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See also:
U.S. Treasury Ready to Prevent Failure of Automakers
John Brinsley and Jeff Green
Bloomberg, Dec. 12 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aK58CIms7sjc&
"Save a little money each month and at the end of the year you'll be surprised at how little you have." —Ernest Haskins
With the key FOMC meeting over, key b/c it was their last official comment before QE ends at month end, what do we now have to look forward to in terms of their exit? IF the economy continues to show signs of improvement, the next move won't be an actual policy change, it will be wording, the telegraph by Fed members in speeches topped off by the April FOMC statement that will tell us that rates won't be "exceptionally low" anymore for an "extended period." That's step 1. While the FOMC won't be raising the fed funds rate anytime soon,...
read more »
December 12th, 2008 at 4:41 pm
I’m for incentives for buying vehicles right now. Any of them (toyota made in us too). Giving money to them doesn’t help sell cars. It’s the same thing as giving money to banks and hope they loan it.
The system is fixing itself. What we see as recession now is withdrawal of credit from people / businesses that shouldn’t have had it in the first place. The system is undergoing normalization.
December 12th, 2008 at 4:45 pm
Ideology does not make good fiscal or social policy. Congressional Republicans apparently saw this loan legislation as an opportunity to slay an ideological dragon, the UAW, and by extension, the entire concept of labor unions. It’s one thing to use a medium such as this one to engage in philosophical debates regarding the efficacy of labor unions in the future; it is quite another to play chicken with 3 million jobs just because you can.
December 12th, 2008 at 4:48 pm
A $1000 tax rebate for purchasing a US made car would work. It would also reward those consumers who have not yet destroyed their credit and are hopelessly in debt.
December 12th, 2008 at 4:48 pm
Hasn’t the union played chicken by striking and thereby forcing long term obligations which were impossible to continue over time without significant correction?
December 12th, 2008 at 4:53 pm
What we see as recession now is withdrawal of credit from people / businesses that shouldn’t have had it in the first place.
What?
The whole problem with a severe recession is that it mostly affects people and businesses who never did anything “wrong.”
Let’s examine the auto industry. How are the thousands of suppliers to GM at fault here? How is a line worker at GM at fault here? How is the person who works at the restaurant near a GM supplier at fault here? These are the people who lose their jobs, and in doing so, may well lose their homes. How is this their fault?
So a recession means that those people who lose their jobs never should have had them in the first place?
Are they now supposed to commit suicide?
December 12th, 2008 at 4:53 pm
The other part of why car’s aren’t selling is the prices. A average car is not worth 15% of an average home. Hasn’t the prices of cars historically been just a few percent of an average home value?
Ford wanted $28K for that small 4×4 Hybrid 2009. I told them I’d be back when pricing was reasonable. I’m really stingy when it comes to spending money on something that’s guarenteed to lose value over time.
December 12th, 2008 at 4:55 pm
Play chicken? Sorry? 20% pay cut vs $14 billion bridge loan and more to come… do the math. This is a musical chair dance, no one wants to be responsible for another failure/another dumb bailout that shows no results.
December 12th, 2008 at 4:59 pm
@DeDude: “A $1000 tax rebate for purchasing a US made car would work. It would also reward those consumers who have not yet destroyed their credit and are hopelessly in debt.”
The same is true of housing. If the government facilitated the transfer of housing from weak hands (nail salon employees and realtors) to stronger hands (e.g. “patient renter” or “leftback”) at fire-sale prices then we could get through this housing mess in no time at all. There are plenty of people with cash on hand who can buy homes, 20% down, 15 year mortgages, BUT will do so only at fair market levels – say, at 1994 prices, not at bubble economy 2007 levels. You can call it “mark-to-normality” accounting. Bubble buyers simply have to come to terms with reality. Game over, you lost, get off the field. It’s happening in California, it will happen all over the US.
December 12th, 2008 at 5:01 pm
Most of what is going on is the media has panicked people into not spending for the people who can afford it. But it is slowly coming back. People can’t help themselves but to spend in stores. The people that spent more than they had well, they will go BK.
December 12th, 2008 at 5:03 pm
Bazzer; give us a break. We’ve just beaten this subject to death below. What do we now know. There was never the remotest chance the administration were going to let the auto industry go pop on their watch. Right wing Republicans are in favor of low wages and foreign auto companies particularly when they are operating in your own state. It’s going to cost a lot more than $15billion to fix this problem but it’s unavoidable like Karma.
December 12th, 2008 at 5:05 pm
And aside from this all, I’m looking at some charts. X has nearly doubled from the bottom. This either screams short or we are reflating quickly.
December 12th, 2008 at 5:05 pm
@ Douglas Watts:
Why does someone that didn’t do anything “wrong” mean I have to hand them MY MONEY (in the form on my taxes” to keep their shitty business afloat?
