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When big companies look like they are going under, should governments use tax money to bail them out?

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You mean, as US did with GM ? I think after Americans did that, there is no room for question, protection for the best country firms has to be, because those companies are the strength of certain country .

-12 ( +1 / -13 )

Bailing out big corporations just promotes corruption. If companies know they can be corrupt to the point that their company will collapse, but get bailed out so it doesn't, they have no motivation to not be corrupt.

10 ( +13 / -3 )

It really depends. Some companies may be too big to fail, on what conditions do you bail them out?

In Japan, large corporations practically can't go bankrupt, but it's completely different than how the western economies bail some companies out.

-2 ( +4 / -6 )

It shouldn't be a black & white matter. The reasons why is just as important. The banks betting againts investors was a good reason NOT to bail them.

Why is it that when it comes to this, NO single tax payers have ANY saying through direct voting of some sorts ? Oh right, our perfect democracy already gave tax payers vote to choose our leaders, so they can be bought to bail corrupt companies, best system ever!

2 ( +2 / -0 )

What about big financial institutions? Let every member lose their money.

2 ( +2 / -0 )

I voted NO because there was no choice for IT DEPENDS.......

For the most part if companies go under, they should stay that way, THEN their competitors can pick up the slack, increase their business, hire more people, get stronger!! But the playing fields need to be level.

In Japan we see time & time again when some company is on the rocks the govt practically tells back & the competition to bail them out/buy them............. THIS IS WRONG as it just makes banks/competing companies WEAKER instead of stronger & the process repeats & the whole economy gets weaker & more corrupt, this is truly a massive problem in Japan!!

Now there are cases where govt assistance might be warranted BUT the stake holders in those companies MUST lose their shirts & NEVER get anything back if the company recovers, if they want back in BUY the shares again at the new price!!

As it is now too many wall street types KNOW they can gamble & if they lose get bailed out THAT is point blank wrong & needs to stop, we see this type of BS in the west a lot & people are sick of it!!! Especially watching people in the US losing their homes meanwhile the scum bags who organized the mortgage scams were covered in too many cases!!!!

3 ( +3 / -0 )

We all grow up with personal responsibility. We all have personal responsibility for our futures. When the going get tough we work through it. If a company has a rough road ahead they need to tighten the belt and struggle through.

In US two examples.

GM bailout was not what they needed. Dismantle the UAW is what they needed. $70,000+ a year plus fantastic benefits for an uneducated assembly line worker is way too much. I think a busy McDonald's worker works harder.

Big banks bailout was criminal. The salaries and bonuses did not reflect the mistakes they themselves made to put them in jeopardy.

1 ( +2 / -1 )

Yes, but under very specific conditions only

-1 ( +0 / -1 )

One thing big companies almost ALWAYS do in some form or another is support the government in order to get favorable treatment.

So when governments are bailing out big companies, they're really bailing out themselves in a roundabout way.

0 ( +0 / -0 )

Too complicated a matter for a yes/no answer !

1 ( +2 / -1 )

A company is an organization of people, more or less a living thing, and when it outlives it's productiveness, it should be allowed to perish so another company can take it's place.

America had no business bailing out GM, or any of the large banks. There should be no company which can be called "too big to fail." No company should be allowed to grow so large that it's failure would cause great economic hardship.

2 ( +3 / -1 )

In a free market: No. But since there never was and never will be a truly free market: Yes, all governments do it, so no one will want to come out on the short end.

0 ( +0 / -0 )

Like always with these questions, the "case by case" answer is missing...

2 ( +2 / -0 )

Corporation should be allowed to die-off and let the chips fall where they may.

But, for the last 40 years governments have allowed corporations to merge and buyout their smaller competitors and then form into monstrous corporations. This has allowed these monstrous corporations to get into bed with politicians and governments. It has gotten so bad today that if a CEO were to pass wind a few dozen politicians would spew out.

Then when these monstrous corporations begin to fail due to mismanagement and corruption governments are forced to bailout them out for the sake of the world economy and the politicians own bank-books.

This is the reason governments shouldn't have allowed these monstrous corporations to form in the first place. If these monstrous corporations weren't here there wouldn't be a need to worry and there would be more competition and more innovation today.

Competition is the driving force behind innovation, how can there be innovation when there isn't any competition. Or worse of all, when these monstrous corporations have agreements with other monstrous corporations?

