Posted by Kendall Harmon

Estimates of monthly GDP indicate that the only growth in the first quarter of 2011 was from February to March. After a temporary rise in March, the economy began sliding again in April, with declines in real wages, in durable-goods orders and manufacturing production, in existing home sales, and in real per-capita disposable incomes. It is not surprising that the index of leading indicators fell in April, only the second decline since it began to rise in the spring of 2009.

The data for May are beginning to arrive and are even worse than April's. They are marked by a collapse in payroll-employment gains; a higher unemployment rate; manufacturers' reports of slower orders and production; weak chain-store sales; and a sharp drop in consumer confidence.

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Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

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Posted June 9, 2011 at 11:28 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The White House said Wednesday that taxpayers could lose roughly $14 billion of the money spent on auto industry bailouts, despite the industry's recent recovery.

The White House cites the potential losses in a report, "The Resurgence of the American Automotive Industry," released ahead of President Barack Obama's trip Friday to a Chrysler Group LLC facility in Toledo, Ohio.

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Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeLabor/Labor Unions/Labor MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentBudgetThe National DeficitPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

9 Comments
Posted June 1, 2011 at 3:52 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

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Filed under: * Economics, PoliticsEconomyHousing/Real Estate MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

1 Comments
Posted March 20, 2011 at 12:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Today’s public offering marks the moment when the Main Street and Wall Street bailouts meet. But the Wall Street firms haven’t been divvied up as G.M. has, in ways so visible to the eye. For General Motors, divided into its “Old” and “New” halves, there’s an inescapable paradox: the only possible route to future profitability is to create, through plant closings, monuments to past unprofitability. Old G.M. may have gone away for the purposes of the stock offering, but it didn’t go away in what might rightfully be called actuality.

Across the nation, as in Detroit, there is an economic disconnect, a split between what the economic numbers say and how things feel on the ground. The economy is growing, but the unemployment rate hasn’t budged. The recession officially ended in June 2009, but more jobs have been lost than have been added since that “ending.”

Handling this disconnect requires political acuity. It brings to mind something Philip Roth once said about those who have little feel for literature and the texture of lived experience it provides and so “theorize” it. Mr. Roth imagined a scene of a father giving his son this advice while attending a baseball game: “Now, what I want you to do is watch the scoreboard. Stop watching the field. Just watch what happens when the numbers change on the scoreboard. Isn’t that great?” Then Mr. Roth asks: “Is that politicizing the baseball game? Is that theorizing the baseball game? No, it’s having not the foggiest idea in the world what baseball is.”

It’ll be fun, for a day or two, to look at the scoreboard, and to see what G.M.’s shares are going for: $26? $29? $33? $35? The numbers on the exchange will change; it’ll be great, and a welcome, temporary relief from the numbers, still difficult to comprehend, of jobs lost and plants closed. Soon enough, though, we’ll have to go back to watching what’s actually happening on the field, where there’s still a blowout in progress, with the home team way behind, and no one, seemingly, with the foggiest idea what to do about it.

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Filed under: * Culture-WatchPsychology* Economics, PoliticsEconomyCorporations/Corporate LifeLabor/Labor Unions/Labor MarketStock MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. Government* International News & CommentaryAmerica/U.S.A.

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Posted November 18, 2010 at 7:40 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The U.S. government will face pressure to bail out struggling states in the next 12 months, said Meredith Whitney, the banking analyst who correctly predicted Citigroup Inc.’s dividend cut in 2008.

While saying a bailout might not be politically viable, Whitney joined investor Warren Buffett in raising alarm bells about the potential for widespread defaults in the $2.8 trillion municipal bond market. She said state and local issuers have taken on too much debt and that the gap between public spending and revenue is unsustainable.

“People will think the federal government will bail these states out,” Whitney, 40, the founder of Meredith Whitney Advisory Group Inc., said in an interview on Bloomberg Television’s “In the Loop.” “It’s going to be an incredibly divisive issue.”

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Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenateState Government

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Posted September 30, 2010 at 6:49 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Winston Churchill once moaned about the long, dishonourable tradition in politics that sees commerce as a cow to be milked or a dangerous tiger to be shot. Businesses are the generators of the wealth on which incomes, taxation and all else depends; “the strong horse that pulls the whole cart”, as Churchill put it. No sane leader of a country would want businesspeople to think that he was against them, especially at a time when confidence is essential for the recovery.

From this perspective, Barack Obama already has a lot to answer for. A president who does so little to counter the idea that he dislikes business is, self-evidently, a worryingly negligent chief executive. No matter that other Western politicians have publicly played with populism more dangerously, from France’s “laissez-faire is dead” president, Nicolas Sarkozy, to Britain’s “capitalism kills competition” business secretary, Vince Cable (see article); no matter that talk on the American right about Mr Obama being a socialist is rot; no matter that Wall Street’s woes are largely of its own making. The evidence that American business thinks the president does not understand Main Street is mounting

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Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeHousing/Real Estate MarketLabor/Labor Unions/Labor MarketTaxesThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentPolitics in GeneralOffice of the PresidentPresident Barack Obama

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Posted September 26, 2010 at 1:41 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Pundits are restless, an election looms – so this week, President Barack Obama is proposing yet another round of special favors, aimed at improving the economy. Prominent columnist Paul Krugman wants the plans to be “bold” and to involve huge amounts of money. Here’s a contrasting view: government should stop declaring recovery plans, bold or otherwise.

Maybe the constant announcing of new plans – especially plans backed by borrowing or tax cuts – is, itself, an impediment to economic growth.

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Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

3 Comments
Posted September 8, 2010 at 6:01 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Obama administration and the Federal Reserve want to fix the United States economy by spending more money. But while that approach might work for Europe, it is risky for the US. The nation would be better off embracing traditional American values like self-reliance and small government.

There's no question about it: The 20th century was America's era. The United States rose rapidly from virtually nothing to become the most politically powerful and economically strongest country in the world. But the financial crisis and subsequent recession have now raised doubts about its future. Are we currently witnessing the beginning of the end of the American era?

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Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAmerica/U.S.A.EuropeGermany

2 Comments
Posted September 4, 2010 at 1:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

We don’t have alternative universe laboratories to run control bailout experiments, but we can imagine the alternative outcomes if different actions were taken.

So let’s do just that. Imagine a nation in the midst of an economic crisis, circa September-December 2008. Only this time, there are key differences: 1) A President who understood Capitalism requires insolvent firms to suffer failure (as opposed to a lame duck running out the clock); 2) A Treasury Secretary who was not a former Goldman Sachs CEO, with a misguided sympathy for Wall Street firms at risk of failure (as opposed to overseeing the greatest wealth transfer in human history); 3) A Federal Reserve Chairman who understood the limits of the Federal Reserve (versus a massive expansion of its power and balance sheet).

In my counter factual, the bailouts did not occur. Instead of the Japanese model, the US government went the Swedish route of banking crises: They stepped in with temporary nationalizations, prepackaged bankruptcies, and financial reorganizations; banks write down all of their bad debt, they sell off the paper. Int he end, the goal is to spin out clean, well financed, toxic-asset-free banks into the public markets.

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Filed under: * Culture-WatchHistory* Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

34 Comments
Posted August 18, 2010 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The administration's second assumption, meanwhile, is a matter of academic theories about the sizes of the relevant economic multipliers. Textbook Keynesian economics tells us that government-purchases multipliers are larger than tax-cut multipliers. And, as we have seen, the Obama administration's economic team consulted these standard models in deciding that spending would be significantly more effective than tax cuts.

But a great deal of recent economic evidence calls that conclusion into question. In an ironic twist, one key piece comes from Christina Romer, who is now chair of Obama's Council of Economic Advisers. About six months before she took the job, Romer teamed up with her husband and fellow Berkeley economist David Romer to write a paper ("The Macroeconomic Effects of Tax Changes") that sought to measure the influence of tax policy on GDP. Crucial to the Romers' method was their effort to identify changes in tax policy made during times of relative economic stability, and driven by a desire to influence economic behavior or activity (to encourage growth, say, or reduce a deficit), rather than those changes made in response to a recession or crisis. By studying such "exogenous" tax-policy changes, the Romers could be more confident that they were in fact measuring the effects of taxes and not those of extraneous conditions.

The Romers' conclusion, which is at odds with most traditional Keynesian analysis, was that the tax multiplier was 3 — in other words, that every dollar spent on tax cuts would boost GDP by $3. This would mean that the tax multiplier is roughly three times larger than Obama's advisors assumed it was during their policy simulations.

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Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

0 Comments
Posted July 24, 2010 at 1:56 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

A new Time poll reveals just how hard the task is: Two-thirds of respondents say they oppose a second government stimulus package. And 53% say the country would have been better off without the first one.

The result is a White House pulled in three directions at once as it tries to repair the economy — and ensure that Obama and the Democrats can survive a rising tide of public anger. First, the Obama team is improvising ways to pass piecemeal spending items through a Congress where stimulus has become a toxic word. At the same time, the White House is signaling its concern about that budget deficit that has Tea Partyers raging — both through token gestures, like a White House contest that lets the public vote on cost-cutting ideas submitted by federal employees (the winner gets to meet Obama and see his or her idea go in the President's next budget), and through Obama's support for the work of a bipartisan deficit commission. And finally, the White House is trying to explain to angry liberals that it's doing everything possible to keep the economy moving and fight Republican resistance to new spending.

It's a delicate balancing act, on a par with Obama's effort to pass health care reform without appearing to get too involved in the details. And just as it did in the health care battle, the future of Obama's presidency — as well as the fate of the American economy — may hang on the outcome.

