GM slouches toward bankruptcy, despite bailouts

When President Bush began the bailout of GM and Chrysler, it was with the idea of keeping them out of bankruptcy and savings the millions of jobs that these companies directly and indirectly create. President Obama continued this policy and has given out multiple extra bailouts to the companies in the meantime. He even managed to get GM's CEO fired in the process.

What it is the result of all of this expensive government intervention? Bankruptcy for GM as well as Chrysler. And, of course, Chrysler sold to Fiat, an Italian company who will likely ultimately move the jobs to Italy. We're right back where we started. GM is even talking about leaving Detroit entirely, despite the fact that one of the MAJOR reasons given for the bailout was to save the struggling region.

Are we finally ready to bite the bullet and admit the bailouts were a mistake?

What's 8 billion dollars between friends?

In yet ANOTHER bid to save the struggling automaker, President Barack Obama today announced he will be giving Chrysler another $8b to finance chapter 11 bankruptcy. And yes, it will include selling a large portion of the company to the Italian Fiat.

Bankruptcy doesn't mean the nation's No. 3 automaker will shut down. A Chapter 11 bankruptcy filing would allow a judge to decide how much the company's creditors would get while the company continues to operate. The goal is for the whole process to happen quickly, Obama said, perhaps within a couple months.

The president said that Chrysler has been responsible for helping to build the American middle class, but over the years also had been weakened by "papering over tough problems and avoiding hard choices."

...The Obama administration had long hoped to stave off bankruptcy for Chrysler LLC, but it became clear that a holdout group of creditors wouldn't budge on proposals to reduce Chrysler's $6.9 billion in secured debt. Obama praised all the constituencies that have offered sacrifices and blasted those that did not.

He said a group of investment firms and hedge funds were holding out for the prospect of an unjustified taxpayer bailout.

Can anyone tell us when the flow of funds will *STOP*? There has to come a point where we will have invested more in the company than it is worth (if we have not already reached that point). At some point, do we not have to bite the bullet and let nature take its course?

I don't want to know what the bill is going to be when GM's execs decide to follow the same route. More and more it seems like that is not an "if" but a "when".

I'll miss Pontiac

From here

All Too True

Big Business gets bailouts, not the rest of us

Everyone said it couldn't happen...

...but Rep. Barney Frank is trying to make it a reality.

http://www.washingtonexaminer.com/politics/Beyond-AIG-A-Bill-to-let-Big-Government-Set-Your-Salary-42158597.html

He wants the right to regulate the pay of ALL EMPLOYEES of ANY company who received government funds. This means that Washington, D.C. could set the salaries, benefits, bonuses, and perks for virtually every bank in the country. Plus, presumably, the auto makers and other companies currently begging for bailout money. The bill would be retroactive, so everyone who has ever accepted a penny would be covered.

Who says they can't pass an Ex Post Facto law? The Constitution? Silly rabbit.

Obama tries to block AIG Bonuses

It is no surprise that the President wants to take a stand against AIG's unreasonable bonuses. But now, he apparently has ordered the Treasury Secretary to prevent payment altogether.

“In the last six months, A.I.G. has received substantial sums from the U.S. Treasury,” Mr. Obama said. He added that he had asked Treasury Secretary Timothy F. Geithner “to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.”

Later in the day, a White House official disclosed that the administration would use a pending $30 billion installment for A.I.G. to recoup the $165 million in retention payments to A.I.G. employees in the business unit that brought the company to the brink of collapse last year.

I'll say it again. It is time to stop trying to make corrupt banking executives do the right thing. It is time to start PUNISHING these executives for what they did wrong. Pay them their millions, and then start taking it back in fines and civil lawsuits. Who would want $6.5 million, if the cost is to have to pay back $20 million?

We're bailing out a sinking ship

From here.

AIG hungry! Want more bailout!

Sigh. What more can be said? Sigh.

The government agreed late Sunday to provide $30 billion more to American International Group as the company prepares to report a $62 billion loss today, people involved in the discussions said.

The insurer’s quarterly loss would be the biggest in history.

The intervention marks the fourth time that the federal government has been forced to step in to help AIG avert bankruptcy.

I hate to ask as a Conservative, but would it be cheaper to just let AIG go bankrupt and promise to fund all the displaced people for 5 years via the unemployment system, when the Recession will likely have passed?

Obama to limit spending/compensation of bailed out companies

We have all been sickened by the hubris-filled spending choices of several bailed-out companies, where taxpayer money has apparently been used to buy private jets, pay for huge parties, or been paid out in bonuses to failed executives. Now, the Obama administration is planning to reveal new rules governing how bailed out companies can act.

"Tomorrow I'm going to be talking about executive compensation and changes we're going to be making there," he said. "We've now learned that people are still getting huge bonuses despite the fact that they're getting taxpayer money, which I think infuriates the public."

Under the president's plan, companies that want to pay their executives more than $500,000 will have to do so through stocks that cannot be sold until the companies pay back the money they borrow from the government.

The restrictions will most affect large companies that receive "exceptional assistance," such as Citigroup.

The struggling banking giant has taken about $45 billion from the government's Troubled Asset Relief Program....

The new rules also will mandate that shareholders of banks have a greater say about the salaries paid to company heads. The measures will put in place greater transparency for costs such as holiday parties and office renovations.

While at first blush this seems like a wise and prudent move, I have to wonder about the unintended consequences here. Let's say you are one of the CEOs from the "Age of Irresponsibility" whose company has two choices: take government bailout money or go bankrupt and put hundreds of thousands out on the street without jobs. If you are an irresponsible executive, won't you take your money and run, leaving the company to collapse? In which case, the general economy is worse than beforehand. I hope I am wrong about this, but I have to wonder.

