18 thoughts on “Two odd pieces”

  1. timmy g is heavily inovlved in the chrysler BK and is basically running the show for the GM BK. i am not involved in chrsyler. but seeing firsthand how the feds are dealing with GM is really quite something. i would say they were masterful in their handling of it thus far, but ed altman beat me to it this morning. so he says it. and i agree.

  2. A couple of days ago Tom linked a piece from a retired American colonel that advocated an American withdrawl from Afgahnistan [1]. To me, India and Pakistan beefing up their nuclear arsenal are directly related to the fear that the U.S. will be unable to maintain domestic political support for operations in Af-Pak much longer and both countries fear being left high and dry when we leave. India probably fears we will abandon the region physically and then side with our banker (China) in any dispute between India and China and Pakistan fears we will abandon the region physically and then choose economic ties with India over military ties with Pakistan that are of increasingly questionable value.

    I don’t think the blaming India for being “reckless” is constuctive and reducing old-core/new-core cooperation by reexaminign the nuclear deal is counter productive.I think both countries are taking rational (but perhaps less than desirable) action to secure themselves in the future.

    All this indicates is that Tom’s long argued for Asian NATO with the U.S, China and India as pillars is needed sooner rather than later.

    [1] http://thomaspmbarnett.com/weblog/2009/05/critical_take_on_iraq_afpak.html

  3. Fed X,

    i am not involved in chrsyler. but seeing firsthand how the feds are dealing with GM is really quite something.

    I would be interested in this. Do you have details you could share?

    Obviously, the Treasury has been very effective in transferring billions of dollars from itself to political friends and allies. Along with this, it has strong-armed secured creditors in defense of politically powerful unsecured creditors.

    Brent,

    Good points.

    Tom’s been unsteady on Asia recently. From identifying an ‘Asian Union’ with the PRC (apparently, annexing is the same thing as joining!) [1] to this piece, he is not arguing coherently.

    [1] http://thomaspmbarnett.com/weblog/2009/05/together_again.html

  4. Barnett is really not all that insightful on virtually any topic. his entire thesis is a riff off Huntington and he has gotton many parts completely wrong. I often wonder how someone can be a grand strategist and not understand the BWII architecture. Barnett is a self promoter with little in the way of insight especially on things economic. Suggesting Geithner is substantive reminds me why I dismiss just about everything he says.

    As for Geithner he is an embarrasment. And suggesting he is doing a brilliant job with the autos is like suggesting mussolini was masterful in getting the train there on time. If abusing legal precident with the backstopping of the taxpayer and the rubber stamp of a kangaroo court is what stands for masterful, we are in more trouble than even the currenct gurggling.

  5. I have details. Few I can share. But I would say that their understanding of the situation is detailed and broad. I would also caution you against swallowing talking points from political artists. “Transferring billions of dollars from itself to political friends and allies.” .. its a bit rich … wouldn’t you say? I didn’t hear you say that when the Bush tax cuts went through early in his administration. Or, for that matter, when any tax cuts go through any Administration. Tongue and cheek much?

    The administration understands that job losses from a liquidation would spell disaster for our economy. Its not a question that this is true. All one needs to look at is the purchaser’s report from Chicago and you’ll see the contagion of b/k infecting the land. At the same time, the Administration understands that if the employees are to own it, they own it lock, stock, and barrel. Which is liberating the discussions with creditors.

    I’m not optimistic that we’re going to reach a deal a soon, but I am optimistic that a deal will be reached and it will be one that provides both short term and long term upside for a government/private partnership.

    Oh I know, Obama is just trying to save the Unions, he’s just helping the banks, he’s just padding the industrialists, he’s bailing out the teachers, he’s offering bribes to the construction worker to fill potholes, and he’s saving the latinos. Lord knows, there aren’t many left to save now are there?

  6. Fed X.,

    Thank you for your comment.

    It may be a personality flaw, but I am skeptical of vague, unverifiable, and secret sources of information.