How can this ever change? Well, that is the $24 trillion dollar question. As long as these monstrous corporations own politicians and the way those politicians get elected there will never be any real change.

A perfect example was the election of President Obama. He came in on a platform of "change" and "yes we can", but has turned into a "screw-change" and "no you can't".

Since his first and now second election nothing has happened other than those monstrous corporations getting even more monstrous.

To get elected in the US of A means that you have to kneel before a CEO beg, promise and agree to do as they want.

In the U.S to get elected to the House of Representatives costs on average $1.4 Million (salary $174,000 2 years), Senate $10.2 million (salary $174,000 6 years) and President $2.7 Billion ((salary $400,000 4 years).

They promise to change this and that, but in the end nothing changes except for the annual bonus of those CEOs.

0 ( +1 / -1 )

JoeBigsApr. 15, 2014 - 08:11AM JST Corporation should be allowed to die-off and let the chips fall where they may.

You are making an assumption without looking at the global picture. What happens in this situation is what’s referred to in the business world as loss mitigation. The path sometimes taken by the goverment is the path that presumably will result in the most minimal losses. If you’re going to have losses anyway, you may as well minimize them as much as possible. In the case of GM, the loss mitigation plan was successful. Workers kept their jobs. Unemployment benefits did not have to be paid. Workers did not lose their houses, which in turn did not put any pressure on the lenders who financed those houses. Which in turn did not result in any failed financial institutions, which in turn did not require any regulatory action, which did not result in a resolution by the FDIC, which did not require that agency to hire more employees to deal with the situation. And since the auto workers still have a paycheck, they can still patronize local businesses, who can then earn enough to pay their employees, and so on and so forth.

2 ( +2 / -0 )

Who is going to bail me out if my personal finances collapse? Of course, no-one. But while I'm on the bones of my arse the Big Corporations who are "too big" to fail will still be sending me threatening letters in respect to my overdue bills. And nobody is going to come to me and say 'you made some really bad investments and some awful decisions but here's a $2 million bonus anyway'. No, they will be saying regretfully we need to take your home and anything you earn into the future you will owe to us.

It's called the "Free Market" because when big corps fail they get bailed out for free and the little guy gets landed with the bill and told he must tighten his belt as tough times are ahead. For some of us at least.

Capitalism is a mind blowing wonderful thing for the very, very rich and elite few. The rest of us just fund it.

3 ( +3 / -0 )

sfjp330Apr. 15, 2014 - 08:27AM JST You are making an assumption without looking at the global picture. What happens in this situation is what’s referred to in the business world as loss mitigation. The path sometimes taken by the goverment is the path that presumably will result in the most minimal losses. If you’re going to have losses anyway, you may as well minimize them as much as possible. In the case of GM, the loss mitigation plan was successful.

What you call "loss mitigation" was in fact a mega bailout to save the unregulated wall street. Come, come now, loss migration has never been used at the scale that the world had to to save Wall Street and those that write the big fat checks.

Name another instance where each and every government in the world had to pool their money to save the great Ponzi scam known as unregulated Wall Street? Before you jump too quickly and try and equate your argument to a trivial bump in investments let us remember the scale we are talking about. In total last time I checked the bailout was a whopping (will have to type those figures on another line)

$20,000,000,000,000 yes that was 20 Trillion Dollars do you think that number is trivial? It might be higher, but I haven't checked. Opps, forgot to mention that was just the US's part of the bailout.....

http://www.pbs.org/wnet/need-to-know/economy/the-true-cost-of-the-bank-bailout/3309/

http://www.theguardian.com/commentisfree/2013/may/28/bank-bailout-cost-taxpayers

http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-feds-16-trillion-bailouts-under-reported/

In fact, the world hasn't been in that much trouble since the Great Depression.

Good for me, I cashed in all my stocks in 2006 so I didn't take a hit....

sfjp330Apr. 15, 2014 - 08:27AM JST Workers kept their jobs. Unemployment benefits did not have to be paid. Workers did not lose their houses, which in turn did not put any pressure on the lenders who financed those houses.

Hmmm looks like the porkies are screaming today. US unemployed due to the crisis as of 2009 3 million......

http://money.cnn.com/2008/09/05/news/economy/jobs_august/

http://money.cnn.com/2009/01/09/news/economy/jobs_december/

sfjp330Apr. 15, 2014 - 08:27AM JST Which in turn did not result in any failed financial institutions, which in turn did not require any regulatory action, which did not result in a resolution by the FDIC, which did not require that agency to hire more employees to deal with the situation. And since the auto workers still have a paycheck, they can still patronize local businesses, who can then earn enough to pay their employees, and so on and so forth.

