50 years of progressive rule, a $60 billion bailout of of General Motors and Chrysler and the $800 billion 2009 American Recovery Act (aka Porkulus) have brought us to this point:
With $320 million of federal, state and private aid in hand, top White House officials came to Detroit and vowed to help the bankrupt city fight crime, improve mass transport and eradicate blight.
The money is mostly grants from federal or state programs for which the city is qualified, or for which it needed red tape cut to speed access. Some is expected from private businesses and philanthropy groups. President Barack Obama also has appointed Don Graves deputy assistant secretary of the U.S. Treasury Department, to oversee Detroit’s recovery, said Gene Sperling, director of the National Economic Council.
“We only have one goal, and that is to have all of Detroit working together for one Detroit, with the Obama administration as a key partner,” Sperling said today.
The city, once an auto-manufacturing powerhouse, declared the largest U.S. municipal bankruptcy in history on July 18 after years of decline in which its population fell by more than half, to 700,000 from 1.8 million. The city has more than $18 billion in long-term obligations and is plagued by unreliable buses, broken street lights and long waits for police and ambulances.
(italics, ours)
It would appear that Detroit will be "saved" by some other rationale than "too big to fail".
Make no mistake about it: Detroit being the model progressive city ruled for years by a collective of statists and public employee and private labor unions, this administration will throw their political capital and your tax dollars to whatever extent they can, not necessarily to save Detroit but to salvage a failed ideological model.
Did we say public employee unions? Why, yes we did...
I’m rarely speechless, but I’m having trouble putting my emotions into words after reading the latest report on the Detroit pension situation. Now, I admit it: I’m kind of naïve. Usually when I see an underfunded pension, I think to myself “poor pensioners -- undone by a combination of stupid tax rules, volatile stock markets and mismanagement by trustees who tried to restore depleted fund assets with an investment approach you might call ‘desperate optimism’." Thus, I was not entirely prepared for the new revelations about the Detroit trustees’ custom of handing out annual holiday “bonuses” to workers, retirees and the City of Detroit. Between 1985 and 2008, they handed out roughly $1 billion this way. Had they been invested, one estimate says those funds would be worth almost $2 billion today -- or more than half the current shortfall in the funds.
These “bonuses” were used to lower the contribution the city was required to make, to give retirees a little something extra around Christmas time, and to fund individual savings accounts that workers are offered along with their pensions. In 2009, when the financial markets were completely frozen and the automakers were shotgunning through the bankruptcy courts, the pension trust paid 7.5 percent interest into those accounts -- which is about 7.5 percent more than they would have gotten at a bank. This while the pension funds were busy losing about a quarter of their value.
(italics, ours)
Color us naive, as well. That money that was used to cover the city of Detroit's contribution shortfalls had to come from somewhere, right?
Well, now it looks as if it's coming from yours and our pocketbook. Fancy that.
Remember, this isn't about saving Detroit rather saving face.
During the Democratic National Convention last week, Team O took great pains to avoid the American Recovery Act of 2009 (aka Porkulus) which cost the American tax-payer upwards of $800 billion and which had little noticeable effect on the private sector economy and the health-care reform act (aka ObamaCare), instead choosing to focus on the killing of Bin Laden and the auto bailout of General Motors and Chrysler.
As loyal subjects American citizens, we’d love to do our part in getting the word out (well, we have been already, if you are familiar with this blog) and in this case, it is with respect to the Chevy Volt.
General Motors Co sold a record number of Chevrolet Volt sedans in August — but that probably isn't a good thing for the automaker's bottom line.
Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.
Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.
And while the loss per vehicle will shrink as more are built and sold, GM is still years away from making money on the Volt, which will soon face new competitors from Ford, Honda and others.
GM's basic problem is that "the Volt is over-engineered and over-priced," said Dennis Virag, president of the Michigan-based Automotive Consulting Group.
They are over-priced even with the $7,500 tax payer-provided subsidy.
And no wonder people are leasing instead of buying. Who wants to fork over another 10 grand in 5-7 years when that battery needs to be replaced?
GM's quandary is how to increase sales volume so that it can spread its estimated $1.2-billion investment in the Volt over more vehicles while reducing manufacturing and component costs - which will be difficult to bring down until sales increase.
But the Volt's steep $39,995 base price and its complex technology — the car uses expensive lithium-polymer batteries, sophisticated electronics and an electric motor combined with a gasoline engine — have kept many prospective buyers away from Chevy showrooms.
Some are put off by the technical challenges of ownership, mainly related to charging the battery. Plug-in hybrids such as the Volt still take hours to fully charge the batteries - a process that can been speeded up a bit with the installation of a $2,000 commercial-grade charger in the garage.
Another $2,000 you can sink into battery technology whose price won’t decline appreciably in the near or mid-term as long as China has an effective corner on the lithium-ion and rare earths market that are essential for these batteries.
Oh, and the greenies haven’t shared with us how it is we are to dispose of these batteries.
Back to the article:
"I don't see how General Motors will ever get its money back on that vehicle," countered Sandy Munro, president of Michigan-based Munro & Associates, which performs detailed tear-down analyses of vehicles and components for global manufacturers and the U.S. government.
It currently costs GM "at least" $75,000 to build the Volt, including development costs, Munro said. That's nearly twice the base price of the Volt before a $7,500 federal tax credit provided as part of President Barack Obama's green energy policy.
Other estimates range from $76,000 to $88,000, according to four industry consultants contacted by Reuters. The consultants' companies all have performed work for GM and are familiar with the Volt's development and production. They requested anonymity* because of the sensitive nature of their auto industry ties.
Basic math, even that taught in California’s public schools, will tell you that selling a product for half the amount it took to produce it will not reap your company its intended profits.
