Please sir, Help us

I pledge that after this writing, I will not write another post about the bailouts or the automakers until Wednesday at the earliest. That gives you a whole 2 day reprieve - unless something really, really, really important happens today or tomorrow, at which point I will entirely default on this pledge and write more about the economy. On Friday, I wrote about the oodles and oodles of dollars being thrown to AIG to help them manage their terrible risk bets.

This morning, there is even further news that AIG is getting even more money. Now, AIG is getting "a reworked $152.5 billion deal from the federal government Monday, as the Federal Reserve and Treasury Department made significant changes to the terms of the company's original bailout." They are getting more money than previously agreed, and the terms of the loan have been drastically altered to reduce the interest AIG is required to pay on these loans. On top of all this, the U.S. government is not getting any larger stake than the current 80% despite the additional money being funneled into AIG.

There is one main reason why this is upsetting to me. The problem is that TARP (Troubled Asset Relief $700B bank funding program) exists entirely because the government wanted to indirectly force banks to begin lending again by making it easier and cheaper for these banks to access capital. Federal Reserve officials of the Bush Administration have repeatedly refused to allow U.S. automakers access to this bucket of cash, because it is intended solely to open the doors for lending/extending credit from banks. This new deal for AIG is funded from the TARP program, and AIG is not a bank. That sounds like a contradiction. On top of that, the TARP program has not convinced banks to extend loans for automobile, and other, purchases. There are many reasons for the auto troubles, but it would be hard to argue that one main reason is that customers can not get access to automobile loans, thereby making it impossible for them to purchase cars. As a personal story, my brother, who has perfect credit but a relatively brief credit history, had to jump through several extra hoops to secure a loan for a recent automobile purchase from General Motors.

If TARP is not doing the job it is meant to do (open lending streams) and it is already being spent on sectors that are not banking, why does the door continue to remain slammed on the U.S. auto companies? It seems, unfortunately for those of us in Michigan and communities around the world based on the automobile industry, that our contributions to the U.S. economy are not valued on par with those of multimillionaire Manhattan-ites.