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Filed under: * Culture-WatchHistoryPsychology* Economics, PoliticsEconomyHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaState Government

0 Comments
Posted July 17, 2010 at 12:30 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

To believe Christopher Dodd, the Connecticut Democrat who is chairman of the Senate Banking Committee, the end of government bailouts is near. In truth, the financial-overhaul legislation now before Congress would do little to arrest the bailouts already in progress.

When the U.S. government rescued American International Group Inc. in 2008, it reasoned that a disorderly failure of the financial-services giant would lead to an economic catastrophe. What the Treasury and Federal Reserve said they needed was a way to wind down systemically important institutions without sending them into bankruptcy courts, to keep the companies from triggering defaults on their obligations that would cascade throughout the broader financial system.

Congressional leaders say their final bill will deliver the resolution authority regulators have been seeking. “It will end bailouts, ensuring that failing firms can be shut down without relying on taxpayer bailouts or threatening the stability of our economy,” Dodd said June 10 at the House-Senate conference committee where the differences between the two chambers’ bills are being negotiated.

It wouldn’t end AIG’s rescue, though. The reason AIG hasn’t failed is that the Fed and the Treasury continue to stand behind it. There’s no sign this will change anytime soon. Nor would the legislation force the government to do otherwise.

Read the whole thing.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeStock MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralSenate

2 Comments
Posted June 18, 2010 at 9:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Taxpayers are naturally eager for news about bailout repayments. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan.

Neil M. Barofsky, the inspector general overseeing the troubled asset program, revealed this detail when he spoke before the Senate Finance Committee on April 20.

“So it’s good news in that they’re reducing their debt,” Mr. Barofsky said of G.M. But he went on to note that G.M. was using other taxpayer money to make the loan repayment, according to the transcript of his testimony.

Armed with this information, Mr. Grassley fired off a letter to Mr. Geithner on April 22, asking for details of the transaction. “I am concerned ... that this announcement is not what it seems,” he wrote. “In fact, it appears to be nothing more than an elaborate TARP money shuffle.”

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Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto Industry* TheologyEthics / Moral Theology

4 Comments
Posted May 3, 2010 at 8:01 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The effect of free money is remarkable. A year ago investors were panicking and there was talk of another Depression. Now the MSCI world index of global share prices is more than 70% higher than its low in March 2009. That’s largely thanks to interest rates of 1% or less in America, Japan, Britain and the euro zone, which have persuaded investors to take their money out of cash and to buy risky assets.

For all the panic last year, asset values never quite reached the lows that marked other bear-market bottoms, and now the rally has made several markets look pricey again. In the American housing market, where the crisis started, homes are priced at around fair value on the basis of rental yields, but they are overvalued by almost 30% in Britain and by 50% in Australia, Hong Kong and Spain.

Stockmarkets are still shy of their record peaks in most countries. The American market is around 25% below the level it reached in 2007. But it is still nearly 50% overvalued on the best long-term measure, which adjusts profits to allow for the economic cycle, and is on a par with two of the four great valuation peaks in the 20th century, in 1901 and 1966.

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Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyStock MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in General

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Posted January 10, 2010 at 2:05 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The second important lesson involves understanding why markets often do not work the way they are meant to. There are many reasons for market failures. In this case, too-big-to-fail financial institutions had perverse incentives: if they gambled and succeeded, they walked off with the profits; if they lost, the taxpayer would pay. Moreover, when information is imperfect, markets often do not work well - and information imperfections are central in finance. Externalities are pervasive: the failure of one bank imposed costs on others, and failures in the financial system imposed costs on taxpayers and workers all over the world.

The third lesson is that Keynesian policies do work. Countries, like Australia, that implemented large, well-designed stimulus programs early emerged from the crisis faster. Other countries succumbed to the old orthodoxy pushed by the financial wizards who got us into this mess in the first place.

Whenever an economy goes into recession, deficits appear, as tax revenues fall faster than expenditures. The old orthodoxy held that one had to cut the deficit - raise taxes or cut expenditures - to "restore confidence." But those policies almost always reduced aggregate demand, pushed the economy into a deeper slump, and further undermined confidence - most recently when the International Monetary Fund insisted on them in East Asia in the 1990's.

The fourth lesson is that there is more to monetary policy than just fighting inflation....

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Filed under: * Culture-WatchGlobalizationHistory* Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveThe National Deficit

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Posted January 3, 2010 at 2:33 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Though the four are not in all the same businesses, they were caught in one of the same traps: They sold mortgage guarantees — in some cases to each other. Now when homeowners default, as they are doing in record numbers, these companies are covering the losses. Essentially, taxpayer money to these companies is being used partly to protect banks and other investors who own the mortgages.

Like the big banks, these four companies would no doubt prefer to be free of government assistance, which comes with pay and other restrictions on their executives. But they appear at risk of getting onto a debt merry-go-round, where they have to draw new money from the government just to keep up with their existing government debts.

Fannie Mae recently warned, for example, that it could not pay the dividends it owes the Treasury, so “future dividend payments will be effectively funded with equity drawn from the Treasury.”

All the companies have recently drawn new government money or are in talks to do so...

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Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeHousing/Real Estate MarketThe Banking System/SectorThe Possibility of a Bailout for the U.S. Auto IndustryThe U.S. Government

1 Comments
Posted December 18, 2009 at 12:24 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The last two quarters were even more extreme: Productivity in the nonfarm business sector grew at a shocking 8.1% annual rate. There are two possible explanations. One: The last two quarters were among the most technologically innovative and entrepreneurial in the history of the United States. Two: Fearful businesses pared payrolls to the bone. If the second is closer to the truth, payrolls are extraordinarily lean right now. Which means that firms will need to hire more workers as their sales and production grow. Which means that employment may start growing sooner than the pessimists think.

I have been pointing this out for months, but until the last employment report, it was a hypothesis supported by no evidence. Not anymore. While payrolls continued to decline in November, it was by only a scant 11,000 jobs; and the job counts for September and October were revised upward. The data now show a clear trend that suggests that net job creation may be only a month or two away. We'll see.

There is more to the case for optimism. For one thing, less than 30% of February's $787 billion fiscal stimulus has been spent to date; over 70% is still in the pipeline. Pessimists dote on the fact that the rate of increase of stimulus spending has probably peaked and will be lower in 2010. True. But the level of GDP will continue to get support from fiscal policy, and a second job-creation package ("Please don't call it a stimulus!") looks to be in the works.

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Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal Reserve

1 Comments
Posted December 16, 2009 at 12:30 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Yet the urgent problem now isn't TBTF [too big to fail], or even banker bonuses. These are distractions. The urgent problem is the giant riverboat gamble that Washington can save the economy by doing what comes naturally—spending money carelessly, creating massive new entitlements without funding them, dishing out cheap credit to politically favored sectors, telling business people where and how to invest.

Mr. Feinberg is an apt symbol indeed, for this gamble is built on the conceit that Washington can hector the recipients, whether auto companies, banks or homeowners, into behaving in ways that are "responsible." So far, however, human nature is proving a disappointment: Take the outbreak of tax fraud related to the government's emergency home-buyer's credit.

Nor is the larger gamble looking so good either. Banks continue to fail at an alarming rate, the dollar is under assault, and Washington is looking at a future of trillion-dollar deficits. One might have guessed it would take a decade of Obamanomics to produce European welfare state levels of youth unemployment, but at 18.5% we're there.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

3 Comments
Posted October 28, 2009 at 12:40 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.

To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.

Because of this gigantic deficit, our country’s “net debt” (that is, the amount held publicly) is mushrooming. During this fiscal year, it will increase more than one percentage point per month, climbing to about 56 percent of G.D.P. from 41 percent. Admittedly, other countries, like Japan and Italy, have far higher ratios and no one can know the precise level of net debt to G.D.P. at which the United States will lose its reputation for financial integrity. But a few more years like this one and we will find out.

An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money....

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Filed under: * Economics, PoliticsEconomyTaxesThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

6 Comments
Posted August 19, 2009 at 9:09 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Why hasn’t President Obama insisted on public hearings over what happened during this financial crisis?

Not a single top executive of a Wall Street securities firm responsible for causing the financial crisis has had the courage or the decency to step forward in front of the cameras and explain to the American people in his own words exactly how and why he allowed his firm to cause the crisis. Both Mr. Fuld and Alan Schwartz, the chief executive of Bear Stearns at the end, in their Congressional testimony blamed the proverbial once-in-a-century financial tsunami. Do they or any of their peers really think this is true?

There may be a way to find out. There is much talk nowadays coming from top bankers — Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorganChase, John Mack of Morgan Stanley and even Ken Lewis of Bank of America — about seeing how quickly they can repay to the Treasury the TARP money Mr. Paulson forced on them. One precondition of their being allowed to repay the funds should be a requirement that each gives a public deposition and explains, under oath, what truly happened and why.

This piece was given an astonishing full page on yesterday's New York Times op-ed page. Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

2 Comments
Posted June 8, 2009 at 5:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Many of Mr. Obama's supporters surely thought this young, dynamic generation of public leaders would elevate the hip, cutting edge of the U.S. economy -- nanotechnology, genomics, robotics, even health and medicine technology. Instead, we've gotten the Old Economy on dialysis. General Motors has been commanded to restart aging UAW factories to output product on behalf of the administration's hybrid-car obsession. Where's the New Economy in any of this?

Or ObamaCare. How will a build-out of Medicare (b. 1965) to cover everyone and costing $1.2 trillion over 10 years not kill innovation in medical and health technology by siphoning away growth capital and its potential financial rewards?