GM is insolvent. If you add all of their off balance sheet liabilities, the company has a giant net negative value. Isn’t it a wonder why there are no big conglomerates moving in to buy GE at these depressed prices (unlike the cases of some banks and energy companies?)
GM has been run by idiots for years, hasn’t made competitive products in years, have lobbied against increased CAFE standards for decades, and now since they can’t survive a recession, we need to bail them out. This is BS, they need to file for bankruptcy.
December 12th, 2008 at 5:09 pm
And those supplier jobs will go elsewhere. Somewhere there is going to be a company creating the cars and more cars if GM doesn’t build any. And I don’t buy bankruptcy of the autos as such a big problem. I do buy that people need confidence and right now is not a time to promote confusion.
December 12th, 2008 at 5:10 pm
Actually, if F goes BK, I wonder if I could get the bid I would place on that hybrid. There will always be an aftermarket parts dealer.
December 12th, 2008 at 5:11 pm
———————ASSHAT—–POST —– 3 in a row. Just cause, LOL.
December 12th, 2008 at 5:15 pm
I guess the Constitution no longer means anything. Congress votes against a bailout for the big 3 and Treasury feels they can override the vote because they had previously voted for TARP. Jesus.
“How is a line worker at GM at fault here”? “ideological dragon”- Are you people serious? Did you ever think these workers may have killed the goose who laid the golden egg?
And how is it my responsibility to bailout industries, workers, and borrowers who made bad decisions? Who lived beyond their means? Who took unreasonable risks? Who blackmailed their employers to pay them wages and benefits far beyond the fair market value of the skills they provided?
December 12th, 2008 at 5:16 pm
The main question right now is, how much money is Obama going to throw at them. $75B…. $150B…?
December 12th, 2008 at 5:18 pm
This will be the No Automaker Left Behind program.
December 12th, 2008 at 5:19 pm
LOL borchers, honestly man you need to calm down.
December 12th, 2008 at 5:23 pm
Leftback @ 4:59; I am with you on that (sort of, I think). I have previously said that government should mail out stimulus checks every other month until this crisis has been solved. Some would use it to get up to speed on their mortgages others to get a new house (at bargin price on an auction), and some would just mindlessly spend it on consumption. I am sure there would be pleanty of people in each group to ensure the bailout of both housing and the rest of the economy.
December 12th, 2008 at 5:23 pm
Tom K,
Couldn’t agree more on all your points.
December 12th, 2008 at 5:26 pm
DeDude @ 5:23
“…government should mail out stimulus checks every other month…”
My take: “Stimulus checks” for unemployed people only.
December 12th, 2008 at 5:26 pm
Stuff folks should know,
In fact, the Alabama Automobile Manufacturers Association says that Alabama paid approximately $175,000 in incentives for “each” of the 891 employees at the Toyota Engine Plant in Huntsville, Alabama. (That´s $156 Million in taxpayer incentives for one single factory)
http://www.californiachronicle.com/articles/84307?print
by Gary Ater
December 10, 2008
“What does the Senator and his other GOP colleagues have against offering a bridge-loan of taxpayer dollars to a key US manufacturing industry?”
I ask this question of the Alabama Senator, because the reason that the foreign automakers are located in these southern states today, is that Alabama, and now Mississippi and Georgia, were successful in out-bidding other US states with large taxpayer incentives. These vast amounts of tax-payer dollars enticed the foreign auto companies into building their factories in these southern states.
In fact, the Alabama Automobile Manufacturers Association says that Alabama paid approximately $175,000 in incentives for “each” of the 891 employees at the Toyota Engine Plant in Huntsville, Alabama. (That´s $156 Million in taxpayer incentives for one single factory) At that kind of taxpayer cost, what problem does the fine Senator of Alabama have with a tax-payer loan, (not cash or long-term tax incentives) to an American industry that currently involves 1 out of every 10 working Americans? (Both “blue” and “white” collar workers.)”
December 12th, 2008 at 5:27 pm
Since when can either Treasury or the Executive exercise powers that are stictly legislative? Financing bailouts is the province of the Congress – the executive has to go to Congress for this money unless the TARP really was nothing but a slush fund the whole time and Congress knew it and went along with it.
December 12th, 2008 at 5:28 pm
I agree with Tom K.
