Save the Bailout Drama 12 comments
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Congress (the Senate to be precise), had made a critical vote about the Big Three Bailout. They voted NO to the bill. They had used the legislative authority authorized by our Founding Fathers in the U.S. Constitution to deny bailout funds to car-makers. Not that this was the final word in the matter. More than likely, the measure would have been picked up by the House of Representatives... revived... revised... and resubmitted to the Senate for another vote. But it was the vote that never was. The Department of Treasury under the approval of the Executive Branch of Government offered up TARP funds to Detroit.
Why all the drama? Good question. It appears that no one ever needed the approval of Congress to begin with. While our Founding Fathers decided that ALL spending measures must originate in the House of Representatives. However, the Executive Branch was once again by-passed the House, the Senate, and for all intensive his own party to extend a helping hand to the car makers.
To put it frankly, there are so many piggy banks in D.C. that can be raided, Congressional approval was only a minor formality to getting this deal done. Here are the piggy banks I can think of right now:
- Congress
- TARP Funds
- Wall Street Emergency Funds
- The Federal Reserve (who is always intended to be the lender of last resort).
One thing is for certain: before our eyes, government transparency, an essential element to democracy, is being destroyed. Without honesty and clarity, government (any government) becomes a tool to those who are in power. In the end the power is always used against the masses. The Roman Republic became the Roman Empire under the shadowy guises of looking out for the "people's best interests." A powerful few manipulated rules, laws, a republic traditions. The transformation continued until Rome was controlled by a dictatorship... then a triumvirate of strong men who eventually ran the empire into the ground. Without democracy, this country is dead... The people have no say in a government that is not representing their interests.
If the auto industry cannot get consumer money from selling cars, I hardly believe they should be given tax payer money to continue the same reckless policies that have landed them in this predicament. More anecdotal evidence of the union gone wild... One police officer said his best arrest came from a Ford worker who was one his way home from work. In Ohio, you are legally drunk at .08. You are smashed at .3. This fellow was at .5 which in most cases means he should be in a coma from intoxication. Instead, I remind you that he was on his way home from work, as in pulling right out of the plant.
In another scenario, I was informed that the best duty to get as an employee is to be sent to the Gin-Pool. This means that when you report to work, you report to a staging area and wait to fill in for someone who calls in sick. If no one calls in sick, then you get to play cards and nap all day. At one auto plant, there are over 200 workers who are part of the Gin Pool. as for the auto industry, I have always made it a point to buy American cars... I just feel good about employing a fellow American.
The story to follow deals with a Sunshine Law suite filled by Bloomberg against the Fed. As it stands, the Fed has loaned well over a trillion ($1,000,000,000,000) to various financial institutions in the United States. These loans were not made with Congressional authority, nor any legislative oversight. Furthermore, now that the Fed has made these loans accepting Lord only knows for collateral, non one... NO ONE can find out who the loans were made to, nor the collateral that was used as security for the loan. While the Fed is using the official excuse as "trade secrets" for non-disclosure, when it is OUR money and OUR debt, every single American deserves to know. And this is why governments need transparency! I will once again write every Congressman I can reach... I beg each reader of this blog to do the same (House, Senate)!
Stock Watch
Unemployment revisions suggest that the numbers will always be estimated on the low end... revised a week later as to help cushion the real blow. No sense on hitting XLY or XLI yet, but I will start bidding on June puts. Wynn (WYNN) and Monarch Casino (MCRI) still stand as slam dunks here. I am increasingly suspicious that inflation, once America's leading export could well be replaced with deflation. Even though treasuries are at historic lows, there is more to be said on this subject. Shorting the dollar may be another play in the deflation scenario.UDN is a consideration as well.
Disclosure: no positions
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This article has 12 comments:
Well... As the Federal Reserve is not a part of the Federal Government, and it is Federal Reserve stamped on the money, I don't see what makes you think it's "our" money at all.
We gave them the honor of taking care of the money years ago. After all, the government cannot be trusted to handle something that important. So goes the argument anyway.
Of course it could be argued that if the Fed was loaned money by the government instead of the other way around, then the Fed would have the right to use it as they see fit.
But I guess it's just better to let them have the cake and hide it too.
December 14, 2008
A “No” vote on the loan package for Detroit’s Big Three was a chance for the GOP senators from the South who led the charge against the legislation to kill two birds with one stone. Not only could they strike a blow to the United Autoworkers, a traditional adversary, but they could also advance the economic interests of their own states. Unfortunately, these senators voted against the economic interests of their own country.
