Bailout Nation

It's sorta common knowledge that our President, a native of urban Chicago, is not a fan of the SUV.

One prominent auto magazine had this take on his mandate to massively increase the fuel economy of the American motor fleet.

Obama's CAFE Fuel Economy Standards to Create Fleet of Tiny, Expensive Vehicles - Car News

But we "know" "everyone loves the environment" and "everyone hates SUVs". So the car buying public is reacting positively to how the auto industry is being changed?

Maybe not..

If you've got your eye on a new SUV, don't blink.

It might be gone. Even with the auto industry mired in depression – sales are down nationally 36.5 percent – big vehicles such as the Ford Expedition and Chevy Tahoe are in tight supply because of drastic production cuts that automakers imposed last year as sales began to plummet.

Now, a year after $4-a-gallon gas nearly killed SUVs, some dealers in this market are selling them for window-sticker prices. Moreover, most late-model used pickups and SUVs have regained all of the thousands of dollars in trade-in value they lost last summer, dealers say.

O.K. , this is Texas, the biggest , reddest and right now most prosperous part of the country. But don't think this is likely to be an aberration. And it is going to be a big problem in trying to recover much of our $100 Billion or so investment in Detroit.

The competitors to GM and Chrysler have to follow CAFE too, but are under less intense pressure to be "green". Look for Ford and Toyota to maximise production of Explorers and Highlanders if GM and Chrysler are pressured to hold down production. And look for SUV prices and profits to rise further due to regulatory scarcity.

One huge problem Obama Motors has is the market share for domestic brands are disproportionately based in Red States, in rural/exurban areas, and among older and non college educated drivers.  Yep, people who mostly voted for John McCain. 

The Obama brain trust will force the two government owned car manufacturers to develop a product line that appeals to young urban sophisticates. ---not the traditional market of "apple pie and Chevrolet". Few of these folks are going to be pried loose from buying foreign brand automobiles. They've just become too accustomed to doing this.   Sounds like Ford is going to gain lots of market share as the last "real American car company" if it can avoid running out of cash.  

I'm certainly not arguing that the previous management of Detroit were a bunch of wise men. But Detroit made SUV's because they were profitable. The Chevy Volt will not be. So the new crew running the car business might lose even more money than the old crew did.

And make the SUV back into a huge status symbol due to its scarcity. 

In his FNS interview today, Mitt Romney mentioned his NYT Op-ed from late last year:

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

While it never should have come to this, it's refreshing to hear Republicans talking about letting losers fail.  Between Romney and Dick Cheney, it's almost looking like we can get the GOP away from Bailouts.  To Paraphrase Rick Santelli, Governor Palin are you listening?!?

In this interview with Larry Kudlow yesterday, Dick Cheney said about TARP:

KUDLOW: But did you anticipate the degree of government control over the banks? No question throwing a safety net from Federal Reserve liquidity was appropriate. I don’t think any economist left or right disagrees with that. On the other hand, what we’ve seen now is that this Congress has moved in to declare, for example, compensation and pay limits, repurchase agreements, dividend policies, merger and acquisition policies. You yourself know these things because you were a CEO of a big company once upon a time. Did you anticipate how Congress would move in to take control of the banks when you made these initial loans?CHENEY: No, I don’t believe we did. I don’t recall any debate within the administration. There may have been some over at Treasury or someplace that focused on the extent of which government would try to control these institutions once they provided financing for them. You know, I’ve got experiences going back to the wage price controls in the Nixon administration where, in effect, we had what I think was a terrible mistake, in that case a Republican administration, where moved in and tried to control the wages, prices and profits of every enterprise in America. It was a huge mistake. We finally got out of it, but it took a long time to do it, and it does a lot of damage.

If you liked that, just wait, it gets better:

CHENEY: Well, some of us at the time wanted GM to go bankrupt, go to Chapter 11.KUDLOW: Were you in that camp?CHENEY: I was.

Essentially, Cheney is saying that he was against bailout nation and Bush overruled him.  I'm not surprised.  Cheney has always been a much more genuine small-govt. guy than Bush ever was.

That said, maybe Quinn Hillyer was right: Cheney, not Bush, should have been President!!!