The real issue here is the ‘ability’ of the treasury department to control US Government funds. The TARP has now been agreed, by all political actors, to grant the Treasury department the right to decide how tax proceeds, and loans paid for by taxes, will be spent. This is completely un-constitutional. It is now a practical fact that the executive branch is free to spend when and how it chooses, only occasionally submitting 5 page documents requesting additional funding to the tune of a trillion dollars. Not only the power of the purse, but evidently (as a practical fact) the power of oversight has been completely dropped as a constitutional power by the legislature. It isn’t that in theory they can’t control the treasury, it is rather that as matter of practice they do not control the executive branch in any way. Whether it be law breaking, war starting, money spending, cash raising (see Fed Notes), or oversight of activity, the congress has simply given up excercising it’s rights. The fact that the public at large, including business entities, sees the executive branch as an ‘alternative’ to the decisions of congress, the fact the executive branch believes itself to represent an alternative to the decisions of congress, means we no longer live in a constitutional republic with co-equal branches having balanced responsibilities. Since the police force and the army both answer to the exectutive, and since the courts have clearly declared their allegiance to executive authority, and since congress has willingly gone along with this executive power grab, there will be no alteration in this pattern, rather it will accelerate. A Democratic Congress will be even less likely to over rule a Democratic President (so-called) than they would a lame duck (in a big way) ‘President’ from the ‘opposition’ party. The party rule is over in this country.
This pattern of power will not disappear. It has been building for quite sometime, and is now clearly and thoroughly entrenched in the day to day operation of the US Government.
December 12th, 2008 at 5:28 pm
Tom K, I don’t think that congress voted against the bailout. The republicans used their minority ability to block the majority from passing this bill unless the majority could come up with 60% of the senators. The majority of senators and the vast majority of those voting were for the bailout.
December 12th, 2008 at 5:29 pm
wups: ‘the party rule’ should be ‘two party rule’
December 12th, 2008 at 5:30 pm
Who blackmailed their employers to pay them wages and benefits far beyond the fair market value of the skills they provided?
—
Collective bargaining is blackmail?
If your key competitor uses slave labor or prison labor, is it “blackmail” to ask to be paid?
Who decides fair market value? Only the buyer, but not the seller?
Just wondering.
December 12th, 2008 at 5:34 pm
I just don’t “get” unions in this day and age. Let companies offer what they are prepared to pay someone to do a job, if they aim too low the market will let them know. When they get to a level where they find whatever qualities they are seeking in an employee for the wage they are willing to pay, they will know they have found the appropriate level of wages and benefits.
I’ve never worked in a union environment. I am motivated to add as much value as I can so that my employer wants to continue to pay me, and if for some reason they can’t, they will recommend me to someone who can. I work hard in my own time to keep my skills current. It must be nice to have a union fixed minimum wage with a minimum amount of work I need to do to get that wage. It’s the dark ages.
December 12th, 2008 at 5:36 pm
DeDude: oh, okay, so it doesn’t matter any more whether congress ‘actually’ passes anything. What matters is if the great and glorious leader decides what ‘the majority’ really wants, and does it regardless of pesky little details called ‘the constitution’. I assume you will be perfectly happy as long as ‘the majority’ all agree with you. Well get ready, the leader gets to decide what ‘the majority’ wants now. And when ‘the majority’ isn’t your majority, and congress votes no, and the leader does it anyway? I do believe we call that a Monarchy.
Sorry Charlie: this is no longer a democracy. Your infinite knowledge about what ‘the majority’ wants is your own belief. Maybe you should be declared ‘The Great and Glorious Leader of the American Empire’.
December 12th, 2008 at 5:36 pm
I wouldn’t trust ‘W’ to make a good deal on even one single used car and now the idiot thinks he has the Superman power to bail out a whole industry. There is something incredibly dangerous about the combination of hubris and idiocy.
Given time – and not a lot – he would bring down the whole world. To date, he’s made a good start.
December 12th, 2008 at 5:37 pm
DL@5:26; I am not against considerable improvements in unemployment support, but to get the economic effect and re-inflation that we need short term, I think about 60 billion per month is about right. Giving that much just to the unemployed would not be possible without creating the wrong incentives
December 12th, 2008 at 5:37 pm
“And how is it my responsibility to bailout industries, workers, and borrowers who made bad decisions? Who lived beyond their means? Who took unreasonable risks? Who blackmailed their employers to pay them wages and benefits far beyond the fair market value of the skills they provided?”
You mean Bankers?
December 12th, 2008 at 5:43 pm
@DeDude – like or not, the Constitution says “each House” has the power to determine “the Rules of its Proceedings.” The cloture rule hasn’t been struck down as unconstitutional.
@Douglas Watts – Who is using “slave labor”. The foreign automakers are paying their line workers between $24 – $26 and hour…unskilled labor.
The buyer should decide fair market value, but you don’t really have a choice if a group of thugs can intimidate other workers from bidding for those jobs/wages.
December 12th, 2008 at 5:45 pm
The real bankruptcy is is American “leaders.” Fools, frauds, and poltroons, the lot of them; bought and sold, and selling their constituents down the river.