With apologies to the voters of Michigan and Ohio, don’t expect to hear anything but happy-speak out there on the campaign trail when one doesn’t have to scratch too far beneath the surface to get to the ugly truth of the auto bailouts.
* Allow us to translate: As long as the U.S. Government still owns a large share of General Motors, we don't want those thugs in this administration knowing it was us sharing the bad news.
Remember, gang, General Motor's sagging fortunes aren't just a result of weak sales here stateside; they've got an entire European operation that is an additional millstone around its neck.
Three years into their forced marriage with GM, the American taxpayers have seen the value of their investment in GM deteriorate by approximately $24 billion, largely due to continuing European losses. Exposure in Europe has contributed to crushing the value of GM's stock due to its chaotic and failing Opel unit in Germany. While government, journalists and Wall Street sympathizers have given the Obama Administration and GM leadership an almost incomprehensible pass on this value destruction and massive loss (presumably due to the macro-economic nature of the crisis), it's time to call for the accountability that this new Board was supposedly going to deliver.
At one time, General Motors had an opportunity to sell off GM Europe so they could consolidate, trim some non-essentials, focus on core competencies, you know, the stuff that corporations do when they are in bankruptcy. Didn't quite happen that way:
Overlooked is the value-destroying, cash-sucking disaster that is GM Europe was packaged and ready for sale to new European buyers in 2009 before the new Obama GM Board of Directors slammed the brakes on the deal, throwing GM into its current value free-fall. In fact, the decision to not sell the Opel operations (which has not been profitable for more than a decade) in 2009 after GM cleared bankruptcy was the very first major decision of the new Obama Board. Had Opel been sold, GM stock would be much higher than it is today.
So, we weren't merely content to bailout an under-performing U.S. manufacturer, we were going to bail out those of Europe as well.
But the "new and improved" Obama Board of Directors, working mostly at the persistent lobbying and urging of the UAW's appointee, Steve Girsky (in photo), were naively convinced that Opel was simply a rough jewel in need of some new leadership (Opel fired its third leader in as many years a few weeks ago) and TLC from the brain-trust in Detroit. With his persuasive lobbying, the union's man Girsky convinced all but two of the Board members to vote to ditch the planned sale and hold onto this "gem" that has now contributed to the loss of about $24 billion of the American taxpayers' forced investment. Beyond the sheer magnitude of the value losses, fixing Europe has become an all-consuming distraction that is draining GM of vital and scarce resources.
Linked article describes how GM CFO Dan Amman hemmed and hawed during last quarter's earnings coference call and never came clean with respect to how much American taxpayer money was going towards the failing Opel and Peugot operations.
Your anger would be totally understandable given that a public-private entity is mum on how much of your scratch is being thrown around an entirely different continent let alone here in our own backyard.
So, with such dismal news for General Motors, what's in the offing? Another bailout?
President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.
This wouldn't surprise us. If their bailout efforts failed the first time around, by their reckoning, a second bailout is fully warranted. We hate to say it, but contrary to what you may have been told, these aren't terribly smart people. They just aren't. Smart people learn from their mistakes and there has been nothing in these last 3-1/2 years that has demonstrated that they have learned anything from their miserable failures in the U.S. economy.
President Obama, while villifying Mitt Romney for opposing the auto industry bailout, bragged about the success of his decision to provide government assistance and said he now wants to see every manufacturing industry come roaring back.
“I said, I believe in American workers, I believe in this American industry, and now the American auto industry has come roaring back,” he said. “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.
“I don’t want those jobs taking root in places like China, I want those jobs taking root in places like Pueblo,” Obama told a crowd gathered for a campaign rally at the Palace of Agriculture at the Colorado State Fairgrounds here.
(He's letting his Peronism show and we don't think he cares because that's who he is. Apparently, green loan programs for not-yet-market-ready technology isn't nearly enough, these days.)
We think we get it: The President wants to sink tens of billions of tax-payer dollars into the manufacturing sector with scant hope of ever seeing it returned dollar-for-dollar while giving the shaft to non-union pensioners as he did to the Delphi retirees who are in process of suing his administration's ass for their trouble. That's kind of the playbook, right?
And we're glad we held off on blogging about this because we are seeing more evidence of the "success" of the General Motors bailout as the Treasury Department released some rather impolite news on Friday:
The Treasury Department says in a new report the government expects to lose more than $25 billion on the $85 billion auto bailout. That's 15 percent higher than its previous forecast.
In a monthly report sent to Congress on Friday, the Obama administration boosted its forecast of expected losses by more than $3.3 billion to almost $25.1 billion, up from $21.7 billion in the last quarterly update.
The report may still underestimate the losses. The report covers predicted losses through May 31, when GM's stock price was $22.20 a share.
On Monday, GM stock fell $0.07, or 0.3 percent, to $20.47. At that price, the government would lose another $850 million on its GM bailout.
GM stock would need to get to $53/share for the U.S. tax-payer to break even. That's not happening. As it stands now, if the government were to dump all of its shares at the current price, the tax-payer would lose more than $16 billion on the GM bailout. Obviously, not 3 months in front of the election, that's not happening either, so not only are we're stuck with this turkey of an "investment", we have the economic illiterate currently in the White House doubling down on the same stupidity.
Last line of linked article:
GM CEO Dan Akerson told employees at a town hall meeting Thursday that the company was working to take actions to boost the automaker's sagging price.
Gee, can't wait to see what that's going to be and more importantly, how much it's going to cost us.
At our very first tea party rally in the spring of 2009, someone stuck a mic in our face and asked us why we were there. We had nothing prepared but it didn't take any deep thinking to know that what was being sold to the American public as a response to the recession was not going to work as it was simply more of the same:
"We're here because we were told that we got into this mess because we borrowed and spent beyond our means and now we are being told in order to get out of this mess we need to borrow and spend beyond our means".
