GM announced on Friday that the company will close 20 of its North American plants and is considering filing for Chapter 11. Chrysler LLC is slated to close 29 plants and lay off 53,000 workers effective immediately. And, though Ford Motor Company CEO Allan Mullaly told a Congressional committee that his company does not face what he called “near-term liquidity issues” which have slammed GM and Chrysler, he still has his cap in hand for $9 billion of Treasury-sponsored credit, should the industry worsen.

Detroit’s cognoscenti maintain that allowing the Big Three to fail could put more than half-a-million unemployed factory workers on the streets and disrupt other industries that supply or benefit from the auto industry. Nobody wants to see unemployment rates climb beyond 6.7 percent. But the automakers seriously overestimate their importance to the American economy.

The auto industry did not just get the stuffing kicked out of it overnight: it’s been unraveling for years. In an interview with the Wall Street Journal, Patrick Anderson, chief executive of East Lansing, MI-based Anderson Economic Group, said that “Michigan has been in a seven-straight year recession. The state’s unemployment rate for non-farm jobs is at 9.7 percent.  Even Michigan’s health care industry has begun to show signs of slowing.

And, amazingly enough, the sky has not caved in.

Detroit’s automakers say that it is unfair for Treasury to bail out the banks on one hand while it leaves the auto industry to suffer. And they have a point. But while it is true that many of the major players in the mortgage fallout did receive a Treasury-sponsored bailout through TARP, there was at least the possibility that, somewhere down the road, the toxic assets that have ruined their balance sheets would have been worth something one day. But Ford Motor Company and GM, which have long since been overshadowed by Japanese automakers such as Honda, at least in terms of popularity, have been poorly managed for decades. And there is no sign from Detroit that management will magically improve.

It would take something at least as revolutionary as the invention of the wheel to turn Detroit around. And, certainly any money that they receive will only be used to cover expenses such as payroll, not for research or development of new technology.

Detroit will suffer greatly if the Big Three do not get an immediate capital infusion. And, frankly, suppliers around the country will most likely go out of business if these companies are allowed to fail. But there’s an aspect of common sense that, so far, only Senator Mitch McConnell has touched on: Throwing money at a bad investment does not make it a good one.

“Very few of us had anything to do with the dilemma that they have created for themselves,” McConnell said of Detroit’s automakers. “We simply cannot ask the American taxpayer to subsidize failure.”

So, Lloyd Blankfein has decided that Goldman Sachs’ top management will forgo their yearly bonuses this year, bringing the “will they or won’t they” argument to a close. Now the others are expected to follow suit.

Smooth move, Lloyd: Please Washington by taking a hit at the top; let the “little people” take home their bonuses; and Wall Street and Main Street are finally reconciled.

Goldman’s “goodwill” move has prompted executives at UK-based, Barclays, PLC, Germany’s Deutschbank AG and Switzerland’s UBS AG to abandon bonuses for senior managers. But executives at Morgan Stanley, Citigroup and AIG aren’t lining up to fall on their swords. In fact, John Mack and Brady Dougan are conspicuously silent on the matter while Vikram Pandit has decided to eliminate the bonus question altogether by slashing jobs.

Everybody should take home a bonus this year, even if I’m not. It’s kind of crazy for Americans in general to expect that, just because they’re hurting, everyone else should hurt too. Congress can mask their little witch hunt as an effort to curtail corporate excess but, seriously, no one went after hedge funds at the peak of their profitability. Nobody targeted Exxon when they announced that they made over $14 billion in the third quarter of this year. So, now, making money is a problem?

Absurd.

Yes, exposure to toxic mortgage-backed securities ruined the global economy. And Wall Street should take the blame. But what is the Street supposed to do: repay investors out of the money that would have gone to bonuses? That’s not free-market capitalism. Moreover, nobody on either side of the Atlantic has mentioned that as an option.

Every economy in the world will have to limp through this recession. And — I’ll admit — some people need to go down for this. But making everyone poor won’t do anyone any good. Besides, if Blankfein — who made more than $50 million in 2007 — is an appropriate model for the typical Wall Street manager, taking a haircut in a bad year won’t hurt those at the top anyway.

Treasury Secretary, Henry Paulson, is trying to save the financial system. But the Treasury’s Troubled Asset Relief Program or TARP cannot fund all of the financial institutions that have applied for it.

Regulators for the Treasury have announced that the agency expects at least 1,800 publicly-held financial institutions to line up for their piece of the $700 billion bailout designed to rid banks of toxic assets.

Paulson moved quickly to shore up the financial services sector in the midst of a meltdown. And, to date, Treasury plans to divide $33 billion  among the nine largest US banks and 16 regional banks. But the Treasury Secretary may have opened up a Pandora’s box since, now, almost any financial institution can apply for a piece of the pie.

