Mitt Romney in the NYT: “Let Detroit Go Bankrupt”
November 19, 2008
Full editorial can be found at The New York Times. It’s short, so if you care about the subject, give it a full read. Nothing in it that cannot be found elsewhere in the discussions, except a bit about George Romney and American Motors.
I find myself largely agreeing with Romney, especially in regards to his recommendation that shareholders not be saved. They (we, myself) made a bet and lost. We deserve to lose money on it. Sadly many shareholders were not gamblers or investors but likely employees looking to support their employer and build up a retirement nest egg at the same time. They will be the losers in this deal, sadly.
While I do agree with the goals espoused by Romney to be achieved through bankruptcy (despite his odd comparison between the Taurus and the Avalon. Really? Camry isn’t a closer match for target market?), I still do not see how that is more likely to be achieved through bankruptcy than through a many-strings-attached bailout. The costs of possible additional job losses and temporary displacement as well as the chaos that may result for bond holding banks (already under duress), other automotive manufacturers, and affiliated parts suppliers during bankruptcy proceedings I would imagine could have costs in the billions (once again, I am nothing close to a bankruptcy expert and Mitt Romney is probably pretty close to an expert on restructuring).
And as little faith I have in the abilities of government, I have even less faith in the heads of the auto unions and the automakers whose incompetence has driven a once-viable and prosperous industry to the slow and obvious collapse we see before us. Would restructuring include giving every party at the table common sense? To quote Some Assembly Required quoting, partially, former Chrysler President Thomas Stallkamp: “”There’s the feeling that next to financial services, automotive execs are the dumbest people in the world.” Not really, there’s politicians, economists and voters to consider, too.“
Depending on the pricetag, could it be worthwhile to force the change through the vehicle of a bailout with conditions, that would salvage the reputation of Detroit somewhat and avoid cataclysm in employment and related industries during a time when every sector of the economy seems to be built of straw?
… and the cow goes moo
Alaska: NOT the Worst Place in America
November 19, 2008
(the title is a follow-up to this post)
“With an estimated 2,500 votes still outstanding and other election certification steps still to take place, Mark Begich, the Democratic mayor of Anchorage, had taken a lead of 3,724 votes out of more than 315,000 cast, and he declared victory [over incumbent/convicted felon/old curmudgeon Ted Stevens].”
It was a bit of a squeaker, but Alaska’s long nightmare is over. I know nothing of this Begich guy, but I feel comfortable saying with absolute certainty that he will be better for America than Ted Stevens. A cardboard cutout of Mark Begich would be better for America than Ted Stevens.
If it feels windy outside this morning, it’s because of all the sighs of relief coming from Republican Senators who were torn between denouncing a convicted felon and expelling him from the Senate (if he won re-election) and returning favors to a powerful senior Senator who, despite being a huge asshole, probably has some favours owed to him by many Republican Senators over the years.
Don’t let the prison door hit you on the way in, Ted!
… and the cow goes moo
A New Theater in the Automaker Bailout Wars: The Military
November 17, 2008
The New York Times has an op-ed by former contender for the Democratic Presidential nomination and former four star general, Wesley Clark, making a case for GM’s survival on national security grounds.
It is a short and easy read, so I recommend anyone engaged or interested in the debate to give it a read.
I am not certain how important a domestic base for the production of our military’s light vehicles may be, but I certainly see Mr. Clark’s logic, even if my lack of direct military experience leaves me at a loss for the details. Mr. Clark’s historical support for the subject is certainly convincing.
I wonder though, is bailing out GM necessary then or just Hummer? Hummer has been languishing on the trading block (for obvious reasons) for months now. Could the company be nationalized? It really did not make sense as a consumer vehicle anyways, but it could still continue as a military producer that makes a faux-military good for ‘that’ consumer set. I’m sure the Federal government could get the marquee for a great price. And I’m sure GM would be happy to have it off of its hands.
And, to show how childish I am, this is actually the part of the article I found most interesting:
“For years the military has sought better sources of electric power in its vehicles — necessary to allow troops to monitor their radios with diesel engines off, to support increasingly high-powered communications technology, and eventually to support electric propulsion and innovative armaments like directed-energy weapons.”
The Army is developing lasers!!! Pew-pew!
… and the cow goes moo
Auto Industry Stimulus, By Way of Consumer Rebates
November 17, 2008
Please see this previous, closely related post (and comments) for some discussion about a similar proposal made by a commenting blogger.
The Wall Street Journal has a short opinion piece (takes a minute to read, at most) exploring the possibility of saving the automakers through a car buyer rebate project.
One key point it brings up that were not addressed the the previous post’s comments is the limitations (and consequences) of selective rebates that rewards American content. Playing tit for tat in reply could lead many countries to close their borders to the already starting-to-fall American exports and lavishing upon their own industrial infirmities similarly protectionist measures.
The bigger issue I would have would be how this could influence the Detroit (formerly) Big Three to change their ways. I am not sure how lawmakers would attach demands for automaker reform to a stimulus package that does not directly go to the automakers.
