General discussion


Is there a "Bailout Clause" in the U.S. Constitution???

By sleepin'dawg ·
There isn't, but there is a Bankruptcy Clause (Article I, Section 8, Clause 4).

The framers of the U.S. Constitution specifically anticipated that the nation would encounter economic troubles from time to time. So they gave Congress the power to enact bankruptcy laws, as opposed to ?bailout? laws. And throughout U.S. history, the various economic ?Panics? ? which occurred every couple of decades ? always led to one direction or another in the evolution of state and federal bankruptcy laws. Hey, bankruptcy works.

At times in U.S. history, the bankruptcy laws favored the creditor class. During other times, the bankruptcy laws favored debtors. The point is that the economic hardships were eventually manifested in bankruptcy proceedings.

Just as all rivers flow to the sea, bad debt must find its way to discharge. So bankruptcy court was where judges and attorneys and other financial experts (like accountants and actuaries) could deal with each case on the merits. The problems could come to some sort of resolution. Some people came out OK. Other people lost everything. But capital flowed from weak hands to strong hands, and the economy moved along.

Why Not Bankruptcy Process?

But not today. Indeed, according to the New York Times many law firms ? including firms that focus on bankruptcy work ? are actually scaling back and laying off staff. Why is that? Why are the politicians so eager to avoid seeing companies go into bankruptcy? The government is trying to solve the problems of gargantuan levels of debt ? along with chronic insolvency and illiquidity within the economy ? without resorting to the constitutional-based legal mechanisms and tools that have served the nation well for over 200 years.

Consider the problems of derivatives. Few understand them. Many so-called derivative ?contracts? are little more than mathematical formulae based on a series of futuristic occurrences that are entirely speculative. Their initial value in the best of times was entirely somebody?s guess. So is it any surprise that it is all but impossible to place a value on such things during the throes of a recession? Yet derivatives are some of the ?troubled assets? that the Treasury is attempting to bail out. This is ridiculous!

Why is the Treasury allowing even one dollar of taxpayer money to get near a derivative? Why not use the bankruptcy process in this kind of situation? The companies that hold unsalable derivatives should have to go into a Chapter 11 proceeding and let a bankruptcy court sort it out. If the derivatives have value, let someone say so ? under oath ? in front of a federal judge. If the derivatives are worthless, let the judges do what we pay them to do ? void the instruments and allocate the losses.

Sure, bankruptcy cases take time to roll through the courts. But could Chapter 11 bankruptcy be any worse than the current drip-drip-drip, hemorrhage of funds into the black hole of the likes of AIG? And at least some bankruptcy judge might just put a stop to the AIG exploits of taking nice vacations to exotic resort locales.

Or what about the U.S. automobile industry? Now the domestic carmakers want some of that TARP money too. Or else what? They?ll have to file for Chapter 11? Yeah? And then?

Well on the day that the automakers file for bankruptcy, the automobile factories will still be there. The patents and designs aren?t going anywhere. The workers and design teams will stick around for a while ? it?s not like there are a whole lot of other jobs out there, except maybe raking leaves in leafy suburbs.

It seems to me that General Motors, Ford or Chrysler ? without the legacy costs of pensions and health care and featherbed contracts for non-working union members ? would actually be a decent investment for a Debtor-in-Possession (DIP) form of financing. Any DIP-lender worth its salt would certainly go into the management suites to take names, kick *** and get rid of the deadwood. And over the long term, if U.S. automakers actually paid more for steel than they have to pay for retiree health care, then we might actually see a revival of that industry.

At present we are losing time and once time is gone, it is gone forever. It is the same thing with the declining U.S. and world economies. The world?s central bankers and treasury ministers dither, and squander capital into bottomless pits of a deflationary recession.(and dare we say it? Perhaps Depression)

But the great villain in all of this is debt, pure and simple. And much debt is just a collection of bizarre debt instruments, exotic forms of speculative contracts, and obligations so massive that they will never be repaid. So why prolong the agony? Liquidate it now. Let the bankruptcy courts do what the framers intended.

Dawg ]:)

Ah, they're all probably saying Ol' Sleepin' Dawg is runing on about the U.S.Constitution again,?as if anyone gives a damn, or pays attention to that ol? thing.

In these heady days of government bailouts and money creation, bringing up the Constitution is like quoting scripture at a bacchanal, or farting in church.

Would anyone be willing to take odds that Congress and our next President will continue to pretend the Constitution doesn?t really exist?

Dawg ]:)

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Stand aside

by santeewelding In reply to Is there a "Bailout Claus ...

This is no time for clear thinking. Besides, you'll get trampled.

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I know but at least I'll have tried. B-) <NT>

by sleepin'dawg In reply to Stand aside
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Exactly the right question

by road-dog In reply to Is there a "Bailout Claus ...

Right now the 24/7 news cycle is covering the bailout prospects for this group or that, how much to whom paid for from where.

The propriety of bailouts is not part of the discussion. Lip service is given to the perceived economic necessity but never to constitutionality.

I don't see where bailouts are covered by law under regulation of interstate commerce, after all, a bailout isn't regulation.

We need to get back to fundamentals here....

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Good luck with all that

by Tig2 In reply to Exactly the right questio ...

Going back to the fundamentals would surely result in someone's pet issue getting binned. Can't have that, now, can we?