All of this seems so out of sync with the persona and promise Barack Obama conveyed in the campaign. A lot of his Web-based supporters probably thought Mr. Obama was going to be about promoting young guns with new ideas seeking risk capital for the next big thing. Instead, it looks as if the Obama years will be about managing soft landings for mature industries and old unions in the American autumn.

Congress is talking about a "bad behavior" tax on beer and soda pop to reduce obesity and fund mega-Medicare. How about a bad-behavior tax on government? Slim as the president looks, Uncle Sam is looking like quite the fat boy.

Read it all.

Filed under: * Culture-WatchScience & Technology* Economics, PoliticsEconomyConsumer/consumer spendingThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentThe National DeficitPolitics in GeneralOffice of the PresidentPresident Barack Obama

3 Comments
Posted June 5, 2009 at 7:48 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

It is a company that helped lift hundreds of thousands of American workers into the middle class. It transformed Detroit into the Silicon Valley of its day, a symbol of America’s talent for innovation. It built celebrated cars, like Cadillacs, that became synonymous with luxury.

And now it is filing for bankruptcy, something that would have been unfathomable even a few years ago, much less decades ago, when it was a dominant force in the American economy.

Rarely has a company fallen so far and so fast as General Motors. And while its bankruptcy appeared increasingly likely in recent weeks, the arrival of the moment is still a staggering blow, particularly for anyone with ties to the company.

Read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto Industry

3 Comments
Posted June 3, 2009 at 6:45 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Such government micromanagement of the economy is everywhere. The Post recently reported that Richard Wagoner, the former CEO of General Motors who was removed by the government, remains on GM's payroll "because senior Treasury officials have yet to decide whether he should get the $20 million severance package that the company had promised him." His 2009 compensation -- $1 -- is payable Dec. 31. The $20 million promised to him includes contractual awards, deferred compensation and pension benefits accrued over 32 years with the company. Promise-keeping, including honoring contracts, is the default position of a lawful society. But suddenly, many citizens' legal claims are merely starting points for negotiations with an overbearing government.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

10 Comments
Posted June 2, 2009 at 4:16 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

On Jan. 21, 1988, a General Motors executive named Elmer Johnson wrote a brave and prophetic memo. Its main point was contained in this sentence: “We have vastly underestimated how deeply ingrained are the organizational and cultural rigidities that hamper our ability to execute.”

On Jan. 26, 2009, Rob Kleinbaum, a former G.M. employee and consultant, wrote his own memo. Kleinbaum’s argument was eerily similar: “It is apparent that unless G.M.’s culture is fundamentally changed, especially in North America, its true heart, G.M. will likely be back at the public trough again and again.”

These two memos, written by men devoted to the company, get to the heart of G.M.’s problems. Bureaucratic restructuring won’t fix the company. Clever financing schemes won’t fix the company. G.M.’s core problem is its corporate and workplace culture — the unquantifiable but essential attitudes, mind-sets and relationship patterns that are passed down, year after year.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentPolitics in GeneralOffice of the PresidentPresident Barack Obama

7 Comments
Posted June 2, 2009 at 12:33 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

General Motors filed for bankruptcy on Monday morning, submitting its reorganization papers to a federal clerk in Lower Manhattan.

G.M. said it had $82.3 billion in assets and $172.8 billion in debts. Its largest creditors were the Wilmington Trust Company, representing a group of bondholders holding $22.8 billion in debts, and affiliates of the United Auto Workers union, representing nearly $20.6 billion in employee obligations.

The filing itself seemed anticlimatic. It was a simple procedure done thousands of times each day across the country, by individuals and business alike. But not usually, as in this case, by companies like G.M. that have woven themselves into the fabric of America culture.

Read it all.

Filed under: * Culture-WatchLaw & Legal Issues* Economics, PoliticsEconomyCredit MarketsThe Possibility of a Bailout for the U.S. Auto Industry

5 Comments
Posted June 1, 2009 at 8:45 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

For all the drastic cuts and financial overhauls that are meant to secure a future for General Motors and Chrysler, their prospects in coming years will be determined more by the answer to a simple question: Can American drivers live without that new-car smell?

In recent years Americans appeared to be hooked on it and took advantage of home equity loans, easy credit and cheap short-term lease deals to send new-car sales to levels of more than 17 million a year.

Now the market has collapsed by 46 percent to below 10 million, as people are making do with the cars they have, leaving the industry to debate — and worry — about what the new normal will be once the recession ends.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeThe Possibility of a Bailout for the U.S. Auto Industry

13 Comments
Posted June 1, 2009 at 8:31 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

With an almost certain bankruptcy filing days away, General Motors is beginning its reinvention, planning to retool one factory to make its smallest vehicles ever in the U.S. and rid itself of the biggest.

As GM's board began two days of meetings Friday to make a final decision on the company's fate, GM was also closing in on a sale of its European Opel unit, and its main union overwhelmingly approved dramatic labor cost cuts. A deal to sell its rugged but inefficient Hummer brand also appeared on the horizon.

The moves provided more clues about what a restructured GM might look like ahead of the expected Chapter 11 filing Monday. Taxpayers will eventually own nearly three-quarters of a leaner GM, with a total government commitment of nearly $50 billion.

GM has yet to confirm it will seek bankruptcy protection but scheduled a news conference for Monday in New York.

With the government's backing and nearly $20 billion in U.S. loans so far, the company has made more dramatic changes in just a few days than it has in decades.

Read the whole article.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto Industry

9 Comments
Posted May 30, 2009 at 12:01 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

They're back. We refer to the global investors once known as the bond vigilantes, who demanded higher Treasury bond yields from the late 1970s through the 1990s whenever inflation fears popped up, and as a result disciplined U.S. policy makers. The vigilantes vanished earlier this decade amid the credit mania, but they appear to be returning with a vengeance now that Congress and the Federal Reserve have flooded the world with dollars to beat the recession.

Treasury yields leapt again yesterday at the long end, with the 10-year note climbing above 3.7%, its highest close since November. Treasury yields had stayed low, and the dollar had remained strong, as long as investors were looking for the safest financial port amid the post-September panic. But as risk aversion subsides, and investors return to corporate bonds and other assets, investors are now calculating the risks of renewed dollar inflation.

They have cause to be worried, given Washington's astonishing bet on fiscal and monetary reflation. The Obama Administration's epic spending spree means the Treasury will have to float trillions of dollars in new debt in the next two or three years alone....

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

0 Comments
Posted May 29, 2009 at 12:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

[BARRY] RITHOLTZ: Most of Wall Street is furious at what happened. Most of Wall Street aren't involved in mortgage securitization or derivatives or any of the other bad assets that have been blowing up. The average guy -- you know Wall Street is a meritocracy, eat what you kill, as much as you can earn in profits you get to take as a bonus -- and I know a lot of guys, everywhere from Merrill Lynch to Bear Stearns to Lehman, that actually were really profitable. But because this one division was run by rogue pirate traders and reckless derivatives salesmen, they wiped up the entire bonus pool for the entire firm, and then some, all the while engaging in really reckless behavior.

[Kai] Ryssdal: Do you figure we're stuck now as a bailout nation? We're going to be subsidizing banks and car companies and insurance companies for some time to come.

RITHOLTZ: You know we've already seen the trucking industry make hints they want stuff. And we've seen the homebuilders who are key players in this, who just overbuilt everything. They've been asking for a bailout. That's the slippery slope. Once you reward people for their worst behavior, for speculative, irresponsible investing and punish the prudent and the people who are careful with that money. Everybody seems to think it's a free for all. Hey, you've got yours. How do I get mine?

Ryssdal: What's the alternative to these bailouts? I mean should we have just done nothing?

RITHOLTZ: What you do is what the FDIC does when a bank is found to be insolvent. Look what happened with Washington Mutual....

Read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentTreasury Secretary Timothy Geithner

0 Comments
Posted May 28, 2009 at 12:52 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

General Motors is preparing to file for bankruptcy protection as early as May 31, but a speedy restructuring of the carmaker faces headwinds from an increasingly sceptical US Congress.

Under the current plan, the US government would cancel most or all of its existing debt in the company and invest in a “new” GM that could emerge from bankruptcy in the autumn, said a person close to the matter.

GM would receive tens of billions of dollars in new government money, probably in stages, to prop up its business at a time when car sales are threatening to be lower than the 10m annual rate at which GM says it can break even.

Read it all.

Filed under: * Culture-WatchLaw & Legal Issues* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryPolitics in GeneralOffice of the PresidentPresident Barack Obama

1 Comments
Posted May 23, 2009 at 7:09 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Dennis Buchholtz spent a lifetime in the automotive industry, working at companies that supplied parts to America's automakers. For more than three decades, he spent his days casting iron dies used to turn sheet metal into fenders, roofs and hoods.

He left the business with no pension and no 401(k) -- only an unshakable faith in the ability of Detroit's Big Three to survive even the worst of economic times.

So when he and his wife, Judy, were weighing how to safely invest their retirement savings, they instinctively turned to the industry's biggest player, General Motors Corp.

Read the whole thing.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeCredit MarketsStock MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto Industry

8 Comments
Posted May 21, 2009 at 4:07 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

General Motors Corp's (GM.N) plan for a bankruptcy filing involves a quick sale of the company's healthy assets to a new company initially owned by the U.S. government, a source familiar with the situation said on Tuesday.

The source, who would not be named because he was not cleared to speak with the media, did not specify a purchase price. The new company is expected to honor the claims of secured lenders, possibly in full, according to the source.

The remaining assets of GM would stay in bankruptcy protection to satisfy other outstanding claims.

