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Paul O'Neill: "We're Headed For The Wall At Lightning Speed."

Former Treasury Secretary Paul O'Neill doesn't like the direction things are going. "We're headed for the wall at lightning speed. And every day that we don't deal with that set of problems is another day closer to absolutely vaporizing our economy," he told the Pittsburg Post-Gazette.

"Not to overstate the problem," he added. 

In a video taped interview, he also shared his thoughts on the auto industry's rescue request. 

The Detroit automakers now say they need $34 billion in loans in order to survive.

Mr. O'Neill examined the problems, but offered no easy answers. Take General Motors' labor costs -- forcing GM to, say, reduce its pay scale to resemble Toyota's in order to qualify for the federal loans might seem to make sense on the first pass, until you consider how the pay cuts would ripple through the economy.

"That sounds pretty simple," said Mr. O'Neill, who sat on GM's board of directors for two years in the 1990s.

But "think about the implications for the people on the other end of that bargain. They have a lifestyle that's consistent with what they've been getting paid for a long time. They own a home that's more home than they could afford" after a big pay cut.

"Their kids go to schools that are more pricey than they could afford at $90,000. Their credit cards are supported by a much higher" level of income. Pay cuts for all of those workers would lead to credit card defaults for some, or mortgage defaults, or car payment defaults -- or all of the above.

Still, Mr. O'Neill said he'd want some assurances that the Big Three were serious about fixing problems that "have been building for 40 years" before extending billions in loans.



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