Tag Archives: bailouts

The Third GMAC Bailout

Barack Obama will bail out GMAC for a third time.

This is necessary, Barack Obama thinks. Otherwise, UAW unionists might lose their jobs.

This is necessary, Barack Obama thinks, because otherwise people with bad credit could not buy cars they could not afford.

This is necessary, Barack Obama thinks, because otherwise Ford  (which has not been bailed out) might gain market share.

This is necessary, Barack Obama thinks, because otherwise people might buy foreign cars.
The third GMAC bailout combines corrupt politics, economic foolishness, socialism, and protectionism.

It is typical of the economic policies of the Obama administration.

The Choice of Accelerating our Decline

Charles Krauthammer says decline is a choice. Tom Barnett calls this the most pathetic thing Krauthammer has ever written. Ginny talks about Obama’s “reflexive anti-Americanism and supports Krauthammer. What’s going on?

America is declining in relative influence.
The systemic causes of this decline is our success.
Our decline has been needlessly accelerated in the last two years.

First, it is obvious that America is declining in relative influence. If you live in some awful place like south-side Chicago or Detroit, having a relatively modest amount of money — and guns — can make you a big player. If you get a professional job and move to a nice neighborhood, you will have less relative influence over your neighbors. You’ll also be much happier and safer. Similarly, the world is no longer politically shattered as it was in 1945, or 1989. Instead, much of the world’s population live in large, growth-oriented blocs (the most vital of which are the America Free Trade Areas, the European Union, China, and India)

Second, our long-term relative decline is in our interests. It is better to live in a safer world than a dangerous one, even if that means its less likely that you get to use your weapons to get your way. Likewise, it is better to live in a richer world than a poorer one. We want to prevent war, and the best way to do this is to create a trade-based, integrated world where war is unthinkable.

Third, it is obvious that our decline is accelerating because of our recent actions. This is bad. America has run large budget deficits for years, and the world has funded these deficits because America has been (a) a fiscally responsible country that (b) uses its power to protect small countries from big ones. George W. Bush ended both patterns. Within two months, America allowed Russia to occupy Georgia and transferred trillions of dollars to politically-powerful friends of the Administrations. Obama has encouraged and reinforced these disastrous decisions.

America’s decline is accelerating because of decisions made by President Bush and President Obama.

The acceleration of decline is a choice… and one that we have already made.

Only fools pay their mortgages. Wise men have friends in the Treasury

I told you so:

When I first called Chase in October, a representative named Sarah said I didn’t qualify for a loan modification because I wasn’t yet 90 days past due. The only “loan modification” she could offer me was a “repayment plan” under which I paid $400 more per month for six months until I was current again.

“It sounds as if I would be better off waiting to fall 90 days behind,” I said. “I think I’ll wait for that.”

Only fools pay their mortgages. Wise men, whether their business is trucking or insurance, have spent their time nursing connections at the Treasury Department.

Will Eric Holder prosecute Tim Geithner if he covers up “Stress Test” Results?

After initially being very critical of Eric Holder (Obama’s Attorney General), I praised Mr. Holder for setting aside the ill-gotten verdict against former Senator Ted Stevens.

While I realize that public declarations of this would be premature, I hope Eric Holder would criminally prosecute Treasury Secretary Tim Geithner if Geithner attempts to squash the reporting the results of the Treasury’s “stress tests”

One more point worth making – Results of the stress tests, especially if they show potential capital shortage, surely constitute a reportable material event and therefore must be publicly disclosed to the SEC to protect the shareholders, who are likely to be diluted.

It is not just the matter of public trust and fairness, it is the SEC law.

More from Calculated Risk:

And on transparency:

“I think serious efforts will be made to respect the confidential nature of the test and its results,” [Ludwig] said, but added that “there is a real danger that the results of the stress test are uncovered and this roils the markets.”

The results of the stress test should be made public – at least for any bank taking TARP money. This would build confidence in the process, otherwise serious doubts will remain.

The “stress tests” are part of the Treasury’s efforts to launder money from the US government to bankers and Wall Street speculators. However, as the “stress tests” themselves will be conducted by career civil servants, the raw analysis (if not the Treasury’s final spin) may well be objective.

I expect Treasury Secretary Tim Geithner to attempt to lean on banks to prohibit them from fulfilling their lawful duties of publicly reporting the details of these material events. I hope Attoreny General Eric Holder will make that right.

Update: The Federal Reserve prohibits banks from publishing their stress-test results. Will Eric Holder prosecute Ben Bernanke?

The Banana Republic of Goldman Sachs

Props to Peking Duck @ Twitter for linking to this article:

The Quiet Coup – The Atlantic (May 2009)
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Obama’s needs to assert operational independence from his Wall Street backers. A great way to start is nationalizing the welfare zombie queen financial institutions and placing a 90% tax on TARP-funded income (salary, bonuses, and capital gains).

Why not just have the Department of Health and Human Services build cars?

Calculated Risk links to this Wall Street Journal article about how the Obama administraton is trying to help GM and Chrysler avoid bankruptcy.

Avoiding bankruptcy means less court review of the company (so less chance of criminal investigations), as well as not having to break the UAW (a major union that supports the Democratic Party).

If we really wanted to have make-work for UAW members, it would be more in keeping with our system of government to simply have the HHS build cars and suvs.

Bailouts and Stimuli

Some impressions:

China’s fiscal stimulus aims at improving national infrastructure, including building national electrical systems and installing hundreds of new subway lines (Good)

Europe’s fiscal stimulus aims at paying people who are not working not to work (Some good, some bad)

Obama’s fiscal stimulus aims at creating zombie banks and letting them hide their bad assets (bad)