This isn't 2007 and it doesn't appear people have learned anything from what got us into this debacle starting 4-5 years ago.
President Obama has touted General Motors (GM) as a successful example of his administration's policies. Yet GM's recovery is built, at least in part, on the increasing use of subprime loans.
The Obama administration in 2009 bailed out GM to the tune of $50 billion as it went into a managed bankruptcy.
Near the end of 2010, GM acquired a new captive lending arm, subprime specialist AmeriCredit. Renamed GM Financial, it has played a significant role in GM's growth .
The automaker is relying increasingly on subprime loans, 10-Q financial reports shows.
Potential borrowers of car loans are rated on FICO scores that range from 300 to 850. Anything under 660 is generally deemed subprime.
GM Financial auto loans to customers with FICO scores below 660 rose from 87% of total loans in Q4 2010 to 93% in Q1 2012.
The worse the FICO score, the bigger the increase. From Q4 2010 to Q1 2012, GM Financial loans to customers with the worst FICO scores — below 540 — shot up 79% to more than $2.3 billion. The second worst category, 540-599, rose 28% from about $3.4 billion to $4.3 billion.
To be fair, we would like to know what other auto lenders are doing such as those affiliated with Toyota and Ford, companies that did not receive bailouts.
Is is it possible that subprime loans are being made simply because the recession has cut so deeply that not many people's credit has been able to be restored?
As it stands, a company in which we have sunk billions with scant hope of ever getting it back is engaging in the same risky practices that sunk our economic house of cards 4 years ago.
A geothermal energy company with a $98.5 million loan guarantee from the Obama administration for an alternative energy project in Nevada — which received hearty endorsements from Energy Secretary Steven Chu and Senate Majority Leader Harry Reid — faces financial problems, and the company’s auditors have questioned whether it can stay in business.
Much like Solyndra LLC, a California solar-panel manufacturer with a $535 million federal loan guarantee that went bankrupt, Nevada Geothermal Power (NGP) has incurred $98 million in net losses over the past several years, has substantial debts and does not generate enough cash from its current operations after debt-service costs, an internal audit said.
“The company’s ability to continue as a going concern is dependent on its available cash and its ability to continue to raise funds to support corporate operations and the development of other properties,” NGP auditors said in a financial statement for the period ending March 31.
“Consequently, material uncertainties exist which cast significant doubt upon the company’s ability to continue as a going concern,” the statement said.
(italics, ours)
So, we are being told that NGP's ability to continue as a going concern is dependent upon factors other than actually turning a profit. Good to know.
Mr. Reid, a Nevada Democrat who led passage of the $814 billion stimulus bill and worked to include the loan guarantee program to help finance clean-energy projects, predicted in 2010 that NGP would “put Nevadans to work” and declared that Nevada was the “Saudi Arabia of geothermal energy.”
Comparing your state to a country that hands out checks to its citizens because of all that oil they're sitting on begs the question of why NGP would need tax-payer assistance in the first place.
Cue the evil Republicans:
But Rep. Jim Jordan, Ohio Republican and chairman of the House Oversight and Government Reform subcommittee on regulatory affairs, stimulus oversight and government spending, is concerned about NGP’s finances and the timing of the loan guarantee.
“The company was in danger of defaulting on its financial obligation, and the [Department of Energy‘s] assistance served as a de facto bailout,” Mr. Jordan said. “After receiving a taxpayer-backed $98.5 million loan guarantee, the company is still struggling.”
He said the loan guarantee “essentially served to prop up an already-faltering firm.”
We thought the following was of particular interest:
Mr. Jordan said the Energy Department handed out more than 20 loan guarantees to companies with an average credit rating of BB-, or “junk status,” meaning they were vulnerable to default if economic or business conditions changed. NPG was rated BB+, which is considered speculative or junk and a step below investment grade.
Mr. Jordan and Mr. Issa have questioned why taxpayer money was “put at such risk.”
That pretty much sums up why this DOE green loan program is such a disaster. Where you wouldn't waste a wooden nickel of your own scratch on junk-rated investments, the DOE, because it has no real skin in the game - it's not like it's coming out of their hide, is more than willing to pour billions of tax-payer dollars down the drain.
The next time you hear the President drone on about "investing" in the future with respect to clean/green energy, recall the rule our chow hall table captain laid down during our first year at Seminary regarding his ban on steak sauce: "Good steak don't need it and bad steak don't deserve it."
(As promised, we are re-running this post from just over two years ago to remind everybody of just what an odious sham were the auto bailouts and in specific the manner in which the TARP funds (funds, by the way, that were never intended for the auto industry in the first place - remember, they were tabbed for the financial sector, only) were paid off. The thuggish history of this administration and its enablers needs to be recalled as often as possible prior to the November elections.)
(Please scroll to bottom for update)
So, General Motors and its folksy CEO, Ed Whitacre, have paid off GM's TARP bailout money? What an incredible turnaround. If by "turnaround", though, you mean paying off your Visa card debt with your Mastercard.
All evidence points to the fact that GM is using a separate TARP line of credit to pay off its primary TARP debt.
During an April 20 hearing on Capital Hill, Sen. Tom Carper, (D-Del.) asked some pointed questions of Neil Barofsky, the “special watch dog” on the Wall Street Bailout, aka, TARP.
It’s good news in that they’re reducing their debt,” Barofsky said of the accelerated GM payments, “but they’re doing it by taking other available TARP money.”…
“It sounds like it’s kind of like taking money out of one pocket and putting in the other,” said Carper, who got a nod of agreement from Barofsky.
“The way that payment is going to be made is by drawing down on an equity facility of other TARP money.”
Senator Charles Grassley (R-Iowa) went off on the Obama administration and the TARP shell game in a letter sent to two-time tax cheat and tax collector-in-chief, Tim Geithner using Barofsky's testimony to level the credible claim that GM was not using GM earnings to pay off TARP debt but rather TARP funds from an escrow account at Treasury to make the debt repayments.
