"The Unfettered Market at Work"
I was thinking to myself this morning, “gee Matt, you don’t any any houses and yet the current downturn’s made it a buyer’s market, why not pick up 7-12 homes?” The trouble, of course, is that I don’t have the necessary $13 million on hand. But still, normally one buys property with a loan, and since I think there are good values out there right now it would be worth borrowing the money. Unfortunately, despite a FICO score of around 800, I bet nobody wants to loan me $13 million. And if they did, they’d demand a huge interest rate. And even worse, they’d expect me to pay the loan back! If only I had some political allies, I could get a break on my interest rates and the whole “repaying the money” aspect of the situation, irrespective of my creditworthiness:
The plan is for the government to lend some $25 billion to the automakers in the first year at an interest rate of 4.5 percent, or about one-third what the companies are currently paying to borrow, the report said.
Under the proposal, the government would have the option of deferring any payment at all for up to five years, the article said.
Meanwhile, between the time Atrios blogged that story and I got around to making my joke, he noted that the request is now up to $50 billion. People sometimes don’t quite get orders of magnitude, so let’s note that $50 billion is the same as $50,000 million — the government could lop $13 million off for me to buy seven (or twelve) homes and still be left with $49,987 million for this boondoggle. Basically it’s just rounding error.
On a somewhat less jokey note, observe that at the moment the entire market capitalization of General Motors is just $5.91 billion. If it’s genuinely the case that access to a low-interest line of credit would turn GM around (I have no idea if this is true), the government could easily afford to buy the company, use the government’s ability to borrow at low rates to effect the turnaround, and then re-privatize it for a profit. Not saying that’s a good idea, but it seems like a better idea than giving loan guarantees to firms that are objectively bad credit risks. On the other hand, Michigan’s a swing state so who knows what the possibilities may be.