    I would also caution you against swallowing talking points from political artists. “Transferring billions of dollars from itself to political friends and allies.” .. its a bit rich … wouldn’t you say? I didn’t hear you say that when the Bush tax cuts went through early in his administration.

    Not sure what you mean here.

    If you mean that the spending of money is policy, of course it is.

    Still, Bush’s tax cuts were a fraction of what Geithner is spending, and (unlike Geithner) the ‘Bush tax cuts’ were specified by Congress. Geithner is spending money on who he wants.

    I can think of no way in which “Bush’s tax cuts” and “Obama’s bailouts” are equivalent construtions, as one were exhaustively specified by Congress, and the other was not.

    The administration understands that job losses from a liquidation would spell disaster for our economy.

    This is a red herring, as Obama and Geithner have made clear that liquidation is off the table in any case. They do not believe that large stakeholders should be forced to accept the negative consequences of their decisions. They have been very clear on this point.

    Rather, Obama has consistently attempted to maximize the benefit of political allies (in this case, most clearly the UAW).

    More broadly, if Obama-Geithner wished to consider liquidation, he might consider the ways that tens of billions can be more productive spent. Of course, this is off the table. I completely believe Geithner when he implies that he will not allow his friends to suffer bad results from bad decisions.

    At the same time, the Administration understands that if the employees are to own it, they own it lock, stock, and barrel. Which is liberating the discussions with creditors.

    Could you clarify this?

    I’m not optimistic that we’re going to reach a deal a soon, but I am optimistic that a deal will be reached and it will be one that provides both short term and long term upside for a government/private partnership.

    Perhaps. As the White House has made clear that they will not be bound by bankruptcy law, the prioritization of creditors, fiscal prudance, protecting the money supply, etc., they can locally optimize for any outcome they wish.

    Oh I know, Obama is just trying to save the Unions, he’s just helping the banks, he’s just padding the industrialists, he’s bailing out the teachers, he’s offering bribes to the construction worker to fill potholes, and he’s saving the latinos. Lord knows, there aren’t many left to save now are there?

    Again, not sure what your point is here.

    Obama supports all those who structurally depend on the federal government. This is progressive politics.

    As I wrote last month: [1]

    As a progressive, Obama’s focus is on the control and improvement of American society. This naturally leads him to favor both the rich and the poor, as they are deeply in debt to the system and have lost the ability to thrive without.

    The middle class, however, is less accommodated.

    Poor can seize houses, and rich speculators get their sub-prime assets bailed out, but middle class people who consume the housing they can afford are squeezed from both sides.

    [1] http://www.tdaxp.com/archive/2009/04/10/the-american-real-estate-market.html#comment-265333

  7. Any odds here that the rats (The UAW) have seized the sinking ship? I still see little viability for GM/Chrysler long-term. Ford will pick up the scraps in a few years while fighting off Hyundai/Toyota/Honda for what’s of greatest value.

    Perhaps what Tom is responding to is the already overwhelming advantage India has over Pakistan. At what point does the need to expand India’s navy, upgrade its police force dramatically and improve its land forces for COIN/spec-ops within its own borders and perhaps beyond finally overwhelm the “great power card” India feels it must play to the tune of billions spent on (for now) unneeded missile upgrades.

    As you and others have noted, they live in a nasty neighborhood where those missiles will not do much good.

    The pending mutation and escalation of the Tamil insurgency against Sri Lanka joining the failing Pakistani, Nepali and Bangaledishi states on the list of “maybe we should get ready for these developments”.

  8. Eddie: GM has substantial value as a going concern. It has negative value, however, as a bankrupt. Instead of spinning off the UAW pension obligations into separate trusts (which WOULD have been required) the UAW has agreed to bit the bullet and make their benefits in direct relation to their ability to compete. Maybe its a sinking ship. But with no debt load, no pension obligations beyond ESOP, and few competitors who can match their reach in both the Chinese and American markets… a reorganized, leaner GM is a very potent company with enormous upside. That is, afterall, what all the fighting is about.