Lawyers for firms such as New York City-based Jones Day, are advising banks that TARP money could strengthen their capital ratios against those of their competitors. And attorneys for super firms such as Skadden, Arps, Slate, Meagher and Flom, which is also based in New York City, are now working overtime to help banks build up their capital ratios and, thus, guarantee TARP approval.

TARP was designed to get “healthy” banks to dump risky securities and get their balance sheets back in order. Treasury would absorb 3 percent or up to $25 billion of these assets. Participating banks would give the agency equity stake in the company and everybody would be satisfied. But when financing companies such as, say, GE Capital or GMAC come calling, one has to ask who gets the bailout billions first: Will it be the banks? Or will Treasury make decisions based on the power of a particular lobby, say, that of the auto industry?

So now, with so many hands out and rumblings throughout Congress, Treasury has two options: Make TARP funds available to any financial institution that applies for it or turn some institutions away and risk appearing ineffective.

The good news is that the Treasury, as the lender of last resort, is putting up the cash to inject some confidence into the country’s battered economy. That could mean a speedier end to what many fear will be a protracted recession.

The bad news is that the same agency has yet to draft the conditions that will determine which entities can and cannot to participate in the Troubled Asset Relief Program or TARP. Treasury may expect 1,800 institutions to come looking for handouts. But many more may find themselves eligible to receive taxpayer money. And few banks, thrifts, insurers or financial institutions of any stripe would be magnanimous enough to turn their backs on a few billion in, essentially, free capital.

Neither Paulson nor the interim chief of the U.S. Treasury Department’s financial rescue plan, Neel Kashkari has issued a statement on how the bailout money will be allocated. But, two more weeks left in the filing period, it is likely that they are working feverishly to figure that out.

Merrill Lynch brokers are looking for the door.

Acquisitions are all about “give-and-take.” But it looks like Bank of America CEO, Kenneth Lewis, is going to have to give much more to Merrill Lynch brokers in order to keep them from defecting.

In an effort to keep Merrill’s 16,850-person brokerage unit intact, Lewis announced that brokers who do $1 million in business will receive bonuses equal to 100 percent of their yearly fees and commissions. The caveat? Those brokers will have to remain at Bank of America for the next seven years before they can collect.

Sure, Kenneth. Hundreds of high-rolling brokers are going to hang around Merrill Lynch for seven years just to validate your decision to purchase the brokerage. Like that’s going to happen.

Lewis’ decision to green-light these long-term bonus arrangements amounts to re-purchasing the one Merrill asset that made the $50 billion Bank of America deal worthwhile. But, with Merrill’s stock price down 76.06 percent from last year and bonus expectations down 30 to 50 percent from last year, top brokers are finding that they can make more elsewhere or on their own.

On Friday, four of Merrill’s elite — Bill Loftus, Bill Lomus, Kevin Burns and Jim Pratt-Heaney — broke away from the 16,850-person brokerage network to form LLBH Group Private Wealth Management. Others are actively being lured away by competitors such as Citibank, MorganStanley and UBS, some of which are offering bonuses in excess of 200 percent of fees and commissions.

Bank of America’s gamble may stave off a mass exodus from Merrill. But who really wants to trade their A-list brokers for a bunch of mediocre desk jockeys who would rather stay put than go after the big fish?

Top brokers will most certainly take their clients with them. Now Lewis has to start negotiating with his brokers to sweeten the deal or let them walk. Either way, BOA’s shareholders are going to lose money on the Merrill acquisition. And Lewis may, ultimately, find himself out of a job.

Antitrust regulators at the US Justice Department signed off on Bank of America’s $34.9 billion dollar acquisition of Merrill Lynch & Co. this morning. But there was little to celebrate as Merrill announced a $7.5 billion-dollar loss in the third quarter, the fifth straight loss since the fourth quarter of 2007.

Though Merrill has retains its cache as the world’s largest brokerage, a laundry list of that firm’s losses suggest that Bank of America’s  “golden egg” may, in fact, be a lemon. The big question is whether or not Bank of America will demand that Treasury guarantee its investment in Merrill in order to keep the purchase on track.

On Monday, Treasury guaranteed Mitsubishi UFJ’s investment in Morgan Stanley. The move kept the Japanese bank from walking away from the deal.  The move placated Mitsubishi UFJ. But, now that there is a precedent for government intervention, domestic banks such as Bank of America may be the next to queue up to Treasury with cap in hand.

Merrill, one of the most well-publicized casualties of the sub-prime mortgage fallout, has been hemorrhaging money since October 2007, when the firm posted a $9.8 billion loss in the fourth quarter of that year. The downward slide continued into the first and second quarters of 2008 as Merrill announced $6.6 billion in total write-downs for that period.

Merrill’s bad news comes on the heels of a 5 percent drop in earnings per share for the Charlotte, NC – based bank. But the deal, which is slated to close in the first quarter of 2009, is still on the rails.