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Of Biblical Parables and Bailouts

December 29, 2008 — Remember the parable told by Jesus about the man who left some gold coins with his servants (Luke 19: 11-28)?  Two decided to wisely invest those coins, and brought their master back his money with interest.  The third one buried his in the dirt.  It went nowhere.  The master wound up taking his share and giving it to the others.

The servant who squandered his chance at making money is a bit like Detroit and Wall Street.  The former gets two gold coins, and seems stuck in 1960s thinking.  The latter, who got ten gold coins, has all but buried that share of the government money, making a poor bailout choice for America. 

Michigan automakers decided years ago that there was an endless supply of oil in the world, and chose to invest in "gas guzzlers."  They mocked the higher fuel standards in cars made by foreign companies and blocked attempts to raise such limits by Congress.  Even as they reap what they sow, Congress has sought to give them a small bailout (the companies are still getting less than what it cost to bail out Bear Stearns).  It still may not be enough to stave off bankruptcy, which would likely prolong America's recession.

But their flop is "chicken feed" compared to what Wall Street did with their bailout share.  These firms received billions more, but won't even provide a vague summary of how the taxpayer money is spent.  According to the Associated Press article "Where'd the bailout money go?  Shhhh, it's a secret" by Matt Apuzzo, an amount of money equivalent to the GNP of the Netherlands has gone down a black hole, with no accounting of how it was spent or going to be spent.  None of the banks interviewed explained what happened to it, and refused to provide such answers.  Meanwhile, other articles have indicated that Wall Street executives are still flying around on those lavish corporate jets.

Here's a little mythbusting you can do for yourself.  Walk into a bank, and ask for a loan of $7,000.  Refuse to tell them how you are going to spend it, or even pay it back.  If you are successful, email me so I can test this hypothesis for myself. 

The last "servant" got a single gold coin…a combination of foreign investment and a forward-thinking entrepreneur (Ray Anderson).  Yet without the benefit of a national government bailout, it may be the servant who deserves the share of the others.

West Georgia was hit hard by globalization.  The textile industry was decimated by foreign competition, leading a number of mills to close in this region.  Yet no pricey bailouts headed this way.  But a remarkable thing happened.  One company (Interface) decided to focus on environmentally friendly practices and a better quality product, in an attempt to outflank foreign competition that cares more about price than value.  You'd think at least a Democratic Party-controlled Congress would drool over such a company, but little government aid has been sent to help such a company.