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  • Posted by  $  jlc 5 years, 3 months ago
    I think it would have done wonders for the competitive construction of automobiles in the US for the biggies to have failed. It would create an ecological vacuum and released a lot of business-forming-techies (kinda like tech 'viruses') who would design better cars 'in their garage' (or in small startup businesses); this is where innovation takes place.

    Jan
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  • Posted by mckenziecalhoun 5 years, 3 months ago
    The knee jerk reaction is "Yes, in a second".
    That's good - that's the ethical response.

    The realistic answer is "No, in a few months".

    The government's role should be slow parachute to auctions, redistribution to the those willing to buy the assets, particularly small business.

    Let them fail - carefully. There will always be uses for the assets unless it is a failed and obsolete industry.

    During the advent of the automobile industry violent arguments ensued over an industry that was failing and loads of public money was spent to avoid having that industry fail and a collection of other industries that depended on that one industry.

    Wagon making.

    Folks, let it fail - gently.
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    • Posted by johnpe1 5 years, 3 months ago
      yes, and the gentleness is provided by the capital
      retention aspect of a capitalist society -- business
      will sustain the capital value of property and trained
      employees by putting them to work, making more
      in a different way. our current monster unemployment
      is a direct result of gubment bribing people to remain
      out of work. with the minimum wage and the
      various welfare systems, we prevent people from
      living inexpensively in YMCAs, with a job. I did,
      for a bit. not bad. -- j

      p.s. ever see the western stage logo of "Body
      By Fisher" on the threshold strip of an old GM car?

      http://www.bing.com/images/search?q=body...
      http://www.bing.com/images/search?q=body...

      p.p.s. I was a dj for 50 years. one day, I found
      that a friend at work was going out of the business,
      and I bought some of his gear. worked well for
      hundreds and hundreds of people!!! no gubment
      required. it let him down gently.

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    • Posted by CircuitGuy 5 years, 3 months ago
      "The government's role should be slow parachute to auctions, redistribution to the those willing to buy the assets, particularly small business."
      I wish the business managers would purchase option and insurance contracts to do that, so the gov't didn't have to. I think they will rise to the occasion if they know no gov't parachute will be provided.
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  • Posted by CircuitGuy 5 years, 3 months ago
    I would have allowed them to fail. Failure is a good thing. If you never failed, you're not attempting anything difficult. People learn from failure. All those investors, employees, vendors, and customers would have come away strong. And if they think they wouldn't, they should have structured things less risky.

    I don't mean to sound harsh. We're not talking about someone dying. This is a business closing. Businesses come and businesses go in a cycle of creative destruction.

    Politicians and bankers are way too full of themselves about how important the finance industry as it stands today is. We need a way to allocate capital, but if one institution fails, new ones pop up.
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  • Posted by johnmahler 5 years, 3 months ago
    YES, it is called market clearing. Some lose, some win, but the real loss isn't passed on to the Tribute Slave. Why ? Because it is unethical for speculators to pass their bad decisions to the backs of TRIBUTE SLAVES!!!
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  • Posted by TarsTarkus 5 years, 3 months ago
    As I recall back when being "Too Big To Fail" was en vogue, what they were really saying was they were "Too Big To be Allowed To Fail" for the betterment of the economy. Sometimes I wish they'd have pushed the lever and let them circle the bowl.
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  • Posted by Herb7734 5 years, 3 months ago
    Of course, let them fail. Why should we taxpayers pay for there inability to stay solvent? Actually, it's small businesses that employ most people and contribute the most to society. If the economics in this world weren't so screwed up, it would be better to say that a business was too small to fail. But as the lady with the restaurant found out, it's the squeaky wheel that gets the oil, even though the silent wheels keep the cart running.
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  • Posted by johnpe1 5 years, 3 months ago
    yes. no enterprise is too big to fail. consider the
    United States. we -- or they, more properly --
    are proving this right now. that an aig or a gm
    could fail is a subset. Yes, our national security
    depends on a healthy industrial base, but gubment
    subsidies and control are Not the way to maintain
    such a base. those who think so are delusional. -- j

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