    TDAXP: the major debtholder deal has already been agreed to. Tthe deadline was met yesterday as a matter of fact. Hummer is about to close on its sale. Talks are progressing with Magna for Opel. In the darkest hour, things are looking much better. This is an extremely complicated bankruptcy which will be as pre-packed as possible and will therefore be a quick bankruptcy. If you had asked someone two years what the GM b/k will look like, none would have expected this as the starting point. We are in a decidedly better position as a result of the Obama administration’s work, and Timmy G has been at the forefront of this. It isn’t pleasant work, no one likes killing off a company, but it is necessary work that will pay dividends for the entire economy as a whole in the near future. Your accusations that all they are doing is turning bankruptcy law upside down aren’t supported by the empirical evidence. Bankruptcy law is designed to force deals. They did it with as little transaction cost as possible in the largest bankruptcy ever. Hard to criticize them from where I sit.

  9. Eddie,

    Any odds here that the rats (The UAW) have seized the sinking ship? I still see little viability for GM/Chrysler long-term. Ford will pick up the scraps in a few years while fighting off Hyundai/Toyota/Honda for what’s of greatest value.

    Perhaps, but this misses the point. The shares should have been sold for cash to renumerate the higher-priority debtees. Instead, that wealth is being transferred to Geithner’s friends.

    Perhaps what Tom is responding to is the already overwhelming advantage India has over Pakistan. At what point does the need to expand India’s navy, upgrade its police force dramatically and improve its land forces for COIN/spec-ops within its own borders and perhaps beyond finally overwhelm the “great power card” India feels it must play to the tune of billions spent on (for now) unneeded missile upgrades.

    I am not sure what you think the ability of India to inflict an effective second-strike capacity is. Or what you think the ability of Pakistan to maintain sensible control of its nuclear weapons inventory are.

    As you and others have noted, they live in a nasty neighborhood where those missiles will not do much good.

    How did I note this?

    It strikes me being in a neighborhood with a beligerent and nuclear neighbor makes having a resilient nuclear capacity more, and not less, needed.

    The pending mutation and escalation of the Tamil insurgency against Sri Lanka joining the failing Pakistani, Nepali and Bangaledishi states on the list of “maybe we should get ready for these developments”.

    True, but this is as sensible as saying that India needs a better health care system, so shoudl stop focusing on railways.

    Fed. X,

    But with no debt load, no pension obligations beyond ESOP, and few competitors who can match their reach in both the Chinese and American markets… a reorganized, leaner GM is a very potent company with enormous upside. That is, afterall, what all the fighting is about.

    I agree that the new, UAW owned GM has substantial advantages in its competition with free-market companies, such as Honda, Toyota, Ford, etc.

    I don’t see why you think this is a good thing.

    the major debtholder deal has already been agreed to. Tthe deadline was met yesterday as a matter of fact.

    I agree that Geithner made debtholders offers they could not refuse.

    Again, however, as I support the rule of law, this is not a good thing.

    If you had asked someone two years what the GM b/k will look like, none would have expected this as the starting point.

    Two years ago, few would have imagined we had a Treasury secretary whose first goal is protecting his personal friends, second goal protecting his political friends, and was apparently unconcerned with the Treasury’s finances.

    We are in a decidedly better position as a result of the Obama administration’s work, and Timmy G has been at the forefront of this.

    Do you have any evidence for this?

    How could this be disconfirmed?

    Bankruptcy law is designed to force deals.

    Indeed. In this case, however, the Treasury is using the billions it has at its arbitrary and unaccountable disposal to push the deals it wants, making the actual bankrupty law a dead letter (at worst) or a mere technical guide (at best).

    They did it with as little transaction cost as possible in the largest bankruptcy ever

    Not sure what you mean by this?

  10. tdaxp: on this blog in the last few comments you’ve made to me about treasury’s “flaunting” of bankruptcy law, you’ve exhibited a rather astonishing ignorance concerning bankruptcy law itself. there doesn’t seem to be much point in continuing this discussion if you won’t agree that the code is the code, and the legal precedents are what they say.

