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Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Pat Dorsey, Morningstar.com director of stock research; Eric Bolling, FOX Business Network; Tobin Smith, ChangeWave Research editor, and Chris Kofinis, Democratic strategist.
Stocks Rebound on Hopes Big Three Will Get Bailout Bucks: Would Wall Street Be Better Off Without Auto Bailout?
Tobin Smith, Changewave Capital: Here's what people don't understand. Ford and GM owe Wall Street about $80 billion. If the automakers go down, then investors don't get their money back on the corporate debt they hold. In some ways, the bailout isn't even about $15 billion. If the bailout doesn't happen, then we'll have about 12 new banks that are going to be in trouble.
Gary B. Smith, Exemplar Capital: This $15 billion is a drop in the bucket. They will be back for more when the new Congress convenes. This number will only multiply and ultimately be horrible for the market. The auto companies will blow through this money in weeks. Chapter 11 allows companies to alter their business model to one that is sustainable. There are a lot of steps being taken right now by the government that will be bad for the market.
Pat Dorsey, Morningstar.com: These companies are too large. They must slim down, but over time in a planned way. You can't just dump huge numbers of U.A.W. workers on the unemployment roles all at once. The auto companies should go into bankruptcy, but a prepackaged one.
Eric Bolling, FOX Business Network: A shot of adrenaline will get the line to blip again for awhile. The old business model is dead. The U.A.W. has its foot on the throat of the victim, and the auto companies can never revive themselves until they break the union. The only way to do that is through Chapter 11.
Big Three Bailout Fiasco: Proof Unions Are Dead in America?
Eric Bolling: Unions are dead -- they're done. And it's the best thing for America. Any industry has to innovate to survive, and this won't happen when you have union bosses prohibiting change.
Chris Kofinis, Democratic strategist: There are a lot of unions that are very successful. Look at Southwest. The real reason the big three are in trouble has a lot to do with the quality and perception of quality and less to do with union labor costs. The Republicans blocking the bailout was outrageous. It could bring about a regional depression. What I find odd is that all these financial executives destroyed bank after bank, and no one blinked about giving them $700 billion--and we won't give Detroit $14 billion?
Gary B. Smith: Unions have killed industry after industry: airlines, steel, and now the auto companies. Excessive costs over the competition hobble their ability to maintain market share.
Pat Dorsey: Unions have been in decline for 30 years. Declining union membership won't stop any time soon. Our economy is going from industrial based to knowledge based.
Tobin Smith: Unions have always been about money and politics. Obama proved you don't need the unions for money. You can raise it over the Internet. Legacy workers are a huge liability for GM, and these practices have led to the collapse of the company.
New Proof Bailing Out Homeowners Will Waste Taxpayers' Money?
Gary B. Smith: 99.9 percent of the time, bailouts don't work. They rarely address the root problem. People are in homes they shouldn't have been in the first place. They can't afford the low payments they're supposed to make now.
Chris Kofinis: I don't like bailouts very much, but when you're talking about millions of potential foreclosures, you have to do something to protect homeowners. The damage to the economy would be atrocious if we allowed these foreclosures to take place. We have to be realistic and pragmatic to keep people in their homes, especially the ones that really can afford to stay there.
Pat Dorsey: If these bad loaning practices hadn't taken place, then we wouldn't be here in the first place. Still, some of these mortgages have worked out, but clearly too many of them have not.
Tobin Smith: These mortgage "workouts" simply extended the mortgage and lowered the interest rate--but did nothing about the principal. You have to have a solid working family with income for the mortgage payments to be met. If the principal isn't brought down, then you're going to continue to have foreclosures.