BMW Receives U.S. Federal Support During Economic Crisis

[a_Username]

Originally Posted by bigearl

As I read this, what I get out of it is that:

*BMW needed a loan.
*Banks WERE NOT lending because of the banking crisis (not the auto crisis, the banking crisis).
*BMW could get a loan under normal circumstances, but lenders weren't lending period.
*Feds set up a funding source to assist with large loans while they worked the banking crisis out.

I don't see this as the Feds helping out BMW, I see this as the Feds standing in for banks because the banks were in such trouble. I'd agree under normal circumstances the funding shouldn't be this way- this ship was sinking though and the feds were just blowing up life rafts as quick as they could.

The Fed is doing nothing but hurting the economy. Even if you assume the Fed's plan, which, by the way, is pretty confident in itself to actually believe any person or entity can plan any economy, is "successful," then you must also realize it's setting itself up for bigger failures in the future. Hazlitt said it best in Economics in One Lesson, "Does not the spendthrift know that after his glorious fling he only creates more future debt and poverty?" (Can't remember the exact quote, word-for-word!)

Although this does not prove nor falsify rather or not TARP did increase lending, this picture at least makes you question the validity of TARP.

[syr74]

Originally Posted by a_Username

Loans straight from the Fed are not supposed to happen. This sounds very different from the government backed loans we heard about before; really, all loans are government backed in the sense of the FDIC.

Actually, loans straight from the Fed can and do happen, they have to. During harsh economic times the Fed will step in as a lender of last resort, which is one of the Central Bank's very necessary roles assuming it comes to that. Apparently it indeed came to that.

So yes, the Federal Reserve effectively lent money directly to the lending arms of Ford, BMW, Toyota, etc so they could continue to loan money on cars. If they hadn't done this the recession would have gotten a whole lot worse because what was actually happening is the private banks were stopping the circulation of money.

Even better, all of those loans have been paid back and the Fed made a lot of money. Ultimately this was just the Central Bank doing the job of other banks when those other banks wouldn't. There are a lot of issues with how the Central Bank operates, but they got this one more or less right.

[a_Username]

Originally Posted by syr74

Actually, loans straight from the Fed can and do happen, they have to. During harsh economic times the Fed will step in as a lender of last resort, which is one of the Central Bank's very necessary roles assuming it comes to that. Apparently it indeed came to that.

The Fed stepping in during "harsh" economic times is nothing more than prescribing poison in the promise of it being the cure. I do realize what the function of the Fed is supposed to be, although I should have clarified myself more; I thought I implied it in the context of economic stabilization or prosperity.

So yes, the Federal Reserve effectively lent money directly to the lending arms of Ford, BMW, Toyota, etc so they could continue to loan money on cars. If they hadn't done this the recession would have gotten a whole lot worse because what was actually happening is the private banks were stopping the circulation of money.

It seems you're implying Neokeynesian, government and central banks need to spend in order to reach full employment and full economic potential, and Monetarist, the resurrection of the quantity theory of money, theories here. These two doctrines, respectively mentioned, of Keynes and Friedman where contradictory ones; you can't have both. This has nothing to do with the circulation of money, yet it has everything to do with markets clearing themselves to show actual wealth and prices. Most mainstream economists were so confident in the powers of the Fed that nearly all did not see this crisis coming, yet, of course, the Austrians just lol'd and said I told you so.

Even better, all of those loans have been paid back and the Fed made a lot of money. Ultimately this was just the Central Bank doing the job of other banks when those other banks wouldn't. There are a lot of issues with how the Central Bank operates, but they got this one more or less right.

IIRC, the jobs of banks were to identify rather or not a potential debtor is worthy of credit, yet, obviously, they deemed most not to be. I also assume that you just overlooked my post showing the level of lending by commercial bank in relation to the enactment of TARP. The funniest part about your last statement is that even the mainstream economists, the ones who are obviously very Keynesian in nature, has begun to seriously question Bernanke's "solutions."

