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OpenMarket: Subsidies and Bailouts

  • Auto Industry Expert: “Romney’s Plan Also Would Have ‘Saved’ Detroit"

    November 5, 2012
    Earlier, we noted that the auto bailouts temporarily look more successful right now than they likely will be in the long-run since Toyota's bogus safety issues, and a series of massive natural disasters that temporarily devastated Japanese automakers, gave General Motors only a temporary advantage over...
  • Chrysler And The Cratering Credit Rating Of Fiat

    November 2, 2012
    My piece yesterday in The Daily Caller, "The Real Fiat Scandal," spotlights the real threat to Chrysler's prospects in the immediate and long term: Fiat's cratering credit rating caused by its bloated workforce in Italy and sinking auto demand in Europe due to the European fiscal crisis. As Barron's put it in a headline, "This time, Chrysler could bail out Fiat." Actually, as I write with former CEI Research Associate Mark Beatty in the piece, Fiat didn't contribute much of anything to Chrysler's bailout "last time." "In the 2009 deal overseen by the Obama administration’s auto task force, Fiat paid no money to acquire its initial 20 percent stake in Chrysler — only contributing some of...
  • Did Bush Save General Motors? Obama Messed Up Chrysler

    November 2, 2012
    If you accept the dubious logic the federal government "saved" the auto industry (which requires ignoring other things that rescued General Motors, such as the Japanese earthquake and tsunami, and Thai floods, that battered its Japanese competitors, and ignores how government red tape weighs down the auto industry), then you have to give the credit primarily to President George W. Bush, not President Obama. PolitiFact leaves out Bush, and refers to the bailouts as Obama's "rescue of the auto industry," in a flawed recent "fact-...
  • On Halloween, Euro Politics Fit Right In

    October 31, 2012
    All the usual characters are present this Halloween night across the Atlantic. But European leaders doing the trick-or-treating aren’t getting the sweet sugar fix they crave, as I write in RealClear Markets:
    [M]any Europeans aren't getting treats this Halloween. That's because the German and ECB houses on the block are handing out austerity apples. And only one type of trick-or-treater eagerly takes those: the nice polite ones who showed up early and go home to do their homework.
    Get the full lowdown on Europe’s list of neighborhood Halloween visitors here.
  • Southern European Bailouts Must Focus On Reform

    October 18, 2012
    As European leaders meet in Brussels this week for a summit on the future of European integration, bailouts for the south will be heavy on their minds. Rescue funding for Greece’s heavily indebted government and Spain’s bust banking sector are sore topics of debate by now, but debate will continue nevertheless. Greece has missed, again, the preconditions for releasing its next tranche of bailout funds. I explain why in the City A.M.
    Greece has become complacent about making necessary structural changes, having received two bailouts, interest rate support from the European Central Bank (ECB), and an internationally sanctioned private debt restructuring earlier this year. It has failed to reform its public sector, privatise state-owned companies, increase...
  • Mother Nature And Good Luck, Not Big Government, Saved General Motors... For Now

    October 15, 2012
    There are lots of claims that the federal government saved the American auto industry by bailing it out. (Never mind that Ford didn't get a bailout, and "foreign" companies such as Honda and Toyota make many of their cars in America.) Critics of the bailout make the valid point "any company can be kept afloat indefinitely with taxpayer subsidies." They also say the bailouts have resulted in GM becoming politicized and "s...
  • Suffocating Athena: Public Sector Unions Kill Greek Salvation -- Again

    October 4, 2012
    On October 1, the Greek government unveiled an austerity package that aims to reduce public spending by $15 billion (11.5 billion euros) for 2013-2014, which includes cuts to welfare as well as salaries and pensions of government employees. The reductions are necessary to receive a 31.5 billion euro installment from the 130 billion euro (second) bailout that has been keeping Greece’s head above the wine-dark sea. The International Monetary Fund, European Commission, and the European Central Bank, collectively referred to as the Troika, have assured that no more money will be given without credible steps being taken to ensure a sound investment. As necessary as the measures are, unions are pitching a fit at the thought of decreased government funding. Two of Greece’s largest unions called for...
  • The Real Spanish Bank Bailout Cost: 113 Billion Euro

    October 1, 2012
    Don’t be fooled by the optimism overflowing from the stress test of Spain’s banking system released on Friday. American Consultancy Oliver Wyman, which performed the test under the steering committee tasked with assessing Spain’s bank recapitalization, uses two disingenuous assumptions to drastically underestimate banks’ financial needs by up to a whopping 60 billion euro. Cries of relief that Spain will not have to request rescue funding in excess of the 100 billion euro in already granted European aid are suspect at best. The Wyman report offers two different scenarios spanning the course of 2012-2014 -- one baseline and one adverse. Media focus has centered upon the adverse case, which is the projected upper bound of a potential bailout’s size. That figure is 53.75 billion euro. Unfortunately, this...
  • State Pension Bailout Threat

    September 24, 2012
    The state pension underfunding crisis has grown so severe that it has prompted most U.S. states to cut benefits, according to calculations by The Wall Street Journal and Boston College's Center for Retirement Research. However, cuts to date have only put a $100 billion dent in a nationwide funding gap of $900 billion. Clearly, states need to do more to lower their pension liabilities. Government employee unions are bound to oppose further proposals to curb benefits or increase employee contributions toward their pensions. For lawmakers in some states, this will make reform a harder sell. In the case of Illinois, Governor Pat Quinn (D) seems willing to give in to union demands from the get-go. In his 2012 budget proposal, he raised the idea of...
  • The European Central Bank's Losing Game Of Chicken

    September 21, 2012
    European Central Bank (ECB) President Mario Draghi is losing a game of chicken with the Euro Area’s distressed peripheral countries. Earlier this month, Draghi announced that the ECB would buy an “unlimited” amount of Euro Area sovereign bonds provided that the distressed party follows austerity conditions set forth by the European Stability Mechanism (ESM). But countries like Spain, Italy, Portugal, and Greece are content to continue evading painful reform while eeking-out bailout funding from the Eurozone core. Since the financial crisis hit European shores in early 2009, the ECB maintained that it would not bailout indebted sovereigns or banks. Such is consistent with the central bank’s mandate...


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