You seem to have forgotten that the 2008 crisis wasn't a wave, it was a tsunami and that tsunami is still being felt.

Not a single financial institute except for..

http://www.fdic.gov/bank/individual/failed/banklist.html

http://online.wsj.com/news/articles/SB10001424052748703399204576108461096848824

sfjp330Apr. 15, 2014 - 08:27AM JST

I do love the way you try and paint the 2008 crisis as a hunky dory moment where no one got hurt. But in fact many many many people felt the pains of that near collapse and a great few made a killing from that near collapse..

Just ask the execs at AIG if they felt the pains of the crisis, I bet each one would say "no". $165 Million dollars in bonus' at the expense of tax payers dollars cushioned the loses...

http://www.economist.com/node/13312913

http://www.globalresearch.ca/the-bank-bailout-scandal-us-treasury-approves-executive-bonuses-for-ceos-of-bailed-out-companies/5321116

http://www.mirror.co.uk/news/uk-news/fatcat-bankers-received-80billion-bonuses-3130125

Mel Brooks said it best, "It's good to be the King"

Only ones that made out like robber barons were the folks that should have lost it all.

Again, when CEO's pass wind politicians come spewing out.

-1 ( +0 / -1 )

Obviously government serves a role and one of those roles is to back its industry in times of trouble. GM and Citibank worked out well, I believe the U.S. made a profit actually.

1 ( +1 / -0 )

It's hard to support bailouts when you see the bailout money going to bonuses and executives. I support bailouts for people who need income to put food on the table and clothes on the back of themselves or their family, not people who already have more than enough.

1 ( +1 / -0 )

No.

Companies are legally people. The government wouldn't bail you or I out if we made bad decisions and got ourselves into financial trouble. Why should it be any different for companies?

Maybe companies will eventually learn to be responsible if governments stop bailing them out.

At the end of the day if a company fails, yes its employees will TEMPORARILY be out of work, but if there really was a market for its goods and services then another company will step into that market gap and create new jobs. If there wasn't really a need for those goods and services then those jobs were doomed anyway.

-5 ( +0 / -5 )

Japan Inc. needs some serious economic reforms. Kindness is cruel. Let the failed companies fail or be bought by their successful competitors. Why incentivize failure?

These companies need to get their acts together. Unemployment isn't the issue, competitiveness and efficiency are. Let's close the history books on the 25 years of keidenretsu crony capitalism. It's time for Japan to change.

0 ( +0 / -0 )

No. Money should be spent on helping mid to low level employees from those companies to find new jobs. The upper tiers, management, CEOs etc. should not be given a penny for at least two reasons. They've got enough money, and even if they don't, it was either their greed or incompetence that caused the company to fold. That should not be rewarded. Trickle down compensation doesn't work.

Privatizing profit and socializing loss is 21st century fuedalism.

0 ( +0 / -0 )

Where a business is strategically important and theres a hope the money can be earned back, its not necesarily wrong to prop up ailing businesses. However, you cant leave individuals to fend for themselves and then bail out failing corporations. There must be a level of equity when governments spend taxpayers money, especially when taxpayers are being pushed to carry a greater burden. Hopefully the authorities can ensure that once returned to profit, these businesses honour their debt to society by paying their fair share of corporation tax.

0 ( +0 / -0 )

If companies know they can be corrupt

A company can't know anything. It's the people who make the key decisions who know, and, if corrupt, they should be replaced by competent, honest people before any public entity loans them money.

Maybe companies will eventually learn to be responsible if governments stop bailing them out.

A company can't "learn to be responsible." The people that run the company are either responsible or they are not. If not, they should be replaced before a public entity loans them money.

It makes no sense at all letting a fundamentally good/beneficial organization go under -- one that represents the interests of possibly many hundreds or thousands of people -- because of the dishonest and irresponsible decisions of a few at the top.

2 ( +3 / -1 )

True, there's nothing wrong with the people who are working under the management. If the management is corrupt, then replace them.