The most pressing issue for those closest to the brink (GM) might be how these theoretical automotive rebates might influence buyers to buy enough cars in a great enough volume to stave off bankruptcy. Without billions of direct funding, GM may not make it through the year. For car purchasers who would use the rebate at GM, the company may not still be around to sell them a car.
… and the cow goes moo
SEE WHAT YOU’VE STARTED?!
November 15, 2008
Calculated Risk posts about two new breeds of panhandlers coming to the taxpayer spigot (I don’t know how taxpayer spigot became abbreviated as TARP, but oh well).
First, we have insurers (not really a new breed if you don’t treat AIG as an exceptional case). CR says:
“The AP reports: 4 insurers ask government to let them acquire thrifts so they can receive bailout funds“
Next in line we have whole cities! CR says:
“From the Mercury News: San Jose mayor seeks slice of bailout pie“
Key quote from the source article:
San Jose Mayor Chuck Reed said “he would seek 2 percent of the bailout, or $14 billion, for San Jose — an eye-popping figure, given that the city’s entire annual budget is $3.3 billion.”
Bravo! Four to five years of the cities budget would be required as a handout for San Jose. They should make it an even $4 billion so that San Jose has enough left over to construct an appropriate monument to commemorate this monumental mismanagement of funds.
One interesting point from the article, as well as CR’s post/excerpt, is that much of the “required” money would be going towards road work and rapid transit. Have we found a backdoor to forcing a revival of the Public Works Administration? By work of poetry or coincidence, the PWA spent $3.3 billion as well. Wow.
CR has another older post that discusses a few more cities with the begging hand thrust out in Washington’s direction, as well as more details about one of the insurers.
I think the more obvious solution for the government would be to setup a new Department of Taxpayer Buggery, run by unelected officials with close ties to major-campaign-donor industries, to administer the doling out of federal funds (can Neel Kashkari have two titles?). It’s only logical, and I’m sure we could keep the administrative overhead below the amount of the funds distributed. Initially, anyways.
… and the cow goes moo
(Previous post on the subject here)
The New York Times provides an update on related events on Friday. Quick summary: Big noises and a whole lot of nothing. Yap yap yap.
A couple of notable points though:
“The majority leader, Senator Harry Reid of Nevada, swiftly rejected the White House proposal as “unacceptable.” Mr. Reid, in a statement, insisted that the Treasury secretary, Henry M. Paulson Jr., had the authority to use some of the TARP money to help the auto industry without additional legislation, which seems unlikely amid the rancor.”
Poor baby. You offloaded Congress’s duties to an unelected and unaccountable (he doesn’t even want to keep his job!) investment banker, and now you’re mad that he won’t share?
“In a terse response, Mr. McConnell reminded Mr. Reid that the Democrats have not provided any draft legislation or cost estimate. He also suggested that many rank-and-file Democrats were opposed to the idea.”
Is Harry Reid just trying to divert the blame for a failure of passage from his own ineffectual leadership / lack of consensus-building / silly independent-rather-than-party-minded legislators to the Republicans in Congress? I think it’s likely the shifting of blame to Paulson has the same purpose.
The first and last resort of the ineffective and incompetent: Blame someone else. It’s also the first and last resort for someone who thinks those he or she is accountable to are unwilling to hold them to an exacting standard.
If people don’t want the responsibilities of Congress, why do we keep voting for them? We should just make lobbyists elected positions and skip the pain of having unwilling legislators run for office to pad their lobbyist credentials. At least we wouldn’t have to endure carrying as much ballast in Congress that way.
… and the cow goes moo
Wilbur Ross says GM Bankruptcy Would Be a ‘Total mess’
November 15, 2008
Wilbur Ross, an apparenty expert on the subject of bankruptcies (I’m not one, so I’ll take Bloomberg’s word for it), has provided a reply to the recent talks of allowing GM to fail, which in turn followed the kneejerk reaction that GM had to be saved.
Excerpt from the Bloomberg article:
“Ross, dubbed the “King of Bankruptcy” by Fortune magazine in 1998, said a restructuring bid by one of the three top U.S. automakers would topple its peers and drive weakened suppliers out of business because the credit crunch dried up financing.”
This is a point I’ve been concerned with for quite some time as I followed the recent conjecture that bankruptcy for GM might be the least painful option for the broader economy. Specifically, I see a bankruptcy by any of the Detroit Three as a bankruptcy of ALL of the Detroit Three: I believe their business and images are too closely linked and beyond the destruction of their shared supplier business, the reputation of all American makes would suffer and consumers would flee American auto dealerships for those of imports (in even greater numbers than they have already). The Seattle Post Intelligencer has an op-ed that touches on the mindset at play for car buyers when faced with the chance that their auto’s manufacturer may go bankrupt.
Of course, GM has stated that “bankruptcy isn’t an option under consideration”, according to TheStreet, so this is all moot. After all, GM is usually really great at predicting the future.
… and the cow goes moo
