Unequal Treatment

Much is being made of the differences in treatment between the financial sector and the auto industry as to financial support. Differences as to firing of leadership and honoring of contractual agreements are being much discussed, but I have not heard any real discussion of a much more fundamental difference in the way the government is dealing with them.

With the auto industry, government is demanding complete restructuring of they way that automakers run their business, and that demand is pretty specific. They must drop some makes and models and focus on others, they must attain certain goals as to performance of their products, they must concentrate on hybrid and electric cars. They must, in fact, become a different car company in order to receive assistance, and the specific commitment to those changes must be made before the money is provided.

With the financial sector, which failed just as disastrously as the auto industry, if not more so? There is some vague expectation that they will start lending and a hint that they will be subjected at some date in the indefinite future to some sort of new rules. None of that is spelled out as any kind of actual requirement, though, and no changes are required of the financial houses before funds amounting to 70 times the amount requested by the automakers are handed to them without further questions.

Do they tell the financiers that they must change their procedures on leveraging before they are eligible for government loans? They do not. Do they tell the financiers that they must change their procedures on selling derivatives before they are eligible for government loans? They do not. Do they tell the financiers that they must change their procedures on giving ratings to bonds and financial instruments before they are eligible for government loans? They do not.

The auto industry, which failed big because it made stupid decisions, needs to make fundamental changes before it can obtain assistance. The financial services sector, which failed even bigger because it made even stupider decisions, must accept the idea that some new rules might be coming in the indefinite future order to obtain assistance, but is told to get back to doing what it was doing before it failed.

That pretty much tells us who is really running the country.

Update: Tuesday, 9:30am
As Attywood says, "What are we going to do about America's ruling class, since we can't seem to vote them out of power?"