When these criticisms were put to GM’s Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:
Question: Are you just paying the government back with government money?
Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d be able to pay this back.
Unbelievable. Dude actually wants some sort of recognition that GM was able to pay off tax payer-funded debt with... tax payer funds.
This is the first acknowledgement that we are aware of a shadow TARP. As if the publicly-known TARP wasn't bad enough there is a subterranean TARP that is backing the initial TARP.
This simply re-enforces our sentiment that we will never in our lives purchase a GM or Chrysler product. These people are straight-up gangsters. There is no other word to describe them and their actions to deliberately deceive and forcibly misuse U.S. tax payer dollars.
We believe this instance provides sufficient cover to get your hate on.
H/T: Hot Air
(UPDATE #1): This time, we lie! Much like GM's false claim that they have paid off its TARP debt with actual earnings, there is no actual update.
We originally posted this over the weekend, when readership is down a bit but we wanted to resurrect it during the week to highlight the sheer audacity of General Motors. The federal government is entirely complicit in what we can only tag as gangster capitalism. The government takeover and bankruptcy proceedings that screwed over the secured creditors in favor of the labor unions was executed in a thuggish manner and now the GM/federal government partnership openly displays their contempt for the American public by running an ad during the NBA playoffs patting itself on the back for a job well done.
We may re-run this post again next week. And the week after that. Whatever we have to do to ensure that we never forget what little regard this administration has for your interests and your tax dollars.
Frank Rich, Paul Krugman and the rest of the intelligentsia of this country may disagree with the politics of those who have opposed the bailouts but that they cannot at least understand where this anger may be coming from, again, speaks to a widening disconnect in this country between the taste-makers and those who are actually footing the bill for this fiasco.
(UPDATE #2): Reason TV's Nick Gillespie takes about as much time to explain the shell game that is General Motor's "paying off" its TARP debt as the GM commercial.
Again, the sheer gall that Government Motors has in running this outright lie will compel us to update this regularly or repost from time to time whether or not there is an actual update.
(UPDATE #3): The nation's paper of record is now on the beat.
AS we inch closer to a clearer understanding of the products and practices that unleashed the credit crisis of 2008, it’s becoming apparent that those seeking the whole truth are still outnumbered by those aiming to obscure it. This is the case not only on Wall Street but also in Washington.
Truth seekers the nation over, therefore, are indebted to Senator Charles E. Grassley, Republican of Iowa, who in recent days uncovered what he called a government-enabled “TARP money shuffle.” It relates to General Motors, which on April 21 paid the balance of its $6.7 billion loan under the Troubled Asset Relief Program.
G.M. trumpeted its escape from the program as evidence that it had turned the corner in its operations. “G.M. is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse,” boasted Edward E. Whitacre Jr., its chief executive.
G.M. also crowed about its loan repayment in a national television ad and the United States Treasury also marked the moment with a press release: “We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,” said Timothy F. Geithner, the Treasury secretary.
Taxpayers are naturally eager for news about bailout repayments. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan.
The CBO estimates we will lose about $30 billion on the GM bailout. And in the article, GM officials are outrageously outraged that anybody would suspect that they are doing anything untoward with taxpayer money. Not that they are specifically denying doing anything untoward.
Greg Martin, a G.M. spokesman, said the company had made no misrepresentations about its repayment. “The bottom line is, our strong business performance has put us in the position that we don’t need these funds,” he said, referring to the cash in the escrow account. “G.M. is performing much better than anyone expected and that does represent a significant milestone for the company.”
And Ron Bloom, senior adviser to Mr. Geithner, bristled at Mr. Grassley’s criticism. “The Treasury Department has tried to be as straight as humanly possible,” he said in an interview. “We have never not been clear about exactly what we paid, exactly the terms of the investment. I’m finding it hard to find anyone obfuscating about this.”
(italics, ours)
They don't need the (TARP) funds... except that they need the funds to pay off the TARP debt.
We'll spare you the righteous indignation this time around because it's all there in black and white. A nice big F-you from General Motors leadership to the U.S. taxpayers.
Andrew Napolitano and his panel on "Freedom Watch" take on the Davos Dodos of the ski party, one in the same that we did here, and yet another round of Keynesian gimmickry to keep people who are underwater in their homes still further forestalling a true housing recovery.
"It's kind of grotesque that the government is coming in and abrogating privity of contract."
And even more grotesque when you can say it with an indignant British accent.
If compelling banks to write down home loans sounds familiar, it should, as we have been down this road before back at the beginning of the Obama administation in January of 2009.
With the help of Martin Scorcese, no less, here is what we wrote about it at the time which illustrated not only the non-sensicalness of it but more importantly, the moral hazards inherent to the cozy private-public relationships in Bailout Nation:
The legislation, which is being advanced by top Senate Democrats, would let judges set new repayment terms for mortgage holders in bankruptcy court. Lawmakers say the measure is aimed at jump-starting broader efforts to renegotiate millions of underwater mortgages now weighing down the housing market.
To better help illustrate what you just read, we call in Academy Award-winning director Martin Scorcese and his outstanding movie Good Fellas. In this scene, a restaurant owner needs some financial help and needs some protection from the cops, other wise guys, people who don’t pay their bills, etc., so he goes to the local crime boss and talks him into going in as partners. Great. The restaurant owner is now partnering up with the local muscle. Good times, right? What could possibly go wrong?
In this clip, Citigroup is the restaurant owner and “Paulie” is the Federal Government.
Wow. That didn’t end too well, now did it?
Maybe now, you are beginning to get an idea of why this bailout business was such a bad idea from the get-go. We’re not Wall St. experts but perhaps the reason why Citigroup dropped its opposition to this legislation is because “Paulie” is into them for $45 billion.