  11. you are the one who seems to think geithner violated the creditor priorities in the chrysler deal. but you don’t say how. and it is obvious why you don’t say, because you simply don’t know.

    the truth is GM and Chrysler are very different 11s. Chrysler had a buyer. GM does not. what happens when you try to have a sale but no buyer? not what you think. different rules apply to different facts. your assertions however have no substance behind them.

    there was no priority violation in Chrysler for the simple reason that there was a buyer, and no stalking horse for the creditors who objected. creditors, even secured lenders, have no absolute right to forestall a sale without some economic rationale that a better suitor can be found.

    with GM, we have a different set of facts. and without a buyer, its hard to argue that they are really having a sale. (you need a sale in order to disencumber the liens). so even a discharge order, and probably an order for sale, would be challenged vigorously. that is why GM is a much more complicated issue. and Geithner has done a great job navigating the complexities. if you don’t take my word for it, ask Ed Altman.

  12. btw, i should note just for the record that the whole issue of whether or not a sale has occurred is at the very root of the rotten foundations of securitization. see prof. carlson’s essay on the same.

  13. Fed X.,

    you are the one who seems to think geithner violated the creditor priorities in the chrysler deal. but you don’t say how. and it is obvious why you don’t say, because you simply don’t know.

    I am not sure what you are asking here — Geithner’s Treasury Department is opaque, and I am not able to offer his private email for evidence at this time. (Though hopefully any such paper trail will be used to prosecture Treasury officials in the future.)

    More broadly, two mechanisms were used to take from secured creditors without compensation: first, backroom threats to TARP or other subsidies the Treasury gives to those creditors (or firms they are enmeshed in), and second, through the financing offer that Treasury made on the FIAT deal. That is, Treasury both made mysterious ‘offers’ to creditors that have not been released, and arranged a subsidized sale on terms that are unfair to secured creditors and amount to a subsidy to the UAW and other politically powerful creditors.

    there was no priority violation in Chrysler for the simple reason that there was a buyer,

    You did not answer my previous question, which I will put again:

    Why do you conflate rule-of-law with rule-by-law?

    Or do you believe there is no difference?

  14. (a) “backroom threats”

    and

    (b) “financing offer made on the Fiat deal”

    if that constitutes a violation of the rule of the law, then by golly just about every C. 11 in this country is open and wanton sedition. you’re a hoot.

    rule of law, and rule by law… hmm… hadn’t really thought you were serious with that question. the law in this issue is the Code, and the Code was followed impeccably.

    yeah it was ugly, but nowhere near as ugly than the Adelphia 11, or even the Worldcom 11. talk about willful and wanton conduct running roughshod over the letter and spirit of the Code.

    puhhaleeeeezzzeeee.

  15. if that constitutes a violation of the rule of the law, then by golly just about every C. 11 in this country is open and wanton sedition.

    I was unaware that the Treasury Department uses its authority to loan billions of dollars to Americans who face bankruptcy.

    The Treasury does not do this for individuals.

    Or even most companies.

    The problem appears to be limited to the financial sector.

    you’re a hoot.

    Please refer to the site’s policy on trolling. [1]

    rule of law, and rule by law… hmm… hadn’t really thought you were serious with that question. the law in this issue is the Code, and the Code was followed impeccably.

    I will ask you again to answer the question:

    Why do you conflate rule-of-law with rule-by-law?

    Or do you believe there is no difference?

    This is the third time I have had to ask, because you ignored the question the first time and gave a non-answer the second.

    If you are interested in conducting a monologue, review the site’s policy on trolls. [1]

    If you are interested in conducting a dialogue, simple consideration and politeness woudl direct you to answer questions that are asked of you.

    [1] http://www.tdaxp.com/archive/2008/06/22/trolls.html

  16. Here’s a hint (as I see it):

    Rule of law: the law is superior to the government, and cannot be arbitrarily changed in application. The law is proactive, prior to cases. The government serves the law.

    Rule by law: the law is a mechanism by which the government rules, and can be changed in application by the government.

    There are arguments of favor of (and against) each, but they are not the same thing.

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