Read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeThe Possibility of a Bailout for the U.S. Auto Industry

29 Comments
Posted May 19, 2009 at 4:28 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Dealers across the United States reacted with a mixture of anger and sadness on Thursday to word that bankrupt automaker Chrysler LLC plans to eliminate franchise agreements with them as part of its restructuring efforts.

But most, even those surprised by the news, entertained little hope they could stop Chrysler from following through on the proposed closures, the latest chapter in the decline of a company that was -- for a brief period in the 1990s -- the most profitable car manufacturer in the world.

As a result, the dealers said they were already taking the sad but necessary preliminary steps to close or consolidate businesses that, in many cases, had carried their family names as well as those of the automaker for generations.

Read it all.

Filed under: * Economics, PoliticsEconomyLabor/Labor Unions/Labor MarketThe Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackagePolitics in GeneralOffice of the PresidentPresident Barack Obama

1 Comments
Posted May 14, 2009 at 5:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The U.S. Treasury auction of long-term bonds on Thursday was “terrible”, in the words of one Wall Street economist, with the rate on the 30 year bond jumping from 4.1 to 4.3 percent. This is just the first sign that the debt-based Obama economic stimulus plan is about to become a major drag on the recovery, just as expected.

The economic news is not all bad. We are seeing signs the rate of contraction is abating quickly, promising a bottom to the recession sometime this summer as many forecasters have expected. But therein lies another piece of the interest rate puzzle, and the trouble ahead.

There are two critical consequences to the economy stabilizing. The first is that the massive liquidity injected into credit markets by the Federal Reserve and central banks around the world transforms from economic medicine to inflationary heroin. Central banks are going to face a difficult task of extracting the excess liquidity before inflation soars and without causing another recession. Doubt about the fight against soaring inflation means higher inflation premiums in interest rates.

The second dangerous consequence is that President Obama is on course to double the national debt in just four years....

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentThe National DeficitPolitics in GeneralOffice of the PresidentPresident Barack Obama

7 Comments
Posted May 10, 2009 at 6:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Still, the tea parties are not based on the cold wonkery of budget data. They are based on an "ethical populism." The protesters are homeowners who didn't walk away from their mortgages, small business owners who don't want corporate welfare and bankers who kept their heads during the frenzy and don't need bailouts. They were the people who were doing the important things right -- and who are now watching elected politicians reward those who did the important things wrong.

Voices in the media, academia, and the government will dismiss this ethical populism as a fringe movement -- maybe even dangerous extremism. In truth, free markets, limited government, and entrepreneurship are still a majoritarian taste. In March 2009, the Pew Research Center asked people if we are better off "in a free market economy even though there may be severe ups and downs from time to time." Fully 70% agreed, versus 20% who disagreed.

Read it all.

Filed under: * Economics, PoliticsEconomyTaxesThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentThe National DeficitPolitics in GeneralOffice of the PresidentPresident Barack Obama

6 Comments
Posted May 1, 2009 at 6:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

A fascinating look back.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

1 Comments
Posted April 29, 2009 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Two people briefed on the plan say General Motors Corp. will close most of its U.S. factories for up to nine weeks this summer because of slumping sales and growing inventories of unsold vehicles.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto Industry

5 Comments
Posted April 22, 2009 at 4:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

. Asked about the tea parties, President Barack Obama responded that he was not aware of them. As Marie Antoinette said, "Let them drink Lapsang Souchong." His Imperial Majesty at Barackingham Palace having declined to acknowledge the tea parties, his courtiers at the Globe and elsewhere fell into line. Talk-show host Michael Graham spoke to one attendee at the 2009 Boston Tea Party who remarked of the press embargo: "If Obama had been the king of England, the Globe wouldn't have covered the American Revolution."

The American media, having run their own business into the ground, are certainly qualified to run everybody else's into the same abyss. Which is why they've decided that hundreds of thousands of citizens protesting taxes and out-of-control spending and government vaporization of Americans' wealth and their children's future is no story. Nothing to see here. As Nancy Pelosi says, it's AstroTurf – fake grass-roots, not the real thing.

Besides, what are these whiners so uptight about? CNN's Susan Roesgen interviewed a guy in the crowd and asked why he was here:

"Because," said the Tea Partier, "I hear a president say that he believed in what Lincoln stood for. Lincoln's primary thing was he believed that people had the right to liberty, and had the right …"

Read it all.

Filed under: * Economics, PoliticsEconomyTaxesThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetThe National DeficitPolitics in GeneralOffice of the PresidentPresident Barack Obama

5 Comments
Posted April 19, 2009 at 3:15 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Mr. Obama is betting that the totality of economic policies his team and the Federal Reserve have put in place will act, like radiation therapy, to halt the spread and reduce the size of the cancerous tumors eating away at our financial system — and stimulate enough new growth and optimism so that Phase II will be small enough to get past Congress and the public.

As Treasury Secretary Timothy Geithner told ABC News, “If we get to that point” — where more funds are needed — “we’ll go to the Congress and make the strongest case possible and help them understand why this will be cheaper over the long run to move aggressively.”

Have no doubt, Phase II is coming. At best, it will require hundreds of billions of dollars more, at worst more than a trillion, to deal with more bad loans and toxic assets weakening the economy — problems that Phase I can’t fully absorb. Because unemployment is still rising — ensuring that the initial spate of mortgage defaults, which came from loans to people who could never repay, will be followed by another spate of defaults from those who could repay but now can’t because the deteriorating economy has stripped them of their jobs, their businesses or their credit lines.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentBudgetFederal ReserveThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

3 Comments
Posted April 6, 2009 at 5:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

It was a dramatic show of muscle, targeting two of the erstwhile Big Three, and the economic mainstay of the city of Detroit and the state of Michigan, which rank among the top five political pillars of the Democratic Party. Michigan's Democratic governor, Jennifer Granholm, protested that Wagoner was being made a scapegoat. But Sen. Carl Levin commented that when Obama met with members of the Michigan delegation, he made plain that "there wasn't much point in arguing whether or not it was fair or unfair, wise or unwise. It was a decision that he didn't ask us about; he informed us."

You can hear in the comments of Levin and other members of Congress the sounds of grudging admiration for a fellow politician who has shown them he has more backbone than they expected.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto IndustryPolitics in GeneralOffice of the PresidentPresident Barack Obama

14 Comments
Posted April 2, 2009 at 10:26 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The government may seek to ease General Motors into what it calls a “controlled” bankruptcy, somewhere between a prepackaged bankruptcy and court chaos, by persuading at least some creditors to agree to a plan that would cleave the company into two pieces, according to people briefed on the matter.

Instead of signing on every creditor as is typically required in prepackaged deals, administration officials are using as leverage the promise of taxpayer financing. Many regard the government as the only lender willing to step up with money — in bankruptcy or out.

“They’re going to have tremendous power,” said Lynn M. LoPucki, a law professor at the University of California, Los Angeles. “They can call off the money and the whole thing fails.”

Read it all.

Filed under: * Culture-WatchLaw & Legal Issues* Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentPolitics in GeneralOffice of the PresidentPresident Barack Obama

5 Comments
Posted April 1, 2009 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

... by enmeshing the White House so deeply into G.M., Obama has increased the odds that March’s menacing threat will lead to June’s wobbly wiggle-out. The Obama administration and the Democratic Party are now completely implicated in the coming G.M. wreck. Over the next few months, the White House will be subject to a gigantic lobbying barrage. The Midwestern delegations, swing states all, will pull out all the stops to prevent plant foreclosures. Unions will be furious if the Obama-run company rips up the union contract. Is the White House ready for the headline “Obama to Middle America: Drop Dead”? It would take a party with a political death wish to see this through.

Furthermore, there’s no reason to think the umpteenth restructuring will produce compelling results. Cost control without a quality revolution will make little difference. There’s no reason to think Americans are going to flock to G.M. cars. (The president lauded their fantabulousness, but G.M. sales fell 51 percent during the first two months of this year while the overall market declined by 39 percent.) Politically expedient environmental demands will make the odds of profitability even more remote.

Corporate welfare rarely works when the government invests in rising firms. The odds are really grim when it tries to subsidize fading ones. (In the ’80s, Chrysler already had the successful K-car in the pipeline.)

The most likely outcome, sad to say, is some semiserious restructuring plan, with or without court involvement, to be followed by long-term government intervention and backdoor subsidies forever.

Read it all. This worries me--I sincerely hope he is wrong..



Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto IndustryPolitics in GeneralOffice of the PresidentPresident Barack Obama

32 Comments
Posted March 31, 2009 at 7:22 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

As an assertion of government control over a huge swath of the industrial landscape, President Obama’s decision to reshape the automobile industry has few precedents.

In essentially taking command of General Motors and telling Chrysler to merge with a foreign competitor or cease to exist, Mr. Obama was saying that economic conditions were sufficiently dire to justify a new level of government involvement in the management of corporate America.

His message amounted to an inversion of the relationship that had helped define the rise of American manufacturing might in the 20th century; now, Mr. Obama seemed to be saying, what is good for America will have to be good enough for General Motors.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryPolitics in GeneralOffice of the PresidentPresident Barack Obama

14 Comments
Posted March 31, 2009 at 12:03 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The White House on Sunday pushed out the chairman of General Motors and instructed Chrysler to form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another much-needed round of government aid.

The decision to ask G.M.’s chairman and chief executive, Rick Wagoner, to resign caught Detroit and Washington by surprise, and it underscored the Obama administration’s determination to keep a tight rein on the companies it is bailing out — a level of government involvement in business perhaps not seen since the Great Depression.