As usual the class warriors insist that the workers take the blame. Evidently it’s more important to protect some incompetent executive’s corporate jet than it is to ….. Aw, why waste my time ….
December 12th, 2008 at 5:48 pm
Winston Munn Says: “You mean Bankers?”
Bankers, bakers and candlestick makers. YES.
December 12th, 2008 at 5:50 pm
What’s wrong with a pre-packaged bankruptcy!? The airlines have gone bust many times over and they still operate. Once all the liabilities are written-off, they can actually attempt to restructure and invite private equity to the table in combination with public investment . The government can spin off their share if the big 3 ever come back and make some money while their at it.
Oops, I guess that would mean screwing the bond and shareholders. Investors (rich ppl) shouldn’t be liable for bad investments!
December 12th, 2008 at 5:50 pm
The Republican sympathizers and Big 3 haters are pathetic.
This is class war and you are identifying with the elites.
Guess what? They don’t identify with YOU.
They don’t care if you lose your health insurance and die because you get laid off.
They don’t care if you get lung cancer from poison air.
They don’t care if you lose your job to outsourcing.
They don’t care if you and your whole town goes down the drain because of foreclosures.
They don’t care if you can’t afford to send your kids to college.
They don’t care if your wages fall while CEO’s make out like bandits.
Etc, etc.
You are a bunch of suckups and all you’ll get from your craven form of ‘politics’ is a mouth full of ass.
December 12th, 2008 at 5:55 pm
Maybe it was a deal between the Bushies and the Republicans on the Hill:
Hank said, You guys go ahead and play tough like you are budget deficit hawks, and we will just give ‘em the money from the $700 billion you already authorized. Oh, and don’t forget to blame the union for it too. Your supporters will love it!
December 12th, 2008 at 5:58 pm
Voice @ 5:36
If the use of those funds is in conflict with the constitution or the TARP legislation, then it should be brought to the courts. I doubt that the administration agrees with you, and as usual in a democracy such differences of opinion, are solved in court. The TARP legislation that was passed, is different from the legislation that was blocked in the senate today.
The issue of what the majority really wants can be seen in the 52-36 vote in favor of the bill. Its just that one of our checks and balances allowing the minority to block the most outrageous power use by the majority was used by the republican minority to block this legislation, because they didn’t think it was union busting enough.
Personally I don’t mind that the republicans used this 60 senators rule to block the legislation. It’s just that the fact that they have used it more in the last two years than democrats did in the preceeding 6 years, would seem to be a little excessive. It gets outright hypocritical when you realize that they threatened with removal of that rule because they thought that democrats abused it. I guess for some people things quickly change when the minority is themselves.
December 12th, 2008 at 5:58 pm
Nationalize the banks and force them to make the loans. Isn’t that why we had TARP in the first place?
December 12th, 2008 at 6:02 pm
Tom K; no the cloture rule has not be declared unconstitutional and Billy boy did not have it removed although he really wanted back when it was blocking the republicans. But the TARP has also not been declared unconstitutional and nobody has made a convincing argument that use of those funds are in conflict with the language of that constitutionally passed piece of legislation.
December 12th, 2008 at 6:06 pm
How are we “suckups” identifying with the “elites”? They bailouts are for the benefit of everyone, from the CEO to the lineworker to the stockholders. Why should I pay for the consequences of their bad decisions.
I don’t live beyond my means.
I live in house that’s valued slightly above my annual household income (it’s almost paid off).
I drive a 1997 Honda Civic with 260,000 on the odo.
I work 50-60 hours a week. I pack my lunch everyday.
I don’t own season tickets, a DVR, or have a drug/alcohol/gambling habit.
Why f$#k should I bailout these imbeciles?
December 12th, 2008 at 6:07 pm
Wow, I go to the gym for a couple of hours and all hell breaks lose at TBP!
Tensions are obviously running high. My only question is, when do the bailouts end? OK, one more: and can we just bail out everyone with funds we don’t have and do no damage to the greenback? Seems like the answer is obvious.
December 12th, 2008 at 6:08 pm
Would the following:
Winston Munn
VoiceFromTheWilderness :
DP :
wally :
Tom K:
…please show me their paper trail protesting Government support of foreign Automobile Manufacturers:
“the Alabama Automobile Manufacturers Association says that Alabama paid approximately $175,000 in incentives for “each” of the 891 employees at the Toyota Engine Plant in Huntsville, Alabama. (That´s $156 Million in taxpayer incentives for one single factory)”
No complaints when citizens money [remember, Alabama receives far more in federal funding than it sends] was transfer to foreign Automobile Manufacturers. Just when it goes to Domestic manufactures? What gives? The hypocrisy here is overflowing.
