Markham's Mix Tape: March 27, 2009

Includes: AIG, BAC, GM, TTM
by: Markham Lee

The usual mixture of news stories and other tidbits I think you may find useful, this edition is a mixture of items from today and earlier in the week.

The Obama administration's automotive task force will announce their plans to save Chrysler and GM on Monday. For now I won't comment much further until the plan comes out, but I will say this: Chrysler and GM need to start thinking in terms of sizing themselves to a smaller market, as opposed to the current strategy of reactionary cost cutting. The former strategy positions them for long-term success, whilst the latter strategy is only a temporary band-aid.

Here are some details related to the treasury's new plans around regulating the financial sector: first here is some coverage from the WSJ, and here is a look at the full text of the Treasury Secretary's comments.

For now I'll just say that having a great plan is one thing but being able to actually execute on it is another. Let's not forget that our current regulatory framework was more than capable of preventing a lot of the problems our banking system is facing. As a result it's not so much the powers given to regulators and the framework they have to work within, it's a question of whether or not they'll do the right thing when the opportunity presents itself.

In any event I'll dig into the proposal over the weekend and provide some additional analysis next week.

Here is an interactive graphic from the FT that provides some details on the treasury's plan to buy up toxic assets with the help of private investors.

Instead of worrying about the bonuses being paid to various AIG executives, perhaps the government should pay more attention to the fact that the executives who "managed" the risks that got the company in trouble still have their jobs.

If you ask me this is one of the biggest problems facing the banking sector: that aside from a few high-profile resignations and/or firings, many of the people who made the bad decisions are still in power. The situation is even worse when you look at Congress, as no one on the various banking committees have gotten the sack for not doing their part to prevent this problem from happening in the first place.

Here are some additional tidbits related to the launch of the Tata (NYSE:TTM) Nano:

Video from the FT discussing a recent test drive of the car , and another video related to the car's launch.

Here is a short article on the plans of BoA (NYSE:BAC) and other institutions to pay back TARP funds once the results of the "stress-tests" come out, with the key motivation being avoiding populist anger and keeping the government out of their affairs. The risk here is that the Bank's desire to get the government off their banks could drive them to return the money before they're ready, especially given that it's possibility that they'll need additional funds in the future.

Here is a look at a story from NPR's marketplace that looks at how the Treasury's plan to purchase toxic assets could make it harder for the banks to hide their weaknesses. This situation could be a double-edged sword because while increased transparency is a good thing, it's likely to reveal problems that could constrain lending even further and/or require more capital infusions into the banks.

Still at the end of the day increased transparency is always a good thing, even if creates more short-term problems.

Here is some additional information related to the launch of the Tata Nano. As the company is anticipating a wave of orders that will exceed production capacity, the company is planning on using a lottery to determine who receives the first 100,000 units of the car.

Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.