Foreign automakers have spent billions building plants in the states these senators represent. Should America’s automakers go down for the count, Americans would still need cars and foreign automakers would step in and spend additional billions building more plants in, you guessed it, the states of these very same GOP senators.
Christopher Hayes of The Nation magazine was interviewed on MSNBC’s Countdown with Keith Olbermann show last week and pointed out what he called “the worst-kept secret in Washington.” Hayes was referring to the glaring double standard that these Southern senators, Alabama’s Senator Richard Shelby in particular, have displayed.
“They’ve been throwing taxpayer dollars at Toyota for years in Alabama and no one raises a stink about that” Hayes said. In fact, as Olbermann noted, Alabama alone has given more in tax subsides per job to foreign automakers than Detroit was asking for in the bailout plan to save jobs at American companies.
The Big Three haven’t been competing against Toyota and Honda and Nissan; they’ve been competing against Japan. Unlike America, that nation actually has an industrial policy. While our government talked about the virtues of free trade, the Japanese government worked hand in glove with their automakers to help make them the world leaders.
Japan is aggressively trying to do with autos what they did with consumer electronics – undercut American manufacturers, drive them out of business and capture the American market. Japan heavily subsidizes their automakers, they fund their research, they manipulate their currency, and they erect trade barriers that make it virtually impossible for American automakers to export to their country. Think the fact that Pacific Rim nations buy up 80-percent of our government debt has something to do with keeping our government from enacting policies to level the playing field? The bank that holds your mortgage doesn't dance to your tune, you dance to the tune of the bank that holds your mortgage.
I don’t care what you’re manufacturing or if your CEO is Albert Einstein, if you are competing against a country that actually has universal health care, while you’re forced to add $1,200 to $1,500 to the cost to every unit you manufacture to cover your employees’ health care, you’re not going to be competitive. If your country doesn’t rebate the value added tax when you export your product while your competitor’s country does, not only will you be priced out of their market, your foreign competitor’s government subsidy will put them at a tremendous price advantage on your home turf.
Now, thanks to the likes of Senator Shelby, the Big Three are not only competing against Japan, they’re also forced to compete against their very own government.
The fact that nothing is made in America anymore is a familiar lament of Americans. But here’s what Americans don’t seem to get: what little is still being manufactured in America is increasingly being made in foreign-owned plants of foreign-owned companies.
I realize that there is a long history of sharecropping in the South, but I see no advantage to we Americans becoming sharecroppers in our own country.
Hey, Southerners: Detroit 3 helped you to survive
BY TOM WALSH
FREE PRESS COLUMNIST
When Hurricane Katrina slammed into Louisiana and Alabama on Aug. 29, 2005, the automobile companies of Detroit did not harrumph that the gulf coast should have been better prepared.
They didn't sit back and wait for New Orleans to submit a detailed plan for future repair of the ruptured levees.
General Motors Corp., on Aug. 30, donated $400,000 to the American Red Cross 2005 Hurricane Relief Fund, pledged to match up to $250,000 more in employee contributions, and sent more than 150 vehicles to the stricken area for use in relief work.
Ford Motor Co. and the UAW quickly made a joint donation of $100,000 to the Red Cross. The Chrysler Group gave $150,000 to the Red Cross and $200,000 to local New Orleans charities. DaimlerChrysler Services chipped in $200,000 for the Red Cross and pledged to match employee donations up to $50,000.
The three Detroit auto companies together gave more than $18 million in cash and vehicles to the Katrina relief effort in the ensuing months. No strings attached.
The U.S. Senate’s most adamant naysayers about whether Detroit deserves rescue loans should have thought about that before now. It might have made Thursday’s futile wrangling over a compromise to get $14 billion in emergency rescue loans for GM and Chrysler a bit less tortuous.
U.S. Sen. David Vitter, R-La., for one, might have dialed down his earlier rhetoric.
Vitter said Wednesday that he plans to vote against the rescue because, in his words, it is "ass-backwards" to give money to the distressed companies before Congress sees more detailed survival plans.
Sen. Richard Shelby, R-Ala., should think about Hurricane Katrina, too. He has threatened a filibuster against the bill, calling it "a bridge loan to nowhere" and stating that Detroit's automakers should undergo a fundamental restructuring before they ask Congress for money.