Until recently, Citigroup had fiercely opposed proposals to give bankruptcy judges latitude to change the terms of mortgages. Its about-face comes after the federal government has pumped $45 billion into the company since last fall. The government is now keeping the company on a tight leash.
Just. like. that.
Let that last line linger for a moment. Taste it again. Let it roll over your palate like vinegar.
Citigroup danced with the devil and lost. They never had a chance. Now that they are the Feds’ lap dog and a newly-minted GSE, any hopes they had of exercising any independent decision-making pretty much just blew right out the window.
And that money that the lenders will be losing with the “restructured” loans will have to made up from somewhere, right? But, where? The first logical place would be to charge higher interest rates for new home loans… but if those higher interest rates are not competitive then Citigroup cannot offer their money for these loans which could then ultimately lead to… if you were going to complete this sentence with “bankruptcy”, you haven’t been paying attention… even more of your tax dollars going to pay for other people’s home loans.
The lynchpin of free enterprise and capitalism: the contract – a contract between two independent entities spelling out the terms for an exchange of goods, services, money and which is bound by law is about to become a thing of the past.
In its place, a capricious set of variables set forth by some who are on the take from the very people they are overseeing and and who are dispensing this power in an arbitrary fashion as they see fit. (ed. note: remember what the British chap said about grotesquness)
We hope we are being guilty of hyperbole, but of all the ridiculous non-sense we have seen and heard with respect to Bailout Nation, this was the first instance that sent shivers down our spine. We welcome cheerful thoughts and comments.
3 years on and nothing has been learned. 3 years on and it's all still business as usual.
Recall how Team O wants to make the General Motors bailout, the one that will cost taxpayers tens of billions of dollars when all said and done, a centerpiece of their re-election campaign and how GM isn't, for obvious reasons, thinking that is not such a hot idea? Well, chalk up yet another reason why bringing attention to such a smashing success may backfire.
New emails obtained by The Daily Caller contradict claims by the Obama administration that the Treasury Department would avoid “intervening in the day-to-day management” of General Motors post-auto bailout.
These messages reveal that Treasury officials were involved in decision-making that led to more than 20,000 non-union workers losing their pensions.
Republican Reps. Dan Burton and Mike Turner say that during the GM bailout, Treasury Secretary Timothy Geithner decided to cut pensions for salaried non-union employees at Delphi, a GM spinoff, to expedite GM’s emergence from bankruptcy.
At a Wednesday hearing, the House Oversight Committee’s Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending started pushing the Treasury Department for answers on the effects of the bailout and on how much of a role the department played in picking winners and losers.
The key point of the Wednesday hearing was to show that the Obama administration advised GM on how to eliminate the Delphi workers’ pensions. The evidence suggests Geithner’s team played a significant role in that process, despite claims to the contrary.
In 2009 congressional testimony, senior Obama administration official Ron Bloom said the president told the Treasury Department to stay out of the management of these companies and downplayed any administration intervention.
“From the beginning of this process, the President gave the Auto Task Force two clear directions regarding its approach to the auto restructurings,” Bloom said then. “The first was to behave in a commercial manner by ensuring that all stakeholders were treated fairly and received neither more nor less than they would have simply because the government was involved. The second was to refrain from intervening in the day-to-day management of these companies.”
We know that first directive was a crock as the unions were shoved to the head of the line ahead of secured creditors in the bankruptcy divvy-up and now it looks like the second was not adhered to either as that noted captain of industry and business tycoon, Timothy Geithner, was wacking pensions in order to hasten an exit from bankruptcy.
The exchanges go on to clearly demonstrate that the administration had a controlling stake in GM’s management timeline.
Borst replied that GM had not “begun conversations with the UAW pending hearing back from you and the PBGC. We can begin that dialogue but our reading of the benefit guarantee is clear that it’s for the benefit of the retirees and not the PBGC. The UAW may not be available to us this week as GM is in the summer shutdown.”
Feldman responded by reminding Borst the steps required to eliminate Delphi’s pension plans.
“Keep in mind we need the PBGC’s help to terminate this plan so we will have to deal with the PBGC,” wrote Feldman. “If you think there is a way to cause its unilateral termination (outside of Delphi going down an 1113 process) let me know.”
Team O will want to take credit for saving a couple of heartland American institutions and the domestic auto industry along the way but the record will show that this was a hostile take-over with the government wielding unprecedented powers in a private sector business to curry favor with the unions and where that government-GM partnership will lose billions of dollars while pushing a heavily-subsidized technology that nobody's buying right now and which may not even be any good for the environment and then turn around and lie about how it is they paid off the loan they received from the Feds. For that you are to be thankful.
Yeah, sounds like a record to run on.
* The dreariness of this post demanded we do something to cheer it up. So we did.
"I actually think the government will be out this year — within the next 12 months, hopefully within the next six months," Akerson said in a two-hour interview with The Detroit News last week.
He is grateful for the government's rescue of GM — "I have nothing but good things to say about them" — but Akerson said the time for that relationship to end is coming because it's wearing on GM.
"It's kind of like your in-laws: It was a nice long weekend. We didn't say a week," Akerson said with a laugh.
And while he is eager to say goodbye to the government as a part owner of GM, Akerson would like to see it step up to the challenge of setting a higher gas tax, as part of a comprehensive energy policy.
A government-imposed tax hike, Akerson believes, will prompt more people to buy small cars and do more good for the environment than forcing automakers to comply with higher gas-mileage standards.
Yeah, because as the economy is about to double-dip here, what we really need is to pay a dollar more a gallon at the pump.
And who doesn't have $41,000 grand laying around to buy the GM's flagship green car, the Chevy Volt?
Of course he's going to say nice things about the feds. Wouldn't you say all sorts of wonderful things about an entity that showered $49.5 billion upon your flagging enterprise?