The perspective that most Americans have of the President, Congress, and Senate is flawed. To the average man, they exist to run things. Partially true, I suppose. I think of their role somewhat differently.

From my perspective, we defined a job and identified the duties of that job. Over the last two years, we have been subjected to what I think of as a job interview. Each candidate was given the opportunity to tell all of us what his/her qualifications are so that we, the hiring manager(s) could determine who was best suited for the role. As there are a bunch of us, we each wrote down who we individually thought was the best and the votes were tallied. The successful candidate was then advised of his start date. As this is a contract job, we have set a limit of four years on the job and then we will publish the Help Wanted ad again.

In short, the President, Congress, and the Senate WORK for ME. Even better, they work for you too.

We- and they- have forgotten that their only power comes from US. Period.

I support Ford. There's a big Ford SUV in the garage. I support GM too. There's a small fuel efficient Saturn in the garage next to the Ford. But that is where my support of these companies should begin and end. I support my local dealerships by taking my vehicles there for service. I don't HAVE to do this. I CHOOSE to.

So I have done my part for the Detroit Three. It should begin and end right there.

I agree with Dawg. Let these guys work through the bankruptcy system. From where I sit, they have proven that they cannot be trusted to spend money wisely. If the government wants to give them a hand, fine. The gov should breathe down their necks until they manage to clean their house. If they simply cannot do this, the gov at that time should be willing to help them restructure- by putting them in touch with a disinterested third party who is capable of making the tough decisions. But finance that? Nope.

We have, for far too long, been complaisant. Why? We as a nation seem to think that the role of government is to keep us all fat and happy. Where is that written?

We can continue to vote bread and circuses but the day will come when there are no more. Then what?

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Support of the Big Three

by Pringles86 In reply to Good luck with all that

Supply and demand... They have too many vehicles out there now and not many people are buying. It is our fault they fell victim to economics 101? If we really want to support those companies we will buy their vehicles and take them to their maintenance shops. I shouldn't have to involuntarily support them.

You are choosing to take your vehicles to them, that's good! I wish we had a choice in all this bailout stuff...

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Same page, Pringles

by Tig2 In reply to Support of the Big Three

I agree completely. If Crystler or GM is going to "be forced to shut their doors" then they should get on with it. Or go through the bankruptcy process. But I have already handed over as much of my money as I care to.

I have supported American auto makers by purchasing their products and having them maintained in their shops. That is where my support should begin and end. I have a neighbor that drives a Honda. And that is HIS choice.

Having watched the back and forth on this, I have been gratified to see that they didn't just waltz in and collect a check. It seems that they are at least being questioned about what restructuring they will do and what level of scrutiny is appropriate. I just wish that they had thought to do as much with the AiG bailout and the $700 billion mortgage/credit bailout.

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Indeed we have met the enemy and it is us

by plymouth In reply to Good luck with all that

We are witnessing the culmination of decades of a sense of entitlement through government indoctrination. We have been schooled and admonished the rich are a bad and we must take from them as they are undeserving of what they have earned. The poor are deserving of what they have not earned. All the while, the bar separating rich (the haves) from everyone else slides lower and lower. Further, we are reminded we have a right to a job, a house, an education and healthcare to name a few.
These are personal responsibilities, which let's face it, some people are just never going to be able to connect the dots enough to meet these responsibilities. So the few with their collective guilt engage in social engineering at the cost of those they deem have enough already. People are given educations, they know not what to do with. Given jobs they know not how to appreciate and keep. Given homes they know not how to hold onto and take care of. Worst of all, given money they know not how to save or spend responsibly.
All the while we elect the same sorry collection of individuals year after year, decade after decade.
We have been fooled into thinking self reliance is selfish and we MUST rely on others. Government. We have allowed these faux cognescenti to convince us we that taking care of ourselves so others do not have to, is some sort of affront to the social order.

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Such a horror in North America

by Oz_Media In reply to Good luck with all that

And yet these things happen on a regular basis all over the world. Car companies go belly up all teh time, they merge they buy and sell each other etc.

Some of teh best vehicles ever designed never saw pavement because of a lack of funding.

Take Germany, England, Italy etc. There are literally hundreds of vehicle manufacturer's, besides the major players. they go belly up all the time because they can't properly manage the budget and get their cars into mass production. Nobody runs ot bail them out, they'll just buy up the patent and recreate it as a Ford instead.

But when you look at how most manufacturer's are amalgamated these days and then look at a garbage manufacturer like GM, there's no wonder they are in hot water but they sure as **** don't deserve a bailout.

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May be

by santeewelding In reply to Is there a "Bailout Claus ...

That our (good) fortune is that this thing proves to be so big it won't matter.

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Is there one in the Canadian Constitution?

by CharlieSpencer In reply to Is there a "Bailout Claus ...

I read the Detroit mis-managers are going hat in hand to your government too, although the article didn't mention how much they're asking. Probably the difference between their $35 billion figure and what Uncle Sugar gives them.

Airlines go in and out of bankruptcy court like it's got revolving doors. Planes keep flying, employees still get paid, passengers don't panic, suppliers of things needed for daily operations still sell to them on credit. Yes, long term improvements go on hold; no new planes are ordered, new maintenance facilities are delayed, etc. But companies in industry seems to enter and emerge from bankruptcy without any problem. If it works for them, maybe the auto industry should give it a try. Begging doesn't seem to be working.

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