President Obama is scheduled to announce details of the auto package at the White House on Monday, but two senior officials, offering a preview on condition of anonymity, made clear that some form of bankruptcy — a quick, court-supervised restructuring, as they described it — could still be an option for one or both companies.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto IndustryPolitics in GeneralOffice of the PresidentPresident Barack Obama

9 Comments
Posted March 30, 2009 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

After experiencing a few emerging-market crises, I get the sense of watching the same movie over and over. All too often, a tragic part of that movie is the failure of the countries' policymakers to hear the loud cries of canaries in the coal mine. Before running up further outsized budget deficits, should we not heed the markets that now see a 10 percent probability that the U.S. government will default on its sovereign debt in the next five years? And should we not be paying close attention to the Chinese central bank governor's musings that he does not feel comfortable with the $1 trillion of U.S. government debt that the Chinese central bank already owns, let alone adding to those holdings?

In the twilight of my career, when I am hopefully wiser than before, I have come to regret how the IMF and the U.S. Treasury all too often lectured leaders in emerging markets on how to "get their house in order" -- without the slightest thought that the United States might fare no better when facing a major economic crisis. Now, I fear time is running out for our own policymakers to mend their ways and offer real leadership to extricate the United States from its worst economic calamity since the 1930s. If we insist on improvising and not facing our real problems, we might soon lose our status as a country to be emulated and join the ranks of those nations we have patronized for so long.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentBudgetThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

5 Comments
Posted March 29, 2009 at 8:33 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

An infographic that flowcharts the nearly $12 Trillion allocated in government progams affecting the financial services industry.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetFederal ReserveThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

4 Comments
Posted March 24, 2009 at 4:14 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

When President-elect Barack Obama picked Timothy F. Geithner to be his Treasury secretary four months ago, numerous analysts praised the choice because of Geithner's expertise in the financial industry. He was president of the Federal Reserve Bank of New York at the time, and had helped craft the response to the troubles roiling global credit markets. But as the debacle over the American International Group bonuses has made clear, Geithner's knowledge about Wall Street is matched by his ignorance about the political culture of Washington. And the blunders committed by Geithner (and others, including the Federal Reserve and previous Treasury Secretary Henry M. Paulson) could undermine key elements of President Obama's economic recovery plan.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

1 Comments
Posted March 21, 2009 at 6:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Sixteen years ago, two economists published a research paper with a delightfully simple title: “Looting.”

The economists were George Akerlof, who would later win a Nobel Prize, and Paul Romer, the renowned expert on economic growth. In the paper, they argued that several financial crises in the 1980s, like the Texas real estate bust, had been the result of private investors taking advantage of the government. The investors had borrowed huge amounts of money, made big profits when times were good and then left the government holding the bag for their eventual (and predictable) losses.

In a word, the investors looted. Someone trying to make an honest profit, Professors Akerlof and Romer said, would have operated in a completely different manner. The investors displayed a “total disregard for even the most basic principles of lending,” failing to verify standard information about their borrowers or, in some cases, even to ask for that information.

The investors “acted as if future losses were somebody else’s problem,” the economists wrote. “They were right.”

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

4 Comments
Posted March 16, 2009 at 6:12 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The misguided policy response from Washington has focused almost exclusively on squandering public money and burdening our children with indebtedness in order to defend the bondholders of mismanaged financial institutions (blame Paulson and Geithner – I've got a lot of respect for our President, but he's been sold a load of garbage by banking insiders). Meanwhile, I suspect that the little tapes in Bernanke's head playing “we let the banks fail in the Great Depression” and “we let Lehman fail and look what happened” are so loud that he is making no distinction about the form of those failures. Simply letting an institution unravel is quite different from taking receivership, protecting the customers, keeping the institution intact, replacing management, properly taking the losses out of stockholder and bondholder capital, and issuing it back into private ownership at a later date. This is what it would mean for these banks to “fail.” Nobody is advocating an uncontrolled unraveling of major financial institutions or permanent nationalization as if we've suddenly become Venezuela.

Make no mistake. Buying up “troubled assets” will not materially ease this crisis, nor will it even improve the capital position of financial institutions (see You Can't Rescue the Financial System if You Can't Read a Balance Sheet). Homeowners will continue to default because their payment obligations have not been restructured to any meaningful extent. We are simply protecting the bondholders of mismanaged financial institutions, even though that bondholder capital is more than sufficient to cover the losses without harm to customers. Institutions that cannot survive without continual provision of public funds should be taken into receivership, their assets should be restructured to better ensure repayment, their stockholders should be wiped out, bondholders should take a major haircut, customer assets should (and will) be fully protected, and these institutions should be re-issued to the markets when the economy stabilizes.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingStock MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

1 Comments
Posted March 10, 2009 at 7:31 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The day after the report I heard from a young Naval aviator in predeployment training north of San Diego. He flies a Super Hornet, sister ship to the plane that went down. He said the Marine investigation "kept me up last night" because of how it contrasted with "the buck-passing we see" in the government and on Wall Street. He and his squadron were in range of San Diego television stations when they carried the report's conclusions live. He'd never seen "our entire wardroom crowded around a television" before. They watched "with bated breath." At the end they were impressed with the public nature of the criticism, and its candor: "There are still elements within the government that take personal responsibility seriously." He found himself wondering if the Marines had been "too hard on themselves." "But they are, after all, Marines."

By contrast, he says, when the economy came crashing down, "nowhere did we see a board come out and say: 'This is what happened, these are the decisions these particular people made, and this was the result. They are no longer a part of our organization.' There was no timeline of events or laymen's explanation of how a credit derivative was actually derived. We did not see congressmen get on television with charts and eviscerate their organization and say, 'These were the men who in 2003 allowed Freddie and Fannie unlimited rein over mortgage securities.' Instead we saw . . . everybody against everybody else with no one stepping forth and saying, 'We screwed up.'" There is no one in national leadership who could convincingly "assign blame," and no one "who could or would accept it."

Read it all or you may also find it here.

Filed under: * Culture-WatchMilitary / Armed Forces* Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentPolitics in General

10 Comments
Posted March 10, 2009 at 6:30 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Bill Clinton declared more than a decade ago "the era of big government is over." With his new budget, President Barack Obama has brought it back.

Obama's $3.55 trillion budget proposal represents a gamble that Americans are ready for the sort of change they embraced by electing him in November, including a tax increase on Americans making more than $250,000 a year.

He proposes expansion of spending on the U.S. healthcare system, on greater energy independence and on education, hoping Americans weary of paying for a raft of expensive bailouts for banks and the car industry will go along.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

9 Comments
Posted February 27, 2009 at 12:03 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

President Barack Obama forecast the biggest U.S. deficit since World War Two in a budget on Thursday that urges a costly overhaul of the healthcare system and would spend billions to arrest the economy's freefall.

An eye-popping $1.75 trillion deficit for the 2009 fiscal year is projected in Obama's first budget. That is equal to 12.3 percent of U.S. gross domestic product -- the largest share since 1945 when the country ran a shortfall of 21.5 percent of GDP.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentThe National DeficitPolitics in GeneralOffice of the PresidentPresident Barack Obama

23 Comments
Posted February 26, 2009 at 12:18 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

President Obama has concentrated enormous power on a few aides in the West Wing of the White House. These aides are unrolling a rapid string of plans: to create 3 million jobs, to redesign the health care system, to save the auto industry, to revive the housing industry, to reinvent the energy sector, to revitalize the banks, to reform the schools - and to do it all while cutting the deficits in half.

If ever this kind of domestic revolution were possible, this is the time and these are the people to do it. Yet they set off my Burkean alarm bells.

I fear that in trying to do everything at once, they will do nothing well. I fear that we have a group of people who haven't even learned to use their new phone system trying to redesign half the U.S. economy.

I fear they are going to try to undertake the biggest administrative challenge in American history while refusing to hire the people who can help the most: agency veterans who are registered lobbyists.

I worry that we're operating far beyond our economic knowledge.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

11 Comments
Posted February 24, 2009 at 12:35 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The government faced mounting pressure on Monday to put billions more in some of the nation’s biggest banks, two of the biggest automakers and the biggest insurance company, despite the billions it has already committed to rescuing them.

The government’s boldest rescue to date, its $150 billion commitment for the insurance giant American International Group, is foundering. A.I.G. indicated on Monday it was now negotiating for tens of billions of dollars in additional assistance as losses have mounted.

Separately, the Obama administration confirmed it was in discussions to aid Citigroup, the recipient of $45 billion so far, that could raise the government’s stake in the banking company to as much as 40 percent.

The Treasury Department named a special adviser to work with General Motors and Chrysler, two of Detroit’s biggest automakers, which are seeking $22 billion on top of the $17 billion already granted to them.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

2 Comments
Posted February 24, 2009 at 12:04 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The price tag for bailing out General Motors and Chrysler jumped by another $14 billion Tuesday, to $39 billion, with the two automakers saying they would need additional aid from the U.S. government to remain solvent.

In return, the two companies also promised to make further drastic cuts to all parts of their operations, in the hope to eventually strike a balance between their cost structures and a dismal market for new car sales.

GM, for example, said it would cut 47,000 more of its 244,000 workers worldwide; close five more plants in North America, leaving it with 33; and cut its lineup of brands in half, to just four: Chevrolet, Cadillac, GMC and Buick.