December 12th, 2008 at 6:15 pm
Tom K; the resons to put taxpayer money into saving the economy is that if the economy is destroyed the value of that house you have almost paid off (congratulations) will be almost 0 (and you will have lost all that money you paied for it. And you won’t need to pack no lunch anymore because you will not have any work (that is if you can afford lunch without having income from your work). To be honest you deserve richly to pay for this because you never worked to block those neo-con imbeciles that allowed this whole mess to develop in the first place (and I did, yet I am not whining about taking the responsibility to pay for getting our economy back on track).
December 12th, 2008 at 6:18 pm
@S Brennan
So let me get this straight. If the state of Alabama pays subsidies to Toyota, government subsidies are fine?
Did you ever hear the phrase “two wrongs don’t make a right”?
December 12th, 2008 at 6:29 pm
The best part is still to come–the auto Czar. This magical person is going to stand behind a curtain and tell GM how to run its business. You can’t make up stupidity like this.
If said person existed they would be running GM now making about 30 mil a year.
December 12th, 2008 at 6:31 pm
Well, since the financial bailout’s been so successful, why not? The autos can just emulate AIG. They seem to be doing just fine doling out taxpayer money to their employees.
AIG Said to Offer Retention Pay to More Employees (Update1)
By Hugh Son
Dec. 12 (Bloomberg) — American International Group Inc., the U.S. insurer under fire for paying 168 executives not to quit after a government takeover, is giving retention awards to at least 2,000 employees, according to a person familiar with the matter.
The “retention bonus” equals as much as a year’s salary and recipients were ordered to keep the payment secret, said the person, who declined to be named because the plan was labeled confidential. Awards were offered to as much as 10 percent of staff at businesses that are for sale, including plane-leasing and insurance units in the U.S. and overseas, the person said.
December 12th, 2008 at 6:33 pm
@DeDude
I saved a 9+ month emergency fund because I knew something like this could happen as long as 20 years ago.
Who are the “neo-cons” I should have worked to block? What about the ne- socialists? Should I have worked to block them too?
There are only a small handful of fiscal conservatives in congress. You’re fooling yourself if your think Bush and the majority of Republicans are fiscal conservatives, or fiscal conservatism got us into this mess.
Capitalism only works if risk-takers pay the consequences. Kicking the can down the road isn’t the solution.
December 12th, 2008 at 6:34 pm
Let me add to my post above: And to think, the UAW still takes far more flack than anyone on Wall Street. Sorry, but the hypocrisy of that is a tad galling.
Class warfare is back with a vengeance.
December 12th, 2008 at 6:35 pm
What a wild and great day. …long night! Last night’s price action was so bad…futures falling apart, but then wait…HOLD ON! The Yen blows off into 13 year resistance target at 113.50 (the 78.62%) and hangs a disgusting daily candlestick….SHOOTING STAR! The SP futures hold at the exact 50% retracement of the move from 739-919 and throws a HAMMER BOTTOM candlestick on the daily. Energy, looking awful in the morning, holds 61.8/78.62 retracement zone and rallies hard.
And now, it looks very much like we’re setting up for a move to 1009 on the SP500. The A=C target is 1009 on the Dec Futures, which is ALSO the exact 38.2% retracement of the Major Third Wave, the perfect target for Wave Fours. Additionally, the lesser degree Fourth wave ALSO finished at 1008. It’s very common for a Wave Four to trade back to a lesser degree Fourth. So, we’ve got THREE important wave targets that align perfectly. Whenever I see alignments like that, it’s usually a pretty powerful magnet. With more price action the picture might change. But for now, 1008 on the SP500 looks extremely viable as a near term target.
Have a great weekend. Let the Holiday Parties begin.
- AT
December 12th, 2008 at 6:42 pm
@Mannwich — “Wow, I go to the gym for a couple of hours and all hell breaks lose at TBP!”
OK, that’s it — no more gym time for you!
December 12th, 2008 at 6:42 pm
Practical matters here for the board: Just refinanced at 4.8%. We might go a little lower, but I strongly recommend jumping on the refi bandwagon right now if it makes sense. I’ve got MAJOR resistance just above on the 10 yr bond. My work suggests long dated government rates are going to bottom soon. These mortgages will not remain sub 5% for very long. My target zone all year long has been 129-131 on the 10 yr continuation…traded 128 last night..yowsa!
- AT
December 12th, 2008 at 6:45 pm
@constantnormal: Without the gym, I would probably lose my marbles (assuming I’m not already there). I feel so much better after blowing off some steam…….MUCH LESS crankier but I’m sure that feeling will come back on Monday.
Time for some dinner and a few beers. Nothing I can do about the state this country’s in. Might as well get away from this blog and get a life for a change this weekend…….
Peace, Love, & Frisbees to all.
