Blackeyebart

The Ultimate Risk of Government Influence Over the Private Sector (Part 2)

"The senior creditors who are owed $7B will get $2B and no equity in the restructured company, the equivalent of $.28 on the dollar."

They and everyone else with an interest in Chrysler had the chance to negotiate their own deal. No doubt they hoped that they would do better from a bailout, and for all I know, they did. They got their time in court and did not convince a judge they had been shafted.

The fact they are still complaining is not proof that the USG has not been sufficiently profligate with the taxpayers money.

The Ultimate Risk of Government Influence Over the Private Sector (Part 2)

"The overarching sense of political pressure," Mr. Lauria said, "remained out there till the end."

Well now, is this really so bad? To make the comparison to the USSR valid, he should at least have been threatened with the Gulag. (Salt Lake City?) Political pressure is the grown up version of threatening to tell your mother.

The Ultimate Risk of Government Influence Over the Private Sector (Part 2)

"I understand that this crisis has put the authorities in uncharted waters but I do not believe that the current circumstances give the government the right to ignore the legal foundations that have made the US the world’s business leader and the safest country in which to invest."

The USG did not merely ignore the legal foundations - they created them. They made CDS legal. Before that they were illegal. They should be illegal. Changing the law to make them illegal will broach legal contracts. Contracts that are in many cases incapable of being completed in any case.

But the Government must do what it must do. This will not undermine the law - the financial collapse did that - with the help of banks and investors - it will create a law that investors and banks can rely on.

The Ultimate Risk of Government Influence Over the Private Sector (Part 2)

"I would argue that these actions are characteristic of authoritarian governments whose countries prudent investors refuse to invest in without an appropriate premium for political risk."

Really -- Cos they threatened to sack him? Idi Amin would have eaten him. There is no comparison.

And what senior Bank Official in the US should be immune to being sacked? Waggoner was sacked.

The Ultimate Risk of Government Influence Over the Private Sector (Part 2)

"Lewis indicated that he was led to believe that if he did not complete the deal the government would used whatever power it had available, possibly through its TARP investment, to remove Lewis and the entire BAC Board."

Well now, his duty to himself and to the Board was clear. Look after number one. Who cares if BAC shareholders get screwed. I'm OK jack!

Now what was your point again?

The Ultimate Risk of Government Influence Over the Private Sector (Part 2)

" At a time when the stock markets and the world economies need the capital currently sitting on the sidelines to move toward riskier asset classes (in order to get credit markets flowing normally), the fear over potential government actions may only prolong the crisis and could serve to undermine the credibility of the US as a safe destination for capital."

The major fear should not be Government action but Government inaction. This is not a crisis of confidence that can be cured by confidence tricks like the stress test. The US economy has been decaying for years. Outlawing CDS would definitely breach contracts. Failing to outlaw CDS will breach the economy. Your choice.

The Ultimate Risk of Government Influence Over the Private Sector (Part 2)

" Do we really want to encourage more of this behavior by taking away all of the financial incentive to protect our investment? I sure don't think so."

This is preposterous. Now police should demand a "bonus" for doing their job. If we are being mugged on both sides of the street, we should move. Or carry a gun.

You cannot rationally invest money into a company that will demand a bonus for protecting it.

The Ultimate Risk of Government Influence Over the Private Sector (Part 2)

"But the truth is that we need these people to help unwind these CDSs and from all indications they have recently been doing a fairly good job of reducing AIG's (and taxpayers') exposure to these ill-conceived derivatives."

Where is the evidence for this proposition? As I see it the US Taxpayer has funded a massive pay-off, but an even more massive load of debt is hanging in never-never land. As time goes on I become less and less convinced that saving AIG is worth the cost.

The Ultimate Risk of Government Influence Over the Private Sector (Part 2)

"the retention bonuses that were promised to the people who had been brought on or promised to stay in order to unwind these toxic and unwieldy contracts caused a national uproar"

Well now, how are they going? How successful have they been at "unwinding"? How can we measure their success? What have they proposed?

I suspect that these good souls are simply selling more or the same. And why not? It's not illegal. And if the USG wanted to stop it they could have by now.

Obama's Foreclosure Plan Helps Banks More than Stimulus

If I understand this correctly, it would be more beneficial for a home-owner to do the bankruptcy step first rather than try and sell the property all by himself.

If he acts alone, he ends up carrying the loss alone. If he takes the bank with him to court then the bank gets to share in the shortfall.

Once this step is taken there is no obvious reason for the home-owner to sell. He has to live somewhere. If this process were widespread it may influence the number of houses for sale, which would be an additional benefit all could share.

Automotive Depression: Government Needs to Let the Weak Fail

It is not as simple as saying that the auto-companies "need to start making drastic changes". They have excess plant. How do they quit it it? Convert it into condos?

Sure the market is down by half. And no-one expects it to bounce back by June, but do we know now that it will never recover? Really? People are planning to walk to work?

The auto companies don't deserve our admiration. They have made a catalogue of errors. They are struggling now to survive. It is mostly their own fault

But this is a time for clear-thinking and determination, not panic.