Oh, you better believe the government is getting out. They can't wait to dump that sinking stock no matter how much of a bath the U.S. tax-payers take ahead of the 2012 presidential election.
And with respect to the nation defaulting on its debt, we found the following to be absolutely priceless:
"We're too good a nation to let ourselves be a banana republic," Akerson said, warning that a default would be "unimaginable" and could hurt auto sales.
Wait, what? You mean a banana republic where an oligarchy colludes with favored businesses to profit them both but where debts incurred are a public responsibility? Those banana republics?
Such is the language of currency in Bailout Nation where the absurdly ironic is passed off as a genuine heartfelt observation.
Well, Gitmo's still open, he formalized indefinite detention of suspected terrorists, he just signed an extension of the Patriot Act he opposed as a Senator, we're still kinetically engaged over in Libya despite the expiration of the War Powers Act, the economy shows real signs of double-dipping and unemployment is still way too high...
... the dude has to run on something though, right?
Team O desires to make the domestic auto bailout a signature feature of it's re-election campaign but yet another recent development may have them re-thinking that strategy.
It would appear that some dealerships are buying up Chevy Volts, taking advantage of the $7,500 credit and flipping them as used cars at a slight mark down.
If you’re desperate to get yourself into a Chevrolet Volt you might make a visit to the Kia dealer in Glendale, Calif. Though most Chevy dealers in the seven initial launch markets for the plug-in hybrid claim to be on back order, three “used” Volts are sitting on the Kia dealer’s lot.
But don’t expect much of a bargain. True, the asking price of $39,995 is a modest discount off the $41,000 sticker price. But a salesman at the suburban Los Angeles showroom said he did not believe the three Volts would qualify for the $7,500 federal tax credit allocated for buyers of new battery vehicles.
The salesman's comment suggests there is truth to reports that some dealers are gaming the system to claim battery car tax credits for themselves, as first reported by a conservative think tank called the National Legal and Policy Center.
“Many Volts with practically no miles on them are being sold as ‘used’ vehicles, enabling the dealerships to benefit from the $7,500 credit supplied by the American taxpayers on each car,” NLPC’s Mark Modica said in a blog post on the practice. “The process of titling the Volts technically makes the dealerships the first owners of the vehicles, which gives them the ability to claim the subsidies. The cars are then offered to retail customers as ‘used’ vehicles."
Though, technically not illegal, we can't imagine this is what the administration had in mind to get people to buy their cars.
Or is it?
A spokesman for the Internal Revenue Service declined to comment beyond pointing to the language of the tax code passed by Congress to help promote the sale of battery vehicles. According to Title 26 Section 30D, a vehicle qualifies for the credit when:
(a) The original use (of the vehicle) "commences with the taxpayer," or
(b) The vehicle "is acquired for use or lease by the taxpayer and not for resale."
Sounds like the dealer ought to lease the car or else they would be running afoul of the law.
While this may seem a minor deal compared to lying to the American public over how the GM TARP loan was paid off or how unions were rushed past secured creditors to the head of the line in the bankruptcy proceedings (and it is), it represents just one more element of shadiness to the whole sorry affair of the GM and Chrysler bailouts.
“Our jaws are literally dropping as we’re reading this,...every one of these transactions is outrageous.”
So, what would you say to a TARP-receiving Wall St. exec making $800,000 accepting zero dollars in the way of bonuses? You might look at that salary and think that was mighty big of that guy but that you were greatly appreciative just the same of that symbolic gesture considering all the other shenanigans going on with Wall St. bonuses.
Then what would you think if ol' boy in 2009 purchased a 107-year-old limestone carriage house on the upper east side of New York for $13.5 million? You might say that perhaps this guy had some spare change setting between the seat cushions in order to make this purchase. No biggie.
But then what if we told you that instead of his own money, he possibly used that of his wife who along with her girlfriend received $220 million from the Feds for their start-up investment firm Waterfall TALF Opportunity?
Sunshine laws passed last year have thrown the door open and have shed light onto just how dirty the dirty Fed may be. We apparently have two budgets: one that's on the books and the other that's off the books. One with which you are familiar with income via taxes and expenditures via aircraft carriers and Social Security payments and the other that is giving out hundreds of billions in near-interest-free loans only to be lent back to the Treasury Department at 3%.
This whole setup — in which millionaires and billionaires gambled on mountains of dangerous securities, with taxpayers providing the stake and assuming almost all of the risk — is the reason that it’s insanely premature for Wall Street to claim that the bailouts have actually made money for the government. We simply can’t make that determination until the final bill comes in on all the dicey securities we financed during the bailout feeding frenzy.
Ditto for the housing market. What completely freaks us out is that Fannie and Freddie are still holding mountains of toxic assets that have not been allowed to be wrung out of the system. To say the housing market is making a rebound is folly until we unwind the entire mess.
Read the entire article here. And since it will appear in Rolling Stone, remember, it was all the Republicans' fault.
Let's put it this way - this is the one we liked and which sprang to mind first when thinking of the best commercials from this past Super Bowl.
Always cool seeing famous people not take themselves too seriously. Then again, you could roast us from here until Easter for the jack that Kenny G. took home for the 5 seconds he was on the screen.
And now, the worst:
2 minutes. $9 million. A schlocky, near-preachy commercial for $9 million of your tax dollars.
And in totally related news, guess who's whining about the terms of the tax payer-funded bailout of his company?
You may have noticed that Chrysler released the longest ad in Super Bowl history on Sunday night, featuring the new Chrysler 200 driven by Detroit native rap star Eminem, an ad that CEO Sergio Marchionne says cost less than $9 million. But given that the company's CEO also announced this past week that is seeking a "better deal" on government loans, it is likely that this ad had more to do with getting political support than selling cars. Besides, is spending millions on a Super Bowl ad appropriate for a company that received a taxpayer bailout to recover from a bankruptcy?