Read it all. I bet your reaction to this was similar to mine--more money? They want more money? Something about this picture is all wrong. Read it all--KSH.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

7 Comments
Posted February 18, 2009 at 6:29 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The administration stepped back over the weekend from naming a "car czar," as it had planned, to oversee the restructuring. But according to people familiar with the task force, it named former Lazard Freres & Co. investment banker Ron Bloom a key adviser. Mr. Bloom, who made a name advising U.S. steelworkers to accept major concessions in several bankruptcy cases, is expected to take the task force's lead role, a senior U.S. Treasury official says.

People who know Mr. Bloom expect him to be tough on the auto makers, the United Auto Workers and other parties involved in their restructuring.

"The management of the Big Three are probably not going to like what Ron Bloom has to say; the UAW is not going to like what Ron Bloom has to say; and certainly the stockholders and creditors will not like what he has to say," said Michael Psaros, a co-founder of private-equity group KPS Capital Partners, who has worked with Mr. Bloom in and out of bankruptcy courts. He adds that Mr. Bloom has "repeatedly shown an ability to transform struggling companies into profitable going concerns."

Read it all from the front page of today's Wall Street Journal. Note especially the section on "dentist-chair bargaining;" it sounds very painful to me.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto IndustryPolitics in GeneralOffice of the PresidentPresident Barack Obama

4 Comments
Posted February 17, 2009 at 5:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

It seems like politicians for months have been throwing around numbers in the billions and saying that unless the government acts right now everything will get worse. What is going on?

The economic system was hit was a flurry of crises at roughly the same time, and there isn't a single solution to all of the problems, even though they are connected.

What is the housing crisis?

Both political parties have supported the idea that individuals should own their own homes. But in pursuing that goal, some financial institutions lent money to people who could not afford the long-term commitment, which often included rising interest rates after an initial period of low payments. Critics complain that a variety of financing vehicles snared people into impossible situations, especially as prices of homes fell and the monthly mortgage payment rose.

Read it all.


Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCredit MarketsHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

0 Comments
Posted February 17, 2009 at 1:58 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

It will take more than one "car czar" to help get the embattled U.S. auto industry back on track, President Barack Obama has decided. Instead, his administration is establishing a presidential task force to direct the restructuring of General Motors Corp. (GM) and Chrysler LLC, a senior administration official said Sunday night.

Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers will oversee the across-the-government panel, the official said, speaking on the condition of anonymity because no announcement has been made.

GM and Chrysler are expected to submit restructuring plans to the government by Tuesday, the deadline for showing how they can repay billions in loans and become viable in spite of a huge drop in auto sales.

The auto industry task force is just one element of Obama's plan to revive the flailing economy. On Tuesday he's flying to Denver to sign the $787 billion stimulus bill into law, taking his economic message to the American people, who are giving him high marks for handling the crisis.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto IndustryPolitics in GeneralOffice of the PresidentPresident Barack Obama

4 Comments
Posted February 16, 2009 at 9:08 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Obama administration is committing huge sums of money to rescuing banks, but the veterans of Japan’s banking crisis have three words for the Americans: more money, faster.

The Japanese have been here before. They endured a “lost decade” of economic stagnation in the 1990s as their banks labored under crippling debt, and successive governments wasted trillions of yen on half-measures.

Only in 2003 did the government finally take the actions that helped lead to a recovery: forcing major banks to submit to merciless audits and declare bad debts; spending two trillion yen to effectively nationalize a major bank, wiping out its shareholders; and allowing weaker banks to fail.

By then, Tokyo’s main Nikkei stock index had lost almost three-quarters of its value. The country’s public debt had grown to exceed its gross domestic product, and deflation stalked the land. In the end, real estate prices fell for 15 consecutive years.


More alarming? Some students of the Japanese debacle say they see a similar train wreck heading for the United States.

“I thought America had studied Japan’s failures,” said Hirofumi Gomi, a top official at Japan’s Financial Services Agency during the crisis. “Why is it making the same mistakes?”

Read it all.


Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackagePolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAmerica/U.S.A.AsiaJapan

2 Comments
Posted February 13, 2009 at 4:09 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The problem is that a significant portion of the very biggest banks are insolvent. And on top of that, most of them have very large capital markets operations which have bean the nexus of credit intermediation. The regulators spent the last decade plus being in studious ignorance of those businesses, at least the complicated ones where all the risk resided. The SEC never was very interested in bonds, and the Fed took a hands-off, "let a thousand flowers bloom" approach to risk management, derivatives and what was called innovation. Author and market observer Martin Mayer warned "a lot of what is called innovative is simply a way to find new technology to do that which was forbidden with the old technology."

But the history of major banking crises unambiguously shows that insolvent financial institutions need to be resolved. There are variations on the theme: the government can take them over and recapitalize them, clean them up and re-sell them, a la Sweden; you can wipe out equity investors and bondholders; you can try new twists, like various good bank proposals that have surfaced lately (making new entities out of the deposits and good assets and leaving the dreck with the existing bond and shareholders). While there would be many important details to be sorted out, this is not path breaking, except in the scale at which it needs to occur. And now, having had four actute phases of a credit crunch, the Fed and other central banks have plenty of liquidity facilites ready to deal with any initial overreaction. Rest assured, although radical measures would not be pleasant or easy, there are plenty of models and precedents.

But...here we have another scowling Treasury secretary, with a bit more hair than his predecessor, serving up the same fatally flawed approach as before: let's just throw money at the banks and hope they get better. This is tantamount to using antibiotics to treat gangrene.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

4 Comments
Posted February 11, 2009 at 5:50 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Worth the time.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

0 Comments
Posted February 11, 2009 at 12:03 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

A: Basically what happens is that after a period of time, economies go through a long-term debt cycle -- a dynamic that is self-reinforcing, in which people finance their spending by borrowing and debts rise relative to incomes and, more accurately, debt-service payments rise relative to incomes. At cycle peaks, assets are bought on leverage at high-enough prices that the cash flows they produce aren't adequate to service the debt. The incomes aren't adequate to service the debt. Then begins the reversal process, and that becomes self-reinforcing, too. In the simplest sense, the country reaches the point when it needs a debt restructuring. General Motors is a metaphor for the United States.

Q: As goes GM, so goes the nation?

A: The process of bankruptcy or restructuring is necessary to its viability. One way or another, General Motors has to be restructured so that it is a self-sustaining, economically viable entity that people want to lend to again.

This has happened in Latin America regularly. Emerging countries default, and then restructure. It is an essential process to get them economically healthy.

We will go through a giant debt-restructuring, because we either have to bring debt-service payments down so they are low relative to incomes -- the cash flows that are being produced to service them -- or we are going to have to raise incomes by printing a lot of money.

It isn't complicated. It is the same as all bankruptcies, but when it happens pervasively to a country, and the country has a lot of foreign debt denominated in its own currency, it is preferable to print money and devalue.

Q: Isn't the process of restructuring under way in households and at corporations?

A: They are cutting costs to service the debt. But they haven't yet done much restructuring. Last year, 2008, was the year of price declines; 2009 and 2010 will be the years of bankruptcies and restructurings. Loans will be written down and assets will be sold. It will be a very difficult time. It is going to surprise a lot of people because many people figure it is bad but still expect, as in all past post-World War II periods, we will come out of it OK. A lot of difficult questions will be asked of policy makers. The government decision-making mechanism is going to be tested, because different people will have different points of view about what should be done.

--Ray Dalio, Chief Investment Officer, Bridgewater Associates in this weekend's Barrons (full content limited to subscribers)

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCredit MarketsHousing/Real Estate MarketPersonal FinanceStock MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackagePolitics in GeneralOffice of the PresidentPresident Barack Obama

1 Comments
Posted February 8, 2009 at 2:04 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Ordinarily, when a business/industry fails from poor management and/or (in the case of the banks) overleveraging, what happens? Put aside the issue of what the business/industry is for a moment. Just ask yourself, what happens?

You know what happens intuitively, even if you've never opened an economics textbook. It is very simple. Entrepreneurs, seeing the mistakes made by those business/industry operators, rush in to start competing businesses to 1) take advantage of the weakened competition, and 2) operate the business better than the competition having the benefit of seeing their mistakes.

Under normal circumstances, this process happens in every industry. It is the normal cycle of capitalism.

But look at what is happening now. Are there any entrepreneurs setting out to start automotive manufacturing businesses? What about entrepreneurs setting out to charter new banks? You already know the answer to that. The question, then, is why?

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

2 Comments
Posted December 30, 2008 at 4:20 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The struggles of the Big Three automakers are sending shock waves through the philanthropic community: The three companies gave a combined $116 million in charitable donations last year.

Listen to it all from NPR.



Filed under: * Culture-WatchCharities/Non-Profit Organizations* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto Industry

0 Comments
Posted December 29, 2008 at 8:14 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

"See the USA in your Chevrolet!" trilled Dinah Shore week after week on TV.

Can you still see the USA in your Chevrolet? Through a windscreen darkly.

General Motors now has a market valuation about a third of Bed, Bath & Beyond, and no one says your Swash 700 Elongated Biscuit Toilet Seat Bidet is too big to fail. GM has a market capitalization of about $2.4 billion. For purposes of comparison, Toyota's market cap is $100 billion and change (the change being bigger than the whole of GM). General Motors, like the other two geezers of the Old Three, is a vast retirement home with a small money-losing auto subsidiary. The UAW is AARP in an Edsel: It has three times as many retirees and widows as "workers" (I use the term loosely). GM has 96,000 employees but provides health benefits to a million people.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackagePolitics in General

2 Comments
Posted December 22, 2008 at 7:43 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

President Bush has grudgingly allowed General Motors and Chrysler to drive away with the last few billion bucks in Treasury's TARP till, which boasted $350 billion a mere 77 days ago.