December 12th, 2008 at 6:45 pm
So aside from all the grousing about rotten bankers, rotten unions, rotten legislators …
… what is a rational and reasonable plan for dealing with a quarter-century depression, with a failing currency somewhere along the way?
And pul-lease don’t give me any nonsense about hoarding gold. Hoarding Jack Daniels would make better sense, at least that’s liquid assets.
December 12th, 2008 at 6:48 pm
@Mannwich — perhaps you could open a virtual gym for the rest of us?
December 12th, 2008 at 6:48 pm
@AT: I was thinking of re-fi’ing as well but the wife’s job/company may be in jeopardy (she’s in retail), so we were going to hold off until we got some clarity about that in Feb. Rates look very enticing. Might lock something in. Am guessing we could get something at/around/slightly below 5%, but future for us here is too uncertain to re-fi just yet.
Do you think we might stay at these rates until next Feb/March ‘09?
December 12th, 2008 at 6:49 pm
@constantnormal: What a great business idea! I’m on it. After all, other companies seem to have thrived under the “virtual (I mean, fake) business” idea. Maybe I can get a bailout too when my business fails?
December 12th, 2008 at 6:51 pm
@Mannwich — perhaps BR would provide a Second Life gateway, and you could open your fine establishment there … maybe call it Gould’s Gym, maybe start a virtual franchise!
December 12th, 2008 at 6:55 pm
That would be great! I’m sure Barry has money to burn on such a venture!
December 12th, 2008 at 7:31 pm
@borchers: “I’m for incentives for buying vehicles right now. ”
Cash is king. Consumer debt is down. Chinese exports are down. The common man seems to understand intuitively what Bush, Paulson et al don’t. Incentives won’t sell enough cars to matter.
@Watts: “ongressional Republicans apparently saw this loan legislation as an opportunity to slay an ideological dragon, the UAW, and by extension, the entire concept of labor unions. ”
I think it’s simpler than that. Many of these Senators have the auto industry in their states. They don’t want to support anything that would put hometown industries at a competitive disadvantage. Also, their constituents are 100% against bailouts in general and Yankee bailouts specifically. I know. You can’t imagine the animosity this has created among people who have lived responsibly, particularly in the South since it appears that virtually all of the bailout dollars so far are going to New York and Detroit, two of our favorite cities
.
@ Tom K.: “Congress votes against a bailout for the big 3 and Treasury feels they can override the vote because they had previously voted for TARP. ”
Remember when Paulson insisted on no oversight? Makes sense, eh? Congress shares the blame. They gave this dolt a blank check.
@S. Brennan: “Stuff folks should know,
In fact, the Alabama Automobile Manufacturers Association says that Alabama paid approximately $175,000 in incentives for “each” of the 891 employees at the Toyota Engine Plant in Huntsville, Alabama. (That´s $156 Million in taxpayer incentives for one single factory)”
There’s a big difference between Alabama taxpayers CHOOSING to spend Alabama tax dollars to attract VIABLE industry to Alabama vs. Paulson stealing tax dollars from Alabama taxpayers to fund failing businesses in Michigan. I hope you can see that, Dude. If you can’t, there’s simply no common ground from which to disagree.
Remember when we bailed out Lee Iaccoca and Chrysler? Iacocca went to Washington with a revamped product line. He had marketing vision. He had a plan. Compare that with this. These guys want the money because AIG got the money. We are absolutely screwed. We are throwing money down a rat hole with no possible return. These companies would fail in the free market. They deserve to fail. At the end of the day, they probably will fail anyway. This is not something a prudent investor would do. I don’t care the rationale. I am glad a handful of Southern Senators had the stones to say no.
December 12th, 2008 at 7:39 pm
Manwich @ 6:45 I guess I will go try that gym – cause this debatin’ didn’t work as well as hoped
December 12th, 2008 at 8:07 pm
Tom K @ 6:18
I agree with you. I don’t object so much to subsidies on the state level. Residents have much more say. Furthermore, if a resident of a given state doesn’t like the tax and spend policies of the state government, he/she can move out.
December 12th, 2008 at 8:33 pm
I think they’re more of a liability than an asset at this point.
December 12th, 2008 at 10:00 pm
Tom K Says: December 12th, 2008 at 6:06 pm
“… Why should I pay for the consequences … I don’t live beyond my means … ”
that was an admirable list of decisions – please supply a couple additional facts:
1> job title?
2> in small business, corporate or government?
thanks in advance
December 12th, 2008 at 11:53 pm
@Texican: “There’s a big difference between Alabama taxpayers CHOOSING to spend Alabama tax dollars to attract VIABLE industry to Alabama vs. Paulson stealing tax dollars from Alabama taxpayers to fund failing businesses in Michigan. I hope you can see that, Dude. If you can’t, there’s simply no common ground from which to disagree.”