-6 ( +0 / -6 )

Absolutely yes. There are jobs involved, but more importantly, also investor/shareholder interests. Once a government fails to bail firms out, it sends a message to potential investors: Our economy is riskier than the one next door. The investors then are more wary to put their money into that economy. Money runs the world, and without investment we won't have jobs. Keeping investors happy and having a free market (with risk socialised out to the middle and lower classes as much as possible) will attract more investment and ultimately make a country richer.

-3 ( +0 / -3 )

Why should i have to pay hgher taxes because some corporate big wig gambled and lost? No...No..No..

1 ( +1 / -0 )

It really depends. Some companies may be too big to fail, on what conditions do you bail them out?

If a company is too big to fail, it is too big.

Many banks are now too big to fail and have taken advantage of their unique position in the economy, both as a home for savings and a facilitator of transactions. They need to be smaller.

Other companies should not be too big to fail - it would not have mattered if GM had collapsed

-1 ( +0 / -1 )

yabitsApr. 18, 2014 - 01:10AM JST A company can't know anything. It's the people who make the key decisions who know, and, if corrupt, they should be replaced by competent, honest people before any public entity loans them money.

Have you ever worked in a very large company? I'm guessing not, because you seem to be labouring under some sort of socialist illusion that only top management are evil and corrupt, and that their decision are made and carried out in a vacuum by entirely innocent and helpless drones.

The truth is very, very different. It tends to start at the top, but before long the good people either leave or just give up fighting the good fight, and soon the company is full of yes men who either don't care if the decision is moral or actively pursue profit at all costs.

Replacing the top people makes no difference at this point as even if you get good people in at the top the greedy and immoral middle managers just continue to pull the same scams, all the while telling the brow-beaten "ex-good guys" that if they open their mouths to top management they'll be fired. And the thing is that given what happens to most whistle blowers they're too afraid to say a word.

This idea that if you cut the head off the snake it'll magically stop being evil just shows a complete lack of real-world knowledge of how companies get this way.

Maybe companies will eventually learn to be responsible if governments stop bailing them out.

A company can't "learn to be responsible." The people that run the company are either responsible or they are not. If not, they should be replaced before a public entity loans them money.

I wrote "companies", not "a company". A company can't learn. Their competitors and partners however can learn. When they see a few big companies cut down they'll quickly realise that it isn't profitable to break the rules.

As for loaning companies money, you've got to be kidding. If I give money for something then I expect to be paid back. That means the company has to be viable, and if it is viable then other companies will pay money for it. If it isn't viable then don't treat the taxpayer like a sucker and expect us to back a horse that no-one else will touch.

It makes no sense at all letting a fundamentally good/beneficial organization go under -- one that represents the interests of possibly many hundreds or thousands of people -- because of the dishonest and irresponsible decisions of a few at the top.

If it was a good/beneficial organisation then it wouldn't be in this mess. You're being hopelessly naive in supposing that top management's bad/evil decisions occur in a bubble at the top without any support from equally bad/evil people further down.

-4 ( +0 / -4 )

Frungy Apr. 19, 2014 - 04:57AM JST I wrote "companies", not "a company". A company can't learn. Their competitors and partners however can learn. When they see a few big companies cut down they'll quickly realise that it isn't profitable to break the rules.

This is why most large companies have board of directors who also performs audits on whether directors are executing their assigned duties in accordance with the basic policy determined by the board of directors. The number of corporate directors will clarify the management accountability of each director. In order to enhance management transparency and soundness, many companies appointed outside director(s) with no ties to the company. Companies has to establish an internal audit system in order to strengthen internal control and regularly perform internal audits on the appropriateness and efficiency of operations as well as on the status of compliance.

-1 ( +0 / -1 )

Frungy, you must be living in an alternate universe. In a normal situation, a CEO is virtually responsible for everything. A mere change in the hands of a skillful CEO can change an entire company's culture and health for the better.

PROVIDED, that the people at the top exercise genuine power that he or she rightfully possess in actuality. This might not be so in a country like Japan, where people in the top actually exercise very little power, and they are more often than not controlled behind the thrones by the middle management.

-5 ( +0 / -5 )

Thomas AndersonApr. 19, 2014 - 06:07AM JST Frungy, you must be living in an alternate universe. In a normal situation, a CEO is virtually responsible for everything. A mere change in the hands of a skillful CEO can change an entire company's culture and health for the better.