[midnighter]

True.
The person below me wants a BMW.

[Cmicasa the Great XvX]

Originally Posted by bigearl

As I read this, what I get out of it is that:

*BMW needed a loan.
*Banks WERE NOT lending because of the banking crisis (not the auto crisis, the banking crisis).
*BMW could get a loan under normal circumstances, but lenders weren't lending period.
*Feds set up a funding source to assist with large loans while they worked the banking crisis out.

I don't see this as the Feds helping out BMW, I see this as the Feds standing in for banks because the banks were in such trouble. I'd agree under normal circumstances the funding shouldn't be this way- this ship was sinking though and the feds were just blowing up life rafts as quick as they could.

Hmmmm sounds vaguely similar to a certain Larger American Automaker's request for the same reasons, but then had to file Chapt 11 an reap untold ridicule and hassle from people in this county who felt that NO private company should get loans from the Federal Gov. I guess it only applies to American companies

[8cd03gro]

Originally Posted by Cmicasa the Great XvX

Hmmmm sounds vaguely similar to a certain Larger American Automaker's request for the same reasons, but then had to file Chapt 11 an reap untold ridicule and hassle from people in this county who felt that NO private company should get loans from the Federal Gov. I guess it only applies to American companies

GM got a hell of a lot more than a loan. Old GM DID receive loans, but they failed anyway.

Acting as a lender of last resort is an essential duty of any central bank. IMO, that's not a good thing, but it's not abnormal.

[Mr. Wyndham]

Well, that was awfully well hidden during the great crap-fan period last year....meanwhile helping companies far more close and important to this country was evil and 'unAmerican' as I recall a few goofballs spewing.

So dissapointing.....

[Cmicasa the Great XvX]

Originally Posted by 8cd03gro

GM got a hell of a lot more than a loan. Old GM DID receive loans, but they failed anyway.

Acting as a lender of last resort is an essential duty of any central bank. IMO, that's not a good thing, but it's not abnormal.

Ironically the true defenders of these Foreign companies getting loans with no issue or problem... all seem to drive Foreign cars. This country is F#CKED if people like this are our future.



The original issue.. and I REPEAT.. is WHY ARE so many IMBECILES DEFENDING BMW GETTING LOANS from THE UNITED STATES GOVERNMENT TO GET THEM THRU HARD TIMES... YET CRUCIFYING GENERAL MOTORS FOR DOING THE SAME???

What has BMW done for this country over the last century to merit it being considered more worthy of financial help.. which it got.. HELP... from MY GOVERNMENT???

WHY was is it a problem for General Motors and Chrysler to get LOANS from it's HOME COUNTRY.. a country that it help bolster into the #1 Economic power, yet not a problem for a GERMAN company to do so?

1) This is not about the money, per se
2) This is about the PUBLIC BACKLASH
3) This is about the fact that if the announcement had been made that other Companies were getting U.S. Loans along with GM and Chrysler then a great deal of backlash would have been squashed

4) I have spelled it out, written in 4 diiferent ways.. an I bet U will still skirt around and avoid the QUESTION... Which pretty much means defenders of this are FULL OF #@%&.

It reminds me of how ignorant people hate on the UAW (which I am glad is now reeled in by GM and Chrysler) for their demanding ways, yet go out and buy VW/AUDI, BMW, or Benz.. not realizing or possibly not caring that they are built by the most ruthless, demanding, Union in the world (IG Metall )

[Cmicasa the Great XvX]

Originally Posted by midnighter

True.
The person below me wants a BMW.

HEY!!! I posted below U...

...and the day I ever buy another BMW is the day I denounce my NRA membership... swear off guns, all while being taken pistol whipped out behind a barn:(

[a_Username]

Originally Posted by Cmicasa the Great XvX

Ironically the true defenders of these Foreign companies getting loans with no issue or problem... all seem to drive Foreign cars. This country is F#CKED if people like this are our future.