What a major load of manure! Are you kidding me? Alabama state tax policy as a shining example of a state doing things the right way…sure!
Fine then, last I read Alabama took a bit more out of the federal coffers than they put in. Next time the rest of the country should tell them to go screw themselves. Is this how we want to play this game?
And how the hell is the business VIABLE if it needs tax subsidies in order to move to Alabama??? Pretty sure there are plenty of schools, roads, and health care facilities in the rest of the state that are not so viable anymore.
December 13th, 2008 at 1:56 am
Vilcabamba @ 11:53
“Alabama state tax policy [is not] a shining example of a state doing things the right way”
In 2005, Alabama was among the four states in the country with the lowest tax burden:
http://money.cnn.com/pf/features/lists/taxesbystate2005/
In my book, a state has the right tax policy if its taxes are low. Perhaps you will disagree.
Regarding your other comment:
“…how the hell is the business VIABLE if it needs tax subsidies in order to move to Alabama?”
I don’t believe that any car companies NEEDED tax incentives in order to be profitable in Alabama; rather it was a question of getting the best deal. It made sense for residents of Alabama to invest in a viable business; it doesn’t make sense for taxpayers in all 50 states to be forced to “invest” in a company that has an unsustainable cost structure.
And if I were to accept your proposition that Alabama has no viable car companies, it would follow that it is the problem of the residents of Alabama, and no one else.
December 13th, 2008 at 2:03 am
Coming Next! Barry use one mere word to spur on 1,000 comments. Unleash Rome, Barry. Unleash Rome.
December 13th, 2008 at 2:10 am
Tom K @ 6:06
I have just one criticism of what you wrote. You’ve got to get yourself a DVR.
December 13th, 2008 at 8:59 am
“Thus the capitalist class will not adopt state capitalism became of its own economic difficulties. Monopoly capitalism, particularly when using the state as a fascist dictatorship, can secure for itself most of the advantages of a single organization without giving up its own rule over production. There will be a different situation, however, when it feels itself so far pressed by the working class that the old form of private capitalism can no longer be saved. Then state capitalism will be the way out: the preservation of exploitation in the form of a “socialistic” society, where the “most capable leaders,” the “best brains,” and the “great men of action” will direct production and the masses will work obediently under their command. Whether or not this condition is called state capitalism or state socialism makes no difference in principle. Whether one refers to the first term “State capitalism” as being a ruling and exploiting state bureaucracy or to the second term “State socialism” as a necessary staff of officials who as dutiful and obedient servants of the community share the work with the laborers, the difference in the final analysis lies in the amount of the salaries and the qualitative measure of influence in the party connections.”
Anton Pannekoek
State Capitalism and Dictatorship, 1936
December 13th, 2008 at 9:01 am
“Thus the capitalist class will not adopt state capitalism became of its own economic difficulties. Monopoly capitalism, particularly when using the state as a fascist dictatorship, can secure for itself most of the advantages of a single organization without giving up its own rule over production. There will be a different situation, however, when it feels itself so far pressed by the working class that the old form of private capitalism can no longer be saved. Then state capitalism will be the way out: the preservation of exploitation in the form of a “socialistic” society, where the “most capable leaders,” the “best brains,” and the “great men of action” will direct production and the masses will work obediently under their command. Whether or not this condition is called state capitalism or state socialism makes no difference in principle. Whether one refers to the first term “State capitalism” as being a ruling and exploiting state bureaucracy or to the second term “State socialism” as a necessary staff of officials who as dutiful and obedient servants of the community share the work with the laborers, the difference in the final analysis lies in the amount of the salaries and the qualitative measure of influence in the party connections.”
Anton Pannekoek
State Capitalism and Dictatorship 1936
December 13th, 2008 at 9:29 am
The Senate repubs are writing a morality play with their filibuster power. The UAW and BIG3 are profligate wastrels and deserve to be shut down. Paulson lied & deceived them about the scope of bailouts and they should filibuster any additional TARP funds. We can all huddle around the campfire in our hairshirts and recite Ayn Rand.
December 13th, 2008 at 10:08 am
Vilcabamba Says: “Next time the rest of the country should tell them to go screw themselves. Is this how we want to play this game?”
If this “no soup for you” game is going to play out as the norm … then yes.
PAYGO and BALANCE. You ready for that?
December 13th, 2008 at 8:37 pm
The problem is that the excess revenue from the bubble overflowed into every sector of the economy. Unfortunately, many people built companies based on bubble revenue. These business owners might be honest but they will suffer from their bad analytical skills and bad foresight. THAT’S capitalism.
December 13th, 2008 at 9:15 pm
Since the U.S. has become a Bailout Nation, why don’t we just give them the $100 billion now, check it off Obama’s to-do list and stop wasting time and taxpayer’s money on a Congress that seems to be operating without a compass. This has already dragged on too long.