Updated 11:25 AM EST with the right link. Sorry folks, sick-brain was in full effect this morning.

Citigroup & Bank of America fall further, get bailed out further

Working in the banking field has been tough this week as bank stocks across the market have been hammered. Why? Primarily because of announcements out of Citigroup and Bank of America which underline how much risk they have gobbled up, and how poorly they have managed as they have acquired small bank after small bank. Citigroup has actually been split this week into two different companies - albeit still under the Citigroup umbrella of management - one of which is likely to be allowed to fail in the next six months. Both banks have also accepted large new sums of capital from the government, making the U.S. government primary shareholders in these companies.

Have we crossed the Rubicon here, on the weekend between presidencies, at a time when Bush is no longer president but Obama has not yet taken on the mantle? This looks and smells just like complete nationalization of the banking system, something our Founding Fathers (and Mothers) were absolutely against and which has lead Europe into a malaise which has kept unemployment high and growth low for decades. The timing of this move is suspicious as it gives all politicians the excuse of not having been in charge when it happened, thus there being no accountability for such a fundamental change to our economic system.

As a bank employee, I am happy to see it as a potential bringer of stability to an unstable market. As an American, I am sad to see it, as it may be the beginning of an era of extreme governmental intrusion and limitation of personal liberties.

"Green" Government

From here.

Too Much Truth is Painful

Did Calvin and Hobbes foresee the Auto Bailout?

Judge for yourself. But it seems eerily prescient to me.

Banks Refuse to Detail Bailout Money Useage

There is an old saying, "A fish stinks from the head," which means that corruption (in both the moral and physical sense) begins with those in leadership. A few weeks back, the Treasury Department began refusing to disclose how the TARP bailout money was being used. Other than theatrical cries of outrage, no one did anything about it. No lawsuits, no independent investigations, no press outlet pledging to track the money to the ends of the earth. (Please correct me in the comments, if I am wrong and just missed it.) Is it any surprise therefore that apparently banks are following the leader and refusing to account for how bailout money is being used? Why potentially compromise competitive disadvantage when it appears that no one is going to make you play by the rules of the game?

This "secrecy" needs to be broken ASAP. I understand the attitude of banks - they are not used to publicly accounting for where the money raised from stock sales are used and such an accounting could well inadvertently disclose information that could be used by a competitor. (For example, if a big bank were about to roll out an innovative new lending product that they expect to capture a good deal of the market.) But the fact is that he who pays the piper, gets to choose the tune. The cost of taking this money was to be held accountable for its use. And every day that the money's use is "kept secret" is undermining trust in banks and the economy, and simply making things worse.

Mr. President, Give the order. Force banks to disclose the use of bailout funds before the inauguration of Barack Obama. Otherwise, there is little hope for a restoration of trust in the drivers of the American economic system. "Trust me," only works BEFORE the Fall.

Bush bails out the Automakers

You know the Auto Bailout. You know, the one that Congress - the only body entrusted with the power to make law and spend money - turned down a week or so go? Well, the Executive Branch - you know the body entrusted to enforce law and protect the citizenry from foreign threats but NOT make law - has put it into practice by tapping the Wall Street Bailout fund. Anyone want to speculate now as to why the Treasury Department refuses to say who got loans from this fun? My guess: it was used to bail out only a few banks, but make loans to all other parts of the economy that taxpayers would be furious about.

Here's hoping SOMEONE in the next 4 to 8 years can restore a Constitutional government in the USA. Because the way things are being run right now, the cart is definitely before the horse.

The Ghost of HUAC Haunts Michigan

I can't believe anyone would use this kind of language in a time of turmoil and trouble in the economy. If she were my governor, I'd be talking Recall.

"It is unacceptable for this un-American, frankly, behavior of these U.S. senators to cause this country to go from a recession into a depression," Granholm said during a radio interview Friday morning.

Negotiations over an agreement to assist Michigan's Big Three stalled last night in a 52-35 vote on a procedural motion to bring up the package for a vote. Republicans largely opposed the bill after it failed to win concessions from the United Automotive Workers union on wages and benefits.

“It is such an unbelievable stab at workers across the country,” Granholm added. “You give this big bailout to these financial institutions–don’t ask a single question, they can do what they want–and then you lay the blame for the auto industry, which is a victim of this financial meltdown, on the backs of the people who are working on the line.”

Let me be clear. "Un-American" is putting your own interests ahead of the Constitution. Let's see, who is doing that in this situation? Senators who are trying to avoid a deficit that we may not be able to afford, and avoid throwing good (taxpayer) money after bad? Or a governor whose political future is tied to getting a bailout, whether her constituents really deserve it or not? Hmmm...

Sorry, governor. The senators are rubber and you are glue...

Auto Bailout dies in Senate... for now

Union bosses refused to consider wage cuts before at least 2011, so the Senate tabled the discussion until January. The auto bailout is dead... for the moment. Democrats and the Bush administration are already hinting that they may simply give the money anyway, from the bank bailout fund.

If Congress is actively asking the President to bypass Congress, what is our legislature for again?

Brilliant and simple critique of the bailout

A particularly pessimistic investor has up a simple and brilliant critique of the banking bailout this morning. One should note it would apply equally well to the coming auto-maker bailout, and is a reminder of why, perhaps, the Republican party deserved to lose power in the 2008 elections.

"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

Isn't it time to realize that we can't resolve the economy with wishful thinking? It isn't enough to WISH that companies had managed their balance sheets better. It is better to reward those who did, and allow them to become the success stories.

Yes, I know this has been done to death...

...but we still need to be reminded.