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Chrysler and the Road to Indonesia

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3 Responses

  1. You may be interested in the book Economic Gangsters, which looks at Suharto among others:

    http://www.economicgangsters.com/thebook.php

    Is the answer more community banks, as this NYT Mag article suggests:

    http://www.nytimes.com/2009/05/17/magazine/17wwln-rendon-t.html?ref=magazine

    “In the midst of the worst banking crisis since the Great Depression, community banks have generally fared well. That’s because they typically shunned the lending practices that led to high default rates. They rarely participated in the securitization of loans, credit-default swaps and other overvalued financial products that put the global financial system in crisis. Instead, they stuck to the fundamentals. They considered the character and history of their borrowers. They required collateral.”

    As Matt Taibbi noted, one of the major consequences of the TARP may be strengthening the big national banks vis a vis the community banks. It appears that “the biggest U.S. banks are using government money to get even bigger.” (see
    http://seekingalpha.com/article/109435-tarp-funds-fueling-global-buyouts-not-lending)

    In general, I think we’re seeing a version of corporatism without labor creeping into the US economy (except for the auto sector, where labor is in an anomalous position of having power). The health lobby’s influence over the upcoming reform is growing, and we’ve seen this pattern in IP for some time. It’s (corporations + the current government) who are making policy, above the heads of a largely distracted populace. Sheldon Wolin explores these dynamics in some detail in his book Democracy Incorporated.

  2. Nate Oman says:

    I doubt that community banks are capable of providing the kind of volume in finance that we ultimately need. Certainly, it isn’t possible to meet the demand for credit with deposits, which means that ultimately the financial system needs access to wholesale credit markets through devices like securitization. The other problem with community banks is that unless they are tied into national and international networks that let them diversify risk they are exposed to local shocks (even as they are insulated from systemic risks to a certain extent). Indeed, securitization of mortgages was initially developed in part as a way for banks to diversify away local mortgage default risk.

  3. JP says:

    Because the scenario you describe is too depressing to think about, I’ve been wondering about what happens in the optimistic scenario. Specifically, if everything goes as the Administration apparently hopes it does, has Obama driven the final nail in the coffin of private-sector organized labor?

    Let’s suppose the market recovers, the TARP recipients become (mostly) independent of government funds and control, and Chrysler and GM either recover or one of them downsizes to nothing at a gradual rate. Will any unionized firm or industry be able to raise capital? Even the passage of EFCA or other Union-friendly legislation will just hasten the demise of unionized industries if potential bondholders think that labor will be propped up at their expense.