The original issue.. and I REPEAT.. is WHY ARE so many IMBECILES DEFENDING BMW GETTING LOANS from THE UNITED STATES GOVERNMENT TO GET THEM THRU HARD TIMES... YET CRUCIFYING GENERAL MOTORS FOR DOING THE SAME???

What has BMW done for this country over the last century to merit it being considered more worthy of financial help.. which it got.. HELP... from MY GOVERNMENT???

WHY was is it a problem for General Motors and Chrysler to get LOANS from it's HOME COUNTRY.. a country that it help bolster into the #1 Economic power, yet not a problem for a GERMAN company to do so?

1) This is not about the money, per se
2) This is about the PUBLIC BACKLASH
3) This is about the fact that if the announcement had been made that other Companies were getting U.S. Loans along with GM and Chrysler then a great deal of backlash would have been squashed

4) I have spelled it out, written in 4 diiferent ways.. an I bet U will still skirt around and avoid the QUESTION... Which pretty much means defenders of this are FULL OF #@%&.

It reminds me of how ignorant people hate on the UAW (which I am glad is now reeled in by GM and Chrysler) for their demanding ways, yet go out and buy VW/AUDI, BMW, or Benz.. not realizing or possibly not caring that they are built by the most ruthless, demanding, Union in the world (IG Metall )

Who are the ones you're trying to call out here?

[Mr. Wyndham]

Originally Posted by a_Username

Who are the ones you're trying to call out here?

As I read it...he's making a general observation more than trying to call anyone specific out.

[ColdCamaroSS]

Pretty evident on what is happening in the world right now concerning the need for a government(s) to sustain infinite growth.

Problem is, infinite growth can only work if you have infinite resources, but seeing that almost everything...food, plastics, transportation, money etc, etc is based off oil, which is not renewable and can only be consumed (tin foil hats deployed) then our path down the bell curve of peak oil directly relates to the inevitability of total systematic collapse of the world's economy.

My take on it..."they're" trying to keep it going for as long as possible with these loans, bailouts etc preventing a widespread "run" on the banks and grinding the system to a halt.

I am indifferent to whether this was right or wrong. I do believe if it wasn't done, I'd be growing a garden next year and the camaro would be parked because the gas pumps would be dry.

*removes tin foil cap

What just happened?

[DGthe3]

Originally Posted by CamaroSkooter

I don't get why a government is bailing out any company, regardless of what it does. If a company is hemorrhaging money because of poor management, why should the government help them? It just doesn't make sense to me. I always thought our government was built to encourage competition, not bad managment practices...

Hemorrhaging money due to bad management isn't a valid reason for government intervention. However, thats not the reason for issuing loans to automakers during the economic crisis. Well ... unless you want to define 'bad management' as being unable to cope with any and every possible contingency.

Originally Posted by 8cd03gro

That article is very vague, but it sounds like a loan, not the free money bail out junk.

Originally Posted by 8cd03gro

GM got a hell of a lot more than a loan. Old GM DID receive loans, but they failed anyway.

Acting as a lender of last resort is an essential duty of any central bank. IMO, that's not a good thing, but it's not abnormal.

Are you saying that GM was given 'free money', or were those comments directed towards others?

[8cd03gro]

The "loans" only totaled to about $6.7 billion. GM doesn't even call the rest a loan. The federal government owns a controlling portion of "new GM." You know that. There is no agreement that the value of the original investment will be returned in full so it is NOT A LOAN. I highly doubt that any analyst expects the fed to recoup all of the original $52 B given to new GM. I'm not talking down GM, these are just the facts. That's why it was and still is so controversial.

Loaning to BMW probably saved a lot of American jobs, just like the loans to GM. BMW is probably contractually obligated to return the loan in full to the fed, with interest. There's nothing abnormal about this. It's a necessary duty of any central bank.