David Paul Ohmer's Flickr photostream/Creative Commons

There’ s been a lot of hooting and hollering going on lately about how the automobile industry is being treated unfairly in its request for federal assistance.  The logic goes that the financial and insurance sectors just received enormous bailouts with very few questions asked and all the while Detroit is being asked to bend over backwards, restructure nearly all of its contracts, ask for enormous concessions from its unions and creditors and even axe its top executive, Rick Wagoner of General Motors, in order to get another dime from Uncle Sam.

While I can understand the confusion of this apparent contradiction in treatment, once you look below the surface, the reasons why are pretty obvious.  The most important reason why Wall Street is getting much better treatment than Detroit by the Feds is that the FIRE (Finance, Insurance, Real Estate) sector has been the driving force of our economy and extremely successful for decades now.  During this same time Detroit has been a slow steady decline, with two of the Big Three finally about to bottom out. 

Now when you’re rich, as Wall Street has been for decades and still is, you can afford to buy a lot of influence, which has endeared the financial sector to politicians across the spectrum.  Meanwhile, Detroit has managed to hold onto the love of basically just Michigan and Ohio politicians many of whose constituents are employed in the auto business.  It might seem unfair, but it is directly correlated to the health of the two industries.  Wall Street could and probably will start making a ton of money again within a year, once their bad assets are off the books.  Adaptability is much easier to come by in the world of high finance, which depends on information and relationships as opposed to the hard labor and heavy manufacturing equipment of the automobile business.  Detroit on the other hand is going to take much longer to retool its business and get on its feet, assuming GM survives this current crisis.

Yet another reason for the difference in treatment is that, honestly, there are plenty of foreign owned automobile companies, as well as the Ford Motor Company, that can provide cars to the American market if General Motors and Chrysler go down.  It won’t be good news for the 2 million workers that depend on depend on GM and Chrysler for their paychecks, for which reason in my opinion it should be avoided, but the results of losing two of the Big Three auto manufacturers would be much less than losing the financial sector.  The reason is simple.  Everyone needs money.  Every business, every organization and every worker.  The banking system of this country is not something that can simply be allowed to go bankrupt if any other business in this country is going to have a chance to survive into the future.  There are no foreign banks waiting in the wings that can simply pick up the slack.  Banking is so closely integrated into our economic system and effects so many other facets of our way of life that it is simply a much bigger priority than some stubborn Detroit carmakers that have made bad business decisions for years now.

You can takepart in learning about the future of cars by checking out AutoBlog Green.

LINKS:

AP: The Obama Administration’s auto industry plan

LA Times: A primer on Obama’s auto industry plan

The New Republic: Why the Bank/Auto industry double standard?