We wouldn't be nearly as cheezed if the commercial didn't stink.
You came for the commericials but stay for Marchionne insulting the U.S. tax-payers while angling for an additional $3 billion retooling loan at the link at the top of the post.
Far from demostrating how "tough" Motown is, the commercal combined with the words of its CEO merely demonstrated the perils of crony capitalism and that of picking winners and losers in our new economy.
H/T: Hot Air
(UPDATE #1): Guess who else wasn't pleased with the Blackeyed Peas as the Super Bowl half-time performers?
“In the future we may have to do exceptional things again if we face a shock that large,”... "It depends on the state of the world–how deep the recession is.”
That from Timothy Geithner, two-time tax cheat and head of the Treasury Department, on why no one, including himself, is convinced that anything substantive has been done towards preventing Bailout Nation from being the default mode when confronting a financial crisis in real time or preventing one from happening in the future.
Not to worry - crony capitalists everywhere are rejoicing.
Go on over to Secular Apostate's place where he breaks down the pervasive culture of No Consequences.
Chronically unemployed with no savings? No problem - there's an app for that.
Do you remember when they told us that if we voted for McCain it would mean at least 4 more years of Jesus Land in the White House? Well they were right.
At least $140 million of the $787 billion stimulus package was directed to "religiously inspired" groups, Politico reports, making the Obama initiative "the largest-scale embodiment of what was, not long ago, a conservative priority: directing tax dollars to 'faith-based initiatives.' " While the stimulus was initially attacked for being "anti-religious," a Politico investigation finds that a significant amount of money went to groups associated with religious organizations, including charities and the secular arms of churches. (Politico didn't include universities and hospitals with religious affiliations in the study). The money, which came from agencies like the Departments of Agriculture, Education, and Energy, went to programs for school lunches, energy-efficiency, and education, among other things. To make sure faith-based organizations got the money, federal agencies also launched an "aggressive" outreach campaign to educate groups about how to apply for the funds and to ensure that state officials gave it to them. While Obama has been alternately praised and criticized for taking "what President Bush did and [expanding] it," White House officials maintain that funding faith-based groups isn't part of a political strategy. "Part of our job is to ensure that there's a level playing field—we don't encourage anyone to favor faith-based groups over other organizations, but we do want to ensure that there's no discrimination against faith-based organizations," said administration official Joshua DuBois.
To head off the inevitable yet fair question: Yes, we were opposed to Bush's faith-based initiative program as well.
Charities, whether faith-based or not, would appear to operate more efficiently and be better structured to pursue their ends free of government entanglement.
Unfortunately, we were unable to link to the Politico story and while the SLATE piece does not suggest anything untoward, what is to keep the government from attaching conditions to their hand outs in the future?
General Motors Co.'s recent stock offering was staged to start paying back the government for its $50 billion bailout, but one group made out much better than the taxpayers or other investors: the company's union.
Thanks to a generous share of GM stock obtained in the company's 2009 bankruptcy settlement, the United Auto Workers is well on its way to recouping the billions of dollars GM owed it — putting it far ahead of taxpayers who have recouped only about 30 percent of their investment and further still ahead of investors in the old GM who have received nothing.
The boon for the union fits the pattern established when the White House pushed GM into bankruptcy and steered it through the courts in a way that consistently put the interests of the union ahead of many suppliers, dealers and investors — stakeholders that ordinarily would have fared as well or better under the bankruptcy laws.
The union's health care and pension trust fund earned $3.4 billion through the sale of one-third of its shares in GM last week. Analysts estimate that it would break even if it sells the remaining two-thirds of its shares at an average price of $36 — close to where the stock traded shortly after the offering hit the market. GM shares closed at $33.45 on Wednesday.
Analysts predict that stocks will have to rise anywhere from $52 to $103 a share for the U.S. taxpayer to break even. Currently, the U.S. taxpayer is $9 million in the hole.
At the bottom of the linked article, we get this:
John Paul McDuffie, a professor at the Wharton School of Business, said the full funding of the union's pension and health care trust fund through the bankruptcy process represents progress because it helped solve one of most "persistent and difficult" bones of contention between GM and its union.
GM and the UAW had been at loggerheads for years over how to deal with GM's so-called "legacy" costs — funding the generous worker health care and retirement benefits it promised in earlier eras.
The bankruptcy settlement enabled GM to proceed with a hard-won 2007 plan it negotiated with the union to spin off those huge liabilities and let them be funded in the future by the trust fund that received the stock.
If this plan was already "won" then why was it part of the sweetheart bankruptcy deal?
Translating McDuffie then: Thorny legacy cost issue? Wave magic wand and give union trust fund exceedingly favorable stock treatment regardless of what had been negotiated previously. Problem solved.
We suppose that what is also part of the outrage with respect to this tax-payer funded bailout is that even if you tried to justify this unholy arrangement, where is the evidence that the federal government will not simply swoop in again to salvage a poorly-run business that makes horrible business decisions and manufactures products that no one wants to purchase?
Oh, and did we mention no guarantees against a tax-payer funded bailout with the attendant arm-twisting and smearing of those voicing objections to the bankruptcy proceedings and the lying about how the bailout money was paid back?
Tell it to this guy.
Craig Coffey, a retiree in Nevada who invested $55,000 in bonds in the old GM that are now worthless, was outraged that the union is on its way to recovering all its money before investors get even a cent of compensation.
"We just sat and watched [the stock offering]. We got nothing," he said. "Screwed again."
Possibly the most important event of the vice president's day Tuesday is to meet at 2:15 with Earl Devaney. Everyone knows him as chairman of the Recovery Accountability and Transparency Board -- the top guy monitoring the gazillion-dollar stimulus and the overdue economic recovery, and ensuring that the taxpayers financing same know all about it.