How did it all slip away so fast?

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackagePolitics in General

6 Comments
Posted December 19, 2008 at 7:07 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The White House said on Thursday that an “orderly” bankruptcy was one option being considered to try to rescue General Motors and Chrysler, which are seeking billions of dollars to avoid a shutdown.

President Bush’s spokeswoman, Dana Perino, confirmed growing speculation within legal circles that the president and Treasury Secretary Henry M. Paulson Jr. were considering the step as part of an overall rescue package for the automobile industry.

The action would be unusual, and would require concessions by the United Automobile Workers union, suppliers, investment banks, the federal pension board, bondholders and other stakeholders in the two auto companies.

Ford Motor, which does not face an urgent need for capital, is not likely to be part of any rescue package.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

2 Comments
Posted December 18, 2008 at 1:57 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

One of Hong Kong’s most-respected bankers, who asked not to be identified, told me that the U.S.-owned investment company where he works made a mint in the last decade cleaning up sick Asian banks. They did so by importing the best U.S. practices, particularly the principles of “know thy customers” and strict risk controls. But now, he asked, who is there to look to for exemplary leadership?

“Previously, there was America,” he said. “American investors were supposed to know better, and now America itself is in trouble. Whom do they sell their banks to? It is hard for America to take its own medicine that it prescribed successfully for others. There is no doctor anymore. The doctor himself is sick.”

I have no sympathy for Madoff. But the fact is, his alleged Ponzi scheme was only slightly more outrageous than the “legal” scheme that Wall Street was running, fueled by cheap credit, low standards and high greed. What do you call giving a worker who makes only $14,000 a year a nothing-down and nothing-to-pay-for-two-years mortgage to buy a $750,000 home, and then bundling that mortgage with 100 others into bonds — which Moody’s or Standard & Poors rate AAA — and then selling them to banks and pension funds the world over? That is what our financial industry was doing. If that isn’t a pyramid scheme, what is?

Painful but important reading.

Filed under: * Economics, PoliticsEconomyHousing/Real Estate MarketStock MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto Industry* International News & CommentaryAmerica/U.S.A.AsiaChina

5 Comments
Posted December 17, 2008 at 6:58 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

“We need a Czar Czar, to crack the whip on all the czars. … P.S.: Also a federal czar policy. Right now, czar decisions are made on an ad hoc, case-by-case basis, with no attempt at czar harmonization.”

Mickey Kaus

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackagePolitics in General

5 Comments
Posted December 16, 2008 at 5:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Shorter WSJ: Will the government use TARP funds to bail out the automakers? Maybe. Will it ask Congress to release the second tranche of TARP funds? Don't know. If it did, would there be ugly scenes in Congress? Don't know. Will the government require the automakers to declare bankruptcy? Don't know. Is there any way to bail in bondholders without forcing the automakers into bankruptcy? Don't know. How much will all this cost? Don't know, could be anywhere between $8 billion and $50 billion.

Shorter shorter WSJ: With banks, you need to get things done over the weekend. With automakers, evidently, not so much.

This all bespeaks a lack of leadership, which is the one thing clearly needed to avoid a worst-case liquidation scenario which is looking increasingly likely.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

6 Comments
Posted December 15, 2008 at 1:47 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

In Oshawa's gritty south end, tough economic times mean big business for Father Makarios Isaac.

"Everybody has been affected in this neighbourhood one way or another," said Isaac, priest at St. Philip The Apostle Catholic Church, a stone's throw from the General Motors' assembly plants facing layoffs or closure.

It's a time when the old adage — as GM goes, so goes Oshawa — affects more and more parts of the community.

Read it all.

Filed under: * Anglican - EpiscopalAnglican ProvincesAnglican Church of Canada* Christian Life / Church LifeParish Ministry* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto Industry* International News & CommentaryCanada* Religion News & CommentaryOther ChurchesRoman Catholic

1 Comments
Posted December 15, 2008 at 12:08 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

MS. CARLY FIORINA: ...I think all of those statistics are an important reminder. While we have been focused in Washington on big companies...

...the Detroit automakers, and big unions, the truth is we're not as concerned, and we should be, about the hundreds and thousands of small businesses who actually create two-thirds of the jobs in this country. Which brings me all the way back to the original problem. We have a recession, a deepening recession right now because credit is unavailable. Credit is unavailable to small businesses so they can't hire. When hundreds of small businesses can't hire 10 and 15 people, over time that creates big unemployment numbers. They may not have big unions to represent their interests in Washington. They're the little guy, but the little guy matters. When credit isn't available, consumers don't have the money they need to spend. So I think we have to go back to the root of this problem, ultimately, which is credit is still unavailable. And that is despite massive bailouts of big financial institutions who are still not lending (my emphasis).

Read it all from today's edition of Meet the Press (and comments from two others besides these three also).

Filed under: * Economics, PoliticsEconomyCredit MarketsHousing/Real Estate MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackagePolitics in General

4 Comments
Posted December 14, 2008 at 5:34 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Steven Levitt's best-selling book, Freakonomics, revitalized economics by explaining how economic principles affect our daily lives. With the economy so prominent in our lives today, how should we interpret what's going on?

Host Scott Simon asks Levitt, now a professor of economics at the University of Chicago, for his thoughts about the state of the national economy.

Listen to it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsHousing/Real Estate MarketPersonal FinanceThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto Industry

0 Comments
Posted December 14, 2008 at 4:25 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Motown left years ago. The city’s former mayor is behind bars. Unemployment hovers around 14 percent. An emergency loan measure for its automakers died in Washington late Thursday after failing to generate enough support from Republican senators. Oh, and its professional football team is 0-13 for the season.

How much more, one wonders, can Detroit take?

“To me, it’s like piling on,” Gail Taylor, one of the city’s legions of unemployed men, said Friday of the Senate’s decision on the loan measure. “We’ve been through enough around here.”

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

5 Comments
Posted December 14, 2008 at 8:09 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The White House weighed its options Saturday for preventing a collapse of the troubled auto industry, once the backbone of the U.S. economy. So far, the only thing certain is that the Bush administration wants to avoid the possibility of a disorderly bankruptcy of any of the Big Three.

General Motors Corp. and Chrysler LLC have said they could run out of cash within weeks without government help.

"Administration officials are continuing to gather financial information from the automakers, assessing the data, their cash position going forward," White House deputy press secretary Tony Fratto said Saturday. "We'll take a look at that information, make some judgments and review our options."

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

2 Comments
Posted December 14, 2008 at 7:01 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

First the Big Three CEOs told Congress they needed $25 billion in federal loans. Then they told Congress they needed $34 billion. Then two of those CEOs — from General Motors and Chrysler, not Ford — told Congress they needed an upfront $14 billion compromise package before year's end. No wonder those guys are in so much balance-sheet trouble: They don't even know how much money they need.

If they did, maybe they could have convinced the Senate to pass that $14 billion compromise approved by the House Wednesday night. Instead, the Senate effectively killed it on Thursday.

It's a shame our auto industry is in such dire shape and that the rest of our nation's economy will feel painful ripple effects from its meltdown, with or without a bailout. But while the Bush administration said Friday that it will provide that $14 billion from the $700 billion financial-sector bailout or "other sources," it's difficult to see how Detroit can rally without a comprehensive overhaul. It's also difficult to generate confidence in the Big Three bosses and in those Treasury officials who pushed through that other bailout in October by charting a "rescue" course that soon took major detours.

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Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

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Posted December 13, 2008 at 9:33 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Senate negotiations for a U.S. automaker bailout plan collapsed, in a blow to General Motors Corp. and Chrysler LLC, which may run out of cash early next year.

“It’s over with,” Majority Leader Harry Reid said on the Senate floor in Washington. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”

The Senate began taking a procedural vote on a House-passed plan, though Reid said he didn’t expect it to get the required 60 votes.

“Millions of Americans, not only the autoworkers, but people who sell cars, car dealerships, people who work on cars, are going to be directly impacted,” said Reid. “It’s going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight.”

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Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto IndustryPolitics in General

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Posted December 12, 2008 at 12:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The prospects of a $14 billion government rescue of the American auto industry seemed to vaporize on Thursday morning as the Senate Republican leader, Mitch McConnell of Kentucky, spoke out forcefully against the bill, effectively dooming its chances despite the urgings of the White House.

In a speech on the Senate floor, Mr. McConnell said he and other Republicans had drawn a clear distinction between the Treasury’s $700 billion economic stabilization, which they helped pass in October, and the proposal to aid the American automakers, which he said raised questions about which industries or individuals deserve help.

“A lot of struggling Americans are wondering where their bailout is,” Mr. McConnell declared. Although Mr. McConnell voiced support of an alternative plan that was developed by Senator Bob Corker, Republican of Tennessee, it seemed unlikely that there was any possibility of compromise at this late point in the year, although some Congressional aides still expressed hope and said talks would continue.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

20 Comments
Posted December 11, 2008 at 1:18 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Sen. Jim DeMint (R-SC), who opposes the proposed bailout of U.S. automakers, says the companies should go into Chapter 11 bankruptcy, which would force them to reorganize. He says the proposed "car czar" to oversee the automakers' restructuring is a "ridiculous" idea.

Listen to it all from NPR.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry* South Carolina

4 Comments
Posted December 11, 2008 at 9:11 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Citing the risk of massive job loss, the House voted Wednesday to loan US automakers $14 billion in return for a direct government hand in restructuring the ailing industry. But the biggest hurdle to clearing the bailout bill lies ahead in the US Senate, where the 60 votes needed to avoid a filibuster and pass the bill are in doubt.