I was discussing the recent financial crisis with a friend tonight.  He said: "The Problem with the GOP is that they deregulated until the banks became too big to fail." BULLSHIT!!! Had our political leaders had a pair of brass balls last year, they would have realized letting the banks fail would benefit America.  We could have re-built a solid banking system instead of the politicized BS we have now.

Unfortunately, the Republican President and Treasury Secretary didn't have the courage of their alleged free market convictions.  Thus, we're stuck with a politicized banking system for the next decade.

And some people are trying to say the GOP has moved too far to the right...ha!

Chris Dodd has a new silver bullet to rescue his sinking political career.

He's hot to pass a "credit card reform bill" to "protect consumers"

No doubt this will be more popular than say, sweetheart mortgages or signing off on bonuses to his contributors, or having his wife earn millions from corporate boards.

But why now? After all Dodd's been chairman of the Senate Banking Committee for almost three years and just got around to getting this bill moving....even though he's claimed to have supported reform for two decades?  (Perhaps that's the "lifetime of leadership"...complain over and over again about the same stuff you never fix)

Well, when you spend over 100 days in Iowa your work in Washington does tend to suffer. 

But why is credit card reform now moving through the Senate faster than a speeding bullet?

Because it's just a trojan horse for another bailout.

Tucked deep inside Chris Dodd's "credit card reform bill" is this little nugget.....an increase of up to $500 billion in borrowing authority for the FDIC.

The bill would provide a permanent increase in the FDIC’s authority to borrow from $30 billion to $100 billion and would provide a temporary increase of up to $500 billion under certain conditions"

Think another $500 billion bank bailout would go over too well right now? So, guess what , we'll just make it the "fine print" in the "credit card reform' bill and make anyone who votes "No" out to be "anti-consumer"

How is that any less sleazy than the fine print in credit card statements this bill claims to prevent? Seems like the banks may be prevented from secretly changing your credit limit, but politicians think nothing of doing it themselves. 

Besides, why do we need to give the FDIC more money? Weren't we told last summer that Dodd "didn't expect many more banks to fail" 

We're up to 33 banks already this year, Chris. 

Remember before Christmas when you were told what a piece of dreck the auto bailout was after Chris Dodd got his hands on it...

well, the results are starting to come home to roost

We are now the sole source of capital for Chrysler...who's business plan as blessed by political wheeler-dealer Steven Rattner is going to be as follows:

A struggling Italian automaker will run a company largely owned by the UAW to make new models of fuel efficient cars that will be better than Toyotas and Hondas. All this from the #5 or # 6 auto maker in US passenger car sales (hello, Dodge trucks and Jeeps are what they really have left)

Really, you think the point is not to shut the joint down before MI certifies its 2012 election results?  No matter how much taxpayer cash they burn through?

Or am I too cynical?

Too bad Bob Corker wasn;t calling these shots. But when it comes to Dodd, this is what we ought to expect

The cause 

A big New York Times story this morning strongly suggests that Team Obama is about to up the ante in an effort to control the banking system for as long as the eye can see.White House and Treasury officials are now talking about turning government TARP loans into common stock for the 19 biggest banks. It’s clearly a backdoor path to nationalization, as Uncle Sam would be the largest shareholder in these institutions. What’s more, it’s not at all clear that the administration will even let certain banks pay down their TARP loans.This is government intervention into the private sector on a grand scale. It is financial/industrial policy. Banks will be kept on a very short leash regarding compensation, loans, credit-card issuance, mergers, acquisitions, and all the rest.Not surprisingly, stocks opened down 200 points today — with banks leading the freefall — and finished down about 300 points. 

The effects

   You can check out any time you want...but you can never leave.....   

Dear Senators Dodd and Schumer and Congressman Frank,

First things first, let me congratulate you for reaching a level of hypocritical grandstanding I thought impossible even for the United States' Congress.

Congressman Frank, you blocked oversight at Fannie and Freddie while you were dating a high ranking Fannie official.

Senator Dodd, you took a bribe from Angelo Mozillo to filibuster George W. Bush's attempts to reign in criminal excesses at Fannie and Freddie.

Senator Schumer, the 100% tax rate you propose on Wall Street bonuses violates the ex post facto clause in the United States Constitution.  Not that you care when you're up for re-election this cycle....

Furthermore, all three of you were crucial players in the decision to bailout Wall Street.  While you may personally disagree with some of the decisions those firms have made, the fact remains you had an oppotunity to let said firms fail six months ago.  Instead of letting Wall Street fail; you failed.

Once you decided to bail these firms out, you implicitly accepted responsibility for any unpopular business decisions said firms made.

Against that backdrop, I find your grandstanding over the compensation paid by the American International Group (AIG) utterly nauseating.  Said compensation, while perhaps unwise from a narrowly defined business perspective, is standard practice in the financial services industry.  Gentlemen, if you didn't want AIG engaging in standard business practices; THEN YOU SHOULDN'T HAVE BAILED THEM OUT IN THE FIRST PLACE!!!

Don't get me wrong: AIG screwed up and THEY SHOULD FAIL as a result (the fact that their screw up is a direct result of Elliot Spitzer's bullying is a topic for another day).  That said, Gentlemen, you are standing in the way of AIG's creative destruction.  Until you are willing to let AIG fail, your whines about executive compensation ring hollow.

Sincerely,

Adam Cahn

Austin, TX

On the main page, Jon Henke offers a template for Republican mea culpa that should allow us to move forward.  I agree with the assessment that we owe the American people an explanation of where we went wrong AND (let's not forget) where we went right over the past eight years.  That said, such a mea culpa has to concentrate on the issues where we actually WENT WRONG as opposed to the one major issue where George W. Bush sacrificed his personal popularity to lead the United States (and the entire world) to a better tomorrow.

On that note, these are the seven legitmate issues for a Republican Mea Culpa:

1) Terri Schivao

2) Harriet Miers

3) TARP and Bailout Nation.

4) 2002 and 2008 Farm Bills

5) Duke Cunningham, et. al.

6) 2005 Highway Bill

7) Continuing and expanding Carter/Clinton "affordable housing" policies.

Things that have NO PLACE on this list: IRAQ, Medicare Part D, Katrina, Missle Defense, or ANYTHING related to the War on Terror.

Agnostic: No Child Left Behind, Immigration.

Thoughts/Suggestions?!?

Obama Adminstration Negotiates Nuclear Bailout Deal with Iran

by. Irving Peter Freely

WASHINGTON -- Declaring the World's Largest Sponsor of Terrorism "too big to fail," U.S. President Barack Obama today announced the Iranian Nuclear Reinvestment Act of 2009.  The controversal deal, opposed by Republicans, will commit the U.S. Government to funding the Iranian nuclear program through the end of 2010.  The Iranian Nuclear program had become a causalty of the global credit crisis and lower oil prices.

"In this time of global economic crisis," President Obama announced today, "when we stand on the edge of catastrophe, Vice President Biden, Secretary Geithner and Iranian president [Mahmoud] Ahmedinejad have negotiated a deal that should allow us to create or save over 400 jobs in the Iranian Nuclear Sector.  Given the unprecedented nature of the pressures Iran faces, not acting is simply not an option."

The deal is expected to meet resistance on Capitol Hill.

"Is the President serious?"  Asked Rep. Eric Cantor (R-VA), a member of House Republican Leadership.

"The American People do not want us to send billions of dollars to prop up the nuclear program of a country that regularly declares it's intention to destroy the United States of America," said Rep. Mike Pence (R-IN).

Not all members of Congress feel this way.

"I find it appaling that Herbert Hoover Repubilcans would follow Rush Limbaugh's marching orders to obstruct this crucial economic and national security measure in order to justify their own failed policies," said House Speaker Nancy Pelosi (D-CA).

"Who do these Republicans think they are?" asked Sen. Chuck Schumer (D-NY), "When the administration negotiates a bailout deal in secret with our enemies, they expect a certain amount of support from the United States Congress.  These Herbert Hoover Republicans seem to think that the Iranian nuclear program will survive if we do nothing.  These Republicans don't understand that real people work in the Iranian nuclear program."

While Republicans are anticpated to largely oppose the deal, Democrats expect the measure to pass largely along party lines, although moderate Sen. Arlen Specter (R-PA) is expected to support the administration.

"I just think that, given the size of the current crisis, we have to do something even if this approach isn't my first choice", Specter said this week on the Sean Hannity Radio show.  "I gave my word to the Senate Leadership and I intend to keep it."