The special inspector general for the Troubled Asset Relief Fund (TARP) has reported that the Treasury Department’s initial estimates of the cost of the American International Group bailout are likely too low, according to Bloomberg. In a report on Tuesday, Neil Barofsky said the government’s latest projection of a $5 billion loss on AIG’s TARP investment “represents a dramatic shift from the $45 billion loss that Treastury had projected in its AIG investment just six months earlier.”
Barofsky acknowledged that there has been improvement in the situation over the past six months, but said the dramatic revision was likely more a product of “a change in Treasury’s methodology for calculating the loss,” and called the discrepancy a “serious question.” However, a Treasury official defended the estimate and insisted that the methodology has remained consistent, clashing with claims from the watchdog that the latest estimate “fails to meet basic transparency standards,” for withholding information about a new calculation protocol. The Treasury official said the lower loss estimate treats the government’s AIG position like common stock due to recent a recapitalization transaction announcement.
$40 billion makes like Keyzer Soze.
You wouldn't be blamed one bit for thinking no one knows what the hell is happening here and also thinking this stinks to high heaven.
Barofsky has appeared to be a stand-up guy in watch-dogging Bailout Nation so if we are taking any sides in this, it's got to be his.
Given their track record why should we believe them?
Instead of scolding the electorate or opining that voter frustration is due to poor "salesmanship", perhaps this country's electoral leadership should look at the fact that they have exercised such malfeasance and have done so in such a dishonest fashion that the country's default position on everything they do and say is... You Lie!
According to a government study based upon 3 predicted models of the economy, the cost of the bailouts for Fannie Mae and Freddie Mac may grow to $363 billion over the next three years. This figure was based upon the worst case scenario of the 3 models which comprised of a stalled economy and sluggish home sales.
And now, the good news.
If housing prices recover quicker than expected, the two companies would need a combined $73 billion on top of the $148 billion they already have received in bailout funding, according to new projections from the Federal Housing Finance Agency.
If prices stay on their current course, the bailouts would total $238 billion.
See. Don't you feel better?
And recall how last Christmas Eve, two-time tax cheat, Tim Geithner, lifted the cap on how much tax-payer money could be poured into Fannie and Freddie and to put a cherry on top of all this, we mused the following at the time:
Just how toxic the assets that Fannie holds may be difficult to figure out since Fannie effectively wacked their own Inspector General. And to keep form, don’t expect the Justice Department run by that miserable hack to look into it. This also begs the question, with no IG oversight and no effective spending limit, what’s to keep Fannie from continuing to encourage and back subprime lending?
After all this, it does not appear there is much in the way of checks or incentives to prevent another housing bubble.
This was originally posted back in May of this year but as promised, we are re-posting it as it is a tremendous representation of the outrageously callous disregard for the truth and transparency held by the regime as well as a callous disregard for the American people.
So, General Motors and its folksy CEO, Ed Whitacre, have paid off GM's TARP bailout money? What an incredible turnaround. If by "turnaround", though, you mean paying off your Visa card debt with your Mastercard.
All evidence points to the fact that GM is using a separate TARP line of credit to pay off its primary TARP debt.
During an April 20 hearing on Capital Hill, Sen. Tom Carper, (D-Del.) asked some pointed questions of Neil Barofsky, the “special watch dog” on the Wall Street Bailout, aka, TARP.
It’s good news in that they’re reducing their debt,” Barofsky said of the accelerated GM payments, “but they’re doing it by taking other available TARP money.”…
“It sounds like it’s kind of like taking money out of one pocket and putting in the other,” said Carper, who got a nod of agreement from Barofsky.
“The way that payment is going to be made is by drawing down on an equity facility of other TARP money.”
Senator Charles Grassley (R-Iowa) went off on the Obama administration and the TARP shell game in a letter sent to two-time tax cheat and tax collector-in-chief, Tim Geithner using Barofsky's testimony to level the credible claim that GM was not using GM earnings to pay off TARP debt but rather TARP funds from an escrow account at Treasury to make the debt repayments.
When these criticisms were put to GM’s Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:
Question: Are you just paying the government back with government money?
Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d be able to pay this back.
Unbelievable. Dude actually wants some sort of recognition that GM was able to pay off tax payer-funded debt with... tax payer funds.
This is the first acknowledgement that we are aware of a shadow TARP. As if the publicly-known TARP wasn't bad enough there is a subterranean TARP that is backing the initial TARP.
This simply re-enforces our sentiment that we will never in our lives purchase a GM or Chrysler product. These people are straight-up gangsters. There is no other word to describe them and their actions to deliberately deceive and forcibly misuse U.S. tax payer dollars.
We believe this instance provides sufficient cover to get your hate on.
H/T: Hot Air
(UPDATE #1): This time, we lie! Much like GM's false claim that they have paid off its TARP debt with actual earnings, there is no actual update.
We originally posted this over the weekend, when readership is down a bit but we wanted to resurrect it during the week to highlight the sheer audacity of General Motors. The federal government is entirely complicit in what we can only tag as gangster capitalism. The government takeover and bankruptcy proceedings that screwed over the secured creditors in favor of the labor unions was executed in a thuggish manner and now the GM/federal government partnership openly displays their contempt for the American public by running an ad during the NBA playoffs patting itself on the back for a job well done.
We may re-run this post again next week. And the week after that. Whatever we have to do to ensure that we never forget what little regard this administration has for your interests and your tax dollars.
Frank Rich, Paul Krugman and the rest of the intelligentsia of this country may disagree with the politics of those who have opposed the bailouts but that they cannot at least understand where this anger may be coming from, again, speaks to a widening disconnect in this country between the taste-makers and those who are actually footing the bill for this fiasco.
(UPDATE #2): Reason TV's Nick