In my opinion, any so-called Car Czar that can rescue these two companies with $14 billion, also wears a cape and can leap off tall buildings. This whole deal strikes me as a way to buy time. The auto industry has a long row to hoe before they reap any results, what with restructuring, slashing their work force, closing plants, dealing with UAW, etc not to mention actually producing cars that consumers want.
So what exactly is on the Car Czar’s to-do list? So far it sounds like he’ll come up with some guidelines for restructuring GM and Chrysler by the first of next year. But if the auto execs can’t prove that they have a plan to reinvent themselves by Feb 15, they have to give the money back. Give me a break!
If the $14 billion is an emergency loan, it’s just a survival kit, so what money will be left to give back? One forecasting firm is saying that with or without the bailout, Chrysler is already a lost cause. And what restructuring plan? Didn’t they already submit a plan? Furthermore, under whose leadership will these terms be set? A lame duck’s or will they be enacted after Obama takes the oath?
Apparently the bill will restrict executive compensation, but why are these two CEO’s still there? I personally would have resigned a long time ago. But these poor excuses for leaders either weren’t paying attention to the mess they were creating, or they just didn’t care. Who are they going to blame now? The reluctant consumer? Oil prices? Japanese and Korean cars? The economy? Who?
I’ll tell you who’s to blame. It’s you, the auto industry CEOs who bear the full responsibility. You were the ones who were either too complacent or else didn’t have the vision to foresee the geopolitical and economic forces that shaped competition as you continued to crank out gas-guzzling SUVs. It is you who have not mastered the core principles of leadership or even the most basic skills required to manage. I’m referring to the bottom-line business basics of planning, organizing, motivating, performance management, risk management, forecasting, and so on. It’s all there in Management 101!
And I also fault the boards of directors for failing in their oversight. Boards are charged with the responsibilities of setting broad policies and objectives, selecting, appointing, supporting and reviewing the performance of the chief executive, ensuring the availability of adequate financial resources, approving annual budgets, being accountable to the stakeholders for the organization’s performance.
These are standard duties for members of any corporate board, but they should be even more rigorously adhered to by high-profile publicly-traded corporations. I give these CEOs and their boards a failing grade on all points –they not only failed, they failed miserably!
And what’s worse, millions of people are being affected, not only throughout the Rustbelt, but millions more across America and around the globe in places like Argentina and other countries where there are manufacturing plants. You have let down all your stakeholders!
Perhaps the savior in the cape, the one they will call the Car Czar, will do a better job than the two CEOs have done. And while the czar will only be a puppet position until Obama takes the reins, I’d like to suggest this as the first order of the day—fire everybody at the top of the auto industry chart who was responsible for creating so much grief.
This comment was posted by Jose Roncal, co-author of “The Big Gamble: Are you investing or speculating?” – For more information, visit http://www.financialspeculation.com
December 13th, 2008 at 10:03 pm
Folks, this is The Big Picture, not Yahoo Groups. Maybe he’s just too busy now, but int he past, Barry carefully nipped purely political and ad hominem exchanges like we’ve seen in some of the messages above. We are here to talk about the economy — the problems and possible solutions.
/rant
December 14th, 2008 at 3:18 am
Regarding the auto bailouts and the evil UAW… and I’m not a fan of unions, I did some VERY rough google calculations (please correct me where I’m wrong):
GM has 74000 UAW employees. They make an average of a little under $30/hour (actually the US average, and I didn’t add retired people compensation). If they work 52 weeks a year full time (which they probably don’t), that total comes to:
4,617,600,000 – about 4.5 billion for 47000 people per year.
Here are the top Hedge fund manager salaries for 2007 (ahh, lets not even look at how much it cost to drive the whole financial industry into the ground):
John Paulson $3.7 billion
George Soros $2.9 billion
James Simons $2.8 billion
Philip Falcone $1.7 billion
Ken Griffin $1.5 billion
And we bail out the financial industry apparently so main street doesn’t have to feel the pain. All’s I can say is, at least the UAW made a fucking car or two.
http://www.businessweek.com/bwdaily/dnflash/content/sep2007/db20070926_079529.htm (74000 UAW workers at GM)
dealbook.blogs.nytimes.com/2007/08/30/new-study-criticizes-hedge-fund-salaries/ (avg US salary)
richard-wilson.blogspot.com/2008/05/hedge-fund-salary.html (Hedge salaries)
http://www.aftermarketnews.com/Item/28594/uaw_losing_pay_edge_foreign_automakers_bonuses_boost_wages_in_us_plants_as_detroit_car_companies_struggle.aspx ($30/hour)
December 14th, 2008 at 6:03 pm
@Greg0658
1. VP
2. Small business