None of the logical arguments made by, or on behalf of, Detroit's auto industry seem to resonate with certain congressional critics.
Not the fact that GM, Ford and Chrysler have slashed billions of dollars in costs. Not the fact that they have the nation's top-selling pickups and minivans. Not the fact that they have lots of high-mileage vehicles and more on the way. Not the fact an auto company bankruptcy would have a horrible ripple effect, wiping out scores of suppliers and making hundreds of thousands more U.S. workers jobless.
No, to the most adamant auto-rescue opponents in the Senate, Detroit doesn't make cars people want. It's a dinosaur not worth preserving.
Could the opinions of these senators be colored by the fact that the foreign-owned plants of Toyota, Honda, Hyundai, Kia, BMW, Nissan and Volkswagen -- which compete with the Detroit Three -- are located in their states?
Nah, let's not even go there.
Let's just say that since logic hasn't worked, we should fall back on a simple moral argument.
If you see a fellow American is drowning, gasping for air, do you quiz him for a while about whether he's drunk or why he never learned to swim better? Or do you throw him a life buoy and ask questions later?
That, it seems to me, is where we are with America's car companies.
You have done nothing and failed them, senators.
So now it's up to President George W. Bush and Treasury Secretary Hank Paulson to, hopefully, rush in with emergency aid from the $700-billion Troubled Assets Relief Program.
They could still hold the Detroit Three's feet to the fire afterward, empowering a strong auto czar to bring all stakeholders together to forge business models for these companies that can withstand future shocks.
Please let's stop using terms of the propaganda art. The essence of democracy is that political power resides in the people NOT IN THE VOTE!
How powerful are YOU feeling today?
This from MSNBC this AM:
"But at the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty [to top execs] would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.
Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts. In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives."
How can you have a democracy when the only power the people have is to "vote the bums out" and vote another bunch of bums in? All the bums are professional politicians. All have to spend hundreds of millions of dollars to get elected. And all are in the pockets of Big Money & Big Business.
Enjoyed your article.
Best,
Seamus O'Bannion.
Re the auto bailout, I'm having trouble making sense of the market's reaction. Surely:
1. The sum concerned is a drop in the ocean relative to cash-burn.
2. To deal with cash-burn requires a radical restructuring. If this doesn't happen, there will have to be more bailouts; if it does happen, plant closures and downsizings together with massive job losses (extending to US and Canadian suppliers as well) are inevitable.
3. Any restructuring will take years and a lot of money. Delaying it won't help - but Chapter 11 would. After all, isn't that what it was designed for?
Most of the bailouts to date are little more than bandaids on limbs needing reconstructive surgery (autos, banks etc etc.).
On Dec 15 08:32 AM Eric W. wrote:
> They won't get it until there are riots and people withold tax money
> and troops turn against the politicians.
We could do alot to help American companies be more competitive by completely overhauling tax code in the U.S. -- it's excessive and onerous, and there's not much reason to employ here with our tax and cost structure.
On Dec 15 07:43 AM sneaketed seat for sale wrote:
> Senate seat for sale
> December 14, 2008
> A “No” vote on the loan package for Detroit’s Big Three was a chance
> for the GOP senators from the South who led the charge against the
> legislation to kill two birds with one stone. Not only could they
> strike a blow to the United Autoworkers, a traditional adversary,
> but they could also advance the economic interests of their own states.
> Unfortunately, these senators voted against the economic interests
> of their own country.
snipped the rest...too long to quote it all
On Dec 15 12:05 PM oldsuretyguy wrote:
> Unfortunately, the troops won't turn against the politicians....they'll
> turn against us. Won't they!
On Dec 15 10:46 AM OldLimey wrote:
> Good article. Something the UK and the US both seem to share is that
> their Constitutions are looking as battered as their economies.
In Austria have have long long tradition concerning capitalism and greed (review the theroy of Austrian School of economics, from 1880 and later - en.wikipedia.org/wiki/... ).
I think it is a very easy balance - produce, earn spend cycle - take a few corporations with major tax benefits, and corrupt politicians that create free world trade. Now take 300 mio US citizens that just like to shop and eat mac
No put a line below this and you will see a big minus, now multiply this with 20 years - bang.
You can not leave the system uncontrolled by its self, people will screw it, you need independent control by government.
But how can this work if corporations pay money for campaigns ????????????, and you always have statistics on how much each party was funded ??????????
The US system has killed its self through greed.