I live in an alternate universe to you perhaps, mine is called the "real world", where CEOs of major companies may be theoretically responsible for everything, but live in a different country from most of their major branches, have no contact with any but the most senior managers in their foreign offices, and in many cases don't even speak the same language as a large percentage of their employees. The very idea that a CEO can walk into a business he doesn't know, rely on reports from individuals who may well be corrupt as hell, and somehow turn the business around on his own is very optimistic. There are CEOs out there like that, but they're rare as hell and the first thing they normally do is fire the entire top management tier, insert their people into key middle management positions and the organisation is generally hell to work in for the first year or two with massive resignations.

As for the myth of a "skillful" CEO, again, come over to reality. Recent research in Fortune 500 companies (the cream of the crop who should have "skillful" CEOs) showed that more than 50% of the time the CEO made the wrong call. Replacing the overpaid CEOs of these major companies with magic 8-balls would have, on average, produced better results.

PROVIDED, that the people at the top exercise genuine power that he or she rightfully possess in actuality. This might not be so in a country like Japan, where people in the top actually exercise very little power, and they are more often than not controlled behind the thrones by the middle management.

Here's a little truth that you might find hard to swallow. The CEO has no "genuine power". No human being has power over another human being that the other human doesn't choose to give them. If people don't like the CEO they can disobey, feed the CEO false information and generally make the CEO's life hell. I've seen it done, and inevitably the CEO is an idiot who thinks they're "entitled" to power over the employees, rather than earning their respect and cooperation. Your post displays that you're firmly in the "entitled" camp, which is not a good place to be.

sfjp330Apr. 19, 2014 - 05:15AM JST This is why most large companies have board of directors who also performs audits on whether directors are executing their assigned duties in accordance with the basic policy determined by the board of directors. The number of corporate directors will clarify the management accountability of each director. In order to enhance management transparency and soundness, many companies appointed outside director(s) with no ties to the company. Companies has to establish an internal audit system in order to strengthen internal control and regularly perform internal audits on the appropriateness and efficiency of operations as well as on the status of compliance.

Did you even look at what you just typed? All but one of the checks you mentioned are INTERNAL. Directors checking on other directors, internal audits, all measured against internal standards. And the very notion of "outside director(s) with no ties to the company" made me snort coffee all over my keyboard. That's like saying, "We're very transparent, we had a plumber come in to evaluate our soap-making business".

2 ( +2 / -0 )

Generally, the private sector should be left to sort itself out - and, in general, it will. If one company fails, this makes room in the market for other, better run compnies, to move in, and the economy as a whole will benefit.

On the other hand, if a company is of national strategic importance, then, yes, the government should step in, but not to simply bail them out, but to nationalise them.

Nationalise the company, get it back onto a stable footing, maybe even break it up, and then privatise it. That's the best solution.

1 ( +1 / -0 )

Let them die. Natural selection at work.

1 ( +1 / -0 )

Look at the votes! 85 percent no! If we lived in democracies, bailouts would never happen! Obviously, we do not live in democracies!

0 ( +0 / -0 )

@ Yathink

Plutocracy, corporatocracy, oligarchy...Take your pick. Democracy brought to you by a corporate sponsor...

0 ( +0 / -0 )

idiocracy

-1 ( +0 / -1 )

From Frungy

Have you ever worked in a very large company? I'm guessing not

Over 20 years at two Fortune 50 enterprises. Coming from Detroit originally, I've got folks in my extended family who were in management positions at all of the Big Three.

and that their decision are made and carried out in a vacuum by entirely innocent and helpless drones.

And yet, in the very next paragraph, you speak of "yes men." I am intimately familiar with conditions at IBM before Lou Gerstner took over, as well as after. The CEO changed the entire culture of the company. I also well recall the government's bailout of Chrysler in 1979 -- under Lee Iaccoca. The biggest transition may have been at Ford under Donald Peterson.

Replacing the top people makes no difference at this point as even if you get good people in at the top the greedy and immoral middle managers just continue to pull the same scams

That's not my experience. Allowing middle managers to continue the same scams means that the people at the top are anything but "good."

That means the company has to be viable, and if it is viable then other companies will pay money for it. If it isn't viable then don't treat the taxpayer like a sucker and expect us to back a horse that no-one else will touch.

You have yet to demonstrate that you have a clue as to what viability means. In fact, you continually demonstrate the opposite. Chrysler in 1979 was a viable company, and Lee Iaccoca proved it -- despite the indication at the time that nobody would touch it.

0 ( +0 / -0 )

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