Off Broadway Bailout Plays

Want to know what to expect on January 22nd. Well here’s a preview.

The line at the TARP window is starting to get longer. A variety of companies are coming out with grievances about the lack of bank lending and therefore the need for the government to either lend directly to them or guarantee their bank loans. The logic employed is worthy of a $1000 an hour attorney.

Basically, the argument goes like this. You gave all this money to the banks and they aren’t lending it to us. The economy sucks and we need loans. Therefore, you need to either guarantee loans to us or lend to us directly. Nothing more really, just that wrapped in a lot of PR sound bites.

Here are a couple of excerpts from a Wall Street Journal article on the issue:

Because of the credit freeze, trucking companies and car- and limousine-rental companies haven’t been able to raise enough cash to finance their fleets. Such companies are “critical to the overall stability and long term sustainability” of the U.S. auto industry, reads a legislative proposal that Avis has circulated on Capitol Hill.

It’s great that [TARP is] helping the banks…but it’s doing nothing for industry in general because of the freeze in the capital markets,” said Arnold Klann, chief executive of ethanol producer BlueFire Ethanol Fuels Inc.

Now so far as Avis goes, I can at least say that I feel their pain. They are credit dependent and to the extent the system is dysfunctional they might at least deserve a look. At the same time, who in Washington has the time or the expertise to say that they would be a reasonable risk. If the banks won’t lend to them at any cost then the taxpayer shouldn’t either unless a compelling case can be made that it is a money good loan. I don’t think that can be done.

As for Mr. Klann of BlueFire, he should probably have not offered any quote at all to the Journal. His company exists only because of federal subsidies that are defensible at crude prices far in excess of those that currently apply. Not only is BlueFire a creation of the federal purse but it is a creation that even its proponents concede was a colossal blunder. To be affiliated with an enterprise that sprang from the ethanol subsidy debacle is to be an entrepreneur that should hope nobody notices them at this point in time.

Think of all of this as a dress rehearsal for February. It’s not so much about getting the money now as it is trying out the act and the arguments and seeing how they play. All of these guys are going to be back after the inauguration and it won’t be sound bites at that point in time. It will be notes that were signed to generate campaign cash and now are due.


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