Although the legislation includes protections for taxpayers ­and the White House has signed off on it, many Senate Republicans say they’re not convinced that the loans will be repaid or that the plan will produce a more viable domestic auto industry.

“People realize this is an incredibly weak bill. It’s the product of an administration that wants to kick the can down the road and let someone else deal with it, and it has minimal, very minimal, support in our caucus,” said Sen. Bob Corker (R) of Tennessee, after a GOP caucus meeting on the bailout on Wednesday.

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Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

0 Comments
Posted December 11, 2008 at 7:26 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

As I think about our bailing out Detroit, I can’t help but reflect on what, in my view, is the most important rule of business in today’s integrated and digitized global market, where knowledge and innovation tools are so widely distributed. It’s this: Whatever can be done, will be done. The only question is will it be done by you or to you. Just don’t think it won’t be done. If you have an idea in Detroit or Tennessee, promise me that you’ll pursue it, because someone in Denmark or Tel Aviv will do so a second later.

Why do I bring this up? Because someone in the mobility business in Denmark and Tel Aviv is already developing a real-world alternative to Detroit’s business model. I don’t know if this alternative to gasoline-powered cars will work, but I do know that it can be done — and Detroit isn’t doing it. And therefore it will be done, and eventually, I bet, it will be done profitably.

And when it is, our bailout of Detroit will be remembered as the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalogue business on the eve of the birth of eBay....

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Filed under: * Culture-WatchGlobalizationScience & Technology* Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

8 Comments
Posted December 10, 2008 at 6:22 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Check it out.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

6 Comments
Posted December 10, 2008 at 12:08 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Congress and the White House inched toward a financial rescue of the Big Three auto makers, negotiating legislation that would give the U.S. government a substantial ownership stake in the industry and a central role in its restructuring.

Under terms of the draft legislation, which continued to evolve Monday evening, the government would receive warrants for stock equivalent to at least 20% of the loans any company receives. The company also would have to agree to limits on executive compensation and dividend payments, much like those contained in the government's $700 billion rescue of the financial industry.

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Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

9 Comments
Posted December 9, 2008 at 8:43 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Several thoughts.

1. Why would anyone with the common sense God gave gravel think that a board consisting of political appointees--none of whom as named to date have any auto experience--will bring anything useful to the table? They don’t know jack about the industry and none has experience as a turn around investor. (OTOH, they can’t do all that much worse than the current management of the Big Three.)

2. An oversight committee comprised of 6 cabinet level officers has way too many chiefs and no indians. Who’s going to be in charge?

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Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

11 Comments
Posted December 8, 2008 at 5:51 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

How many employees does General Motors have? How many General Motors employees and their spouses are covered by GM's pension plan? What is the ratio between the first and the second?

No googling or researching, please. Take a guess.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

4 Comments
Posted December 8, 2008 at 5:20 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

An agreement between the White House and Congressional Democrats over the shape of a rescue plan for the auto industry advanced on Monday, with Congressional Democrats calling for a taxpayer-financed plan that would be directed by one or more appointees of President Bush.

According to draft language being circulated on Capitol Hill, the Democrats would call for an overseer, also known as a “car czar,” with expertise in such areas as “economic stabilization, financial aid to commerce and industry, financial restructuring, energy efficiency and environmental protection."

The United Auto Workers union, meanwhile, is planning to seek a stake in General Motors and a seat on its board in exchange for concessions by its members.

The draft bill, which is still being negotiated by Congressional leaders and the Bush administration, would provide emergency bridge loans totaling about $15 billion to the foundering automakers, particularly General Motors and Chrysler, which are in the greatest danger of financial collapse.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

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Posted December 8, 2008 at 4:43 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Sunday service at Greater Grace Temple began with the Clark Sisters song “I’m Looking for a Miracle” and included a reading of this verse from the Book of Romans: “I consider that our present sufferings are not worth comparing with the glory that will be revealed in us.”

Pentecostal Bishop Charles H. Ellis III, who shared the sanctuary’s wide altar with three gleaming sport utility vehicles, closed his sermon by leading the choir and congregants in a boisterous rendition of the gospel singer Myrna Summers’s “We’re Gonna Make It” as hundreds of worshipers who work in the automotive industry — union assemblers, executives, car salesmen — gathered six deep around the altar to have their foreheads anointed with consecrated oil.

While Congress debated aid to the foundering Detroit automakers Sunday, many here whose future hinges on the decision turned to prayer.

Outside the Corpus Christi Catholic Church, a sign beckoned passers-by inside to hear about “God’s bailout plan.” Roman Catholic churches in the Detroit area distributed a four-page letter from Cardinal Adam Maida, the archbishop, offering “some pastoral insights and suggestions about how we might prepare to celebrate Christmas this year when economic conditions are so grim.”

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Filed under: * Culture-WatchReligion & Culture* Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

2 Comments
Posted December 8, 2008 at 4:17 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The most important issue is cutting Detroit's output to an appropriate level. "What we would tell a client who went from 30% to 20% [share] and they say, 'We're modeling now at 20%,' I'd say, 'Let's model it at 16%,'" says Conway. Scaling below capacity doesn't mean you give up on 20% or even 22% share — you can add shifts, for instance, to boost output.

Reducing capacity could also go a long way toward solving Detroit's revenue problem. Between Detroit and the transplants, there are around 17 million units of manufacturing capacity in the U.S. In 2007 vehicle sales hit 16 million, but about 2 million of those were driven by the combination of easy credit and discount pricing. In a normal economy, the true size of the business may be closer to 15 million units. The Detroit Three simply have to generate more revenue per car and, not incidentally, a profit. Right now, the revenue gap per car is $4,000 vs. Toyota.

The competition hasn't stood still, of course. Japanese and German makers continue to improve their products, and the U.S. customers they have won over will be hard for the home team to get back. Even as the Big Three have closed the distance over manufacturing, drivetrain and other engineering issues, another has opened up. The transplants have moved on to the sensual: the quality of materials, the look and touch of dashboard knobs, the sound a door makes, the feel of seats. Craftsmanship is the new point of difference. "The Japanese have figured out, How do we reduce friction?" notes Gidwani. "Now they are going to have to catch them in a new area."

The real catch, though, is whether American taxpayers are willing to give the Big Three the chance.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

1 Comments
Posted December 8, 2008 at 5:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Here is one:

Re “Auto Executives Face a Hard Sell on Capitol Hill” (front page, Dec. 5):

I am one of those skeptics who believe that no amount of money will effect changes in businesses that keep their leadership in place. Promises aside, they’ve led their companies into the fix they’re in. A structured Chapter 11 is the way to go.

Also, I strongly suggest to the president-elect to institute a $1 tax on every gallon of gasoline on the day he takes office. With it, he can finance the desperately needed rebuilding of our infrastructure and create jobs. We Americans must have a powerful incentive to give up our wasteful, lazy ways — buying big cars, spending and driving unnecessarily.

Barack Obama must be honest with us; it’s not the economy of the country that is in peril, it’s the economy of the earth — and all its inhabitants.

Lawrence Holofcener


Read them all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

10 Comments
Posted December 6, 2008 at 2:27 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Members of Congress wanted Detroit's Big Three automakers to redo their homework before they resumed begging for a government bailout today. So how'd they do?

It doesn't matter. If a Senate Banking Committee on the matter Thursday was any indication, America's automakers failed badly enough and pose such a danger to the economy that lawmakers seem less focused at this point on whether they'll give the automakers a bailout, and more so on how they'll do it.

"We're not going to leave town without trying," committee chairman Sen. Christopher Dodd, D-Conn., said of their efforts to provide funding for General Motors , Ford Motor and Chrysler.

Read it all.



Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

5 Comments
Posted December 4, 2008 at 7:36 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

i found this helpful.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout Package

3 Comments
Posted December 3, 2008 at 7:08 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

At the moment, D.C. and Detroit are brooding on a Morton's Fork: Watch the American automakers auger in and take hundreds of thousands of jobs with them, or bail out these failed and incorrigible companies whose management so richly deserves whatever hell (flying coach?) awaits them.

Tops on the critics' list of grievances is Detroit's failure to anticipate the inevitable. Why didn't these companies sufficiently invest in next-generation technology -- fuel-efficient small cars, high-mileage hybrids, plug-ins and all-electric vehicles -- that could help wean the U.S. off foreign oil and take the automobile out of the climate-change equation? As the auto executives again bring their begging bowl to Congress, a consensus is forming: No bailout unless Detroit builds greener cars.

From my perch, as someone who drives all of the Big Three's North American product offerings, I think a lot of the anger is reflexive and misplaced.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto Industry

12 Comments
Posted December 3, 2008 at 5:33 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

If the Big Three automakers follow the instructions of House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, they will unveil on Tuesday “credible” plans that “result in a viable industry.”

But there is actually little chance of the Big Three presenting Congress with any “credible” plans. A reborn Detroit requires a radical, harsh restructuring for which neither Detroit nor Washington really has the appetite.

The fevered rhetoric of the past few months has been all about protecting workers and resurrecting the American car industry.

But the sad reality of creating a viable industry is all about firing workers and shutting down excess capacity.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Possibility of a Bailout for the U.S. Auto IndustryPolitics in General

10 Comments
Posted December 1, 2008 at 5:49 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Apparently GM is considering selling Saab, Saturn, and Pontiac in addition to already planned sale of the Hummer brand as part of a larger scheme in order to get congressional approval.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryPolitics in General

8 Comments
Posted November 26, 2008 at 5:27 pm [Printer Friendly] [Print w/ comments]




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