December 14, 2008In early 2007, the economy was humming along and General Motors was considered to be in the process of a turnaround. To help stabilize itself, the company was considering buying its smaller, money-losing rival Chrysler.
December 11, 2008In a famous quotation from his 1986 address to the annual White House Conference on Small Business, President Ronald Reagan quipped that "government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
The Detroit bailout bill that passed the U.S. House of Representatives last night -- agreed to by the White House and Democratic leaders but at this point apparently without enough Republican support to survive a filbuster in the Senate -- is unique in that it fulfills all three of the government actions Reagan describes in one fell swoop. All it once it not only subsidizes U.S. automakers, it subjects them to heavy regulation as well...
December 8, 2008Eli, in answer to the blog post you phrased as a question, the argument from the individual you heard, echoed by other Big 3 execs, is not a valid point in support of a bailout.
Their claim that consumers won't buy from an automaker in bankruptcy is a specious argument. Yes, some won't, but many consumers also are not going to buy cars from companies perceived to be so weak that they have to beg for a bailout from the government. A company's clutching to a government lifeline to keep from going bankrupt wouldn't be that much different for many car buyers than an actual bankruptcy.
This is particularly true if the government forces the companies, as a condition of the bailout, to make "environmentally correct" cars that no one really wants. A company emerging from a Chapter 11 bankruptcy, by...
December 4, 2008Today at noon Eastern time, I will enter the lion's den.
I will be live in the New York City studios of liberal network Air America having a friendly discussion about deregulation on The Thom Hartmann Program. Hartmann, author of books such as ""Screwed: The Undeclared War Against the Middle Class," usually broadcasts form Oregon, and when I'm guest I have joined him by phone. But today, he's broadcasting form the home office and I will be joining him live and in person.
Hartmann is tough but friendly, and the last couple times I've been on his show, we've actually sort of agreed on the issues. The civil libertarian in him and me both strongly objected to the...
November 28, 2008In the debate about bailing out the Big 3 automakers, it is said that we just can't allow a bankruptcy. Despite the fact that Chapter 11 bankruptcies have taken place for retailers such as Circuit City and many airlines such as U.S. Airways, autos are said to be different because of the duration of time that people hold on to their cars for.
Horrific senarios are painted of consumers not being able to get parts for their automobiles if manufacturers are no longer in existence. But of all the many admittedly complicated aspects of a bankruptcy of General Motors (the company the Congressional hearings established was in the most trouble), these consumer issues provide the least reason for worry.
In a Chapter 11 bankruptcy, GM would most likely be reorganized into a new company, sans the current management and heavy costs. This is something that has proved impossible so far due to lax...
November 21, 2008If news accounts are true, and Presidet-Elect Barack Obama has indeed decided on Timothy F. Geithner to be his Treasury Secretary nominee, it represents a giant step away from Obama's promise of "change you can believe in."
The Geithner nomination would be "more of the same" in almost every respect -- more bailouts, more lack of transparency in the bailouts, and more corporate welfare. Geithner was the architect of the Bear Stearns bailout and cohort of Treasury Secretary Paulson in American International Group and the TARP bailouts. In choosing Geithner, Obama might as well have nominated Hank Paulson to another term!
Geithner's financial qualifications are in many respects quite thin. He has never been a banker nor an academic economist. As liberal columnist Robert Kuttner noted recently...
November 20, 2008President-Elect Barack Obama just nominated former Senate Democratic Leader Tom to be his Secretary of Health and Human Services. Much is being written about Daschle being a Washington insider, which he certainly is, but after leaving the Senate after his defeat in 2004, Daschle has commendably taken on the Beltway conventional wisdom on an important issue: The Sarbanes-Oxley accounting mandates.
In late 2005, Daschle became one of the first Democrats to criticize the 2002 law, rushed through Congress in the wake of the Enron and WorldCom falures, for its unintended consequences on entrepreneurs. In doing so he helped make the cause of Sarbox relief and reform biparisan. In a Wall Street Journal...
November 12, 2008Today, in addition to Treasury Secretary Henry Paulson's expected announcement of a major mortgage modification plan through the $700 billion TARP, Barney Frank's House Financial Services Committee is holding a hearing entitled "Private Sector Cooperation with Mortgage Modification." However, despite the word "cooperation" in its title, it's clear from letters Frank and others sent out that the hearing will be confrontational rather than cooperative. Specifically, Frank and some fellow committee members seek to villify investors in mortgage-backed secuties who assert their property rights under contracts with banks servicing the mortgages.
The harsh tone was set in a letter that Frank and fellow...
October 31, 2008As soon as the elections are over, Congressional leaders are planning to have a "break the bank" party. On top of the $700 billion bailout that unfortunately both Republicans and Democrats supported, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid plan to call Congress back into a "lame duck" session in mid-November to pass a $300 billion "stimulus" package. The attitude seems to be, what's $300 billion for "Main Street" after we just approved $700 billion for Wall Street fat cats?
But all the package is really likely to do is add $300 billion to Main Street's public debt without spurring economic growth. There is no reason to believe that the hodgepodge of programs Pelosi and Reid want the stimulus to fund -- from food stamps to unemployment benefits to infrastructire -- will be any more successful at jumpstarting the economy than the hundreds of billions spent...
October 14, 2008Since the $700 billion bailout was first proposed, whatever the stock markets did, much of the press took that as a sign that the market wanted more government intervention. The markets sinking on Sept. 29, the day the House voted down the first bailout bill (although much of the sinking was before the bailout was defeated), was a sign that markets needed the bailout. Then, when it went up about 500 points the next day, it was somehow explained as anticipation of Congress passing a new bailout.
The press was somewhat at a loss for words when the market tanked all last week, just after the bailout had been passed. But yesterday, when the Dow Jones Industrial Average zoomed up 900 points, the explanation was that the markets just loved the forthcoming global bailouts and partial nationalizations. Comedy Central's Stephen Colbert, as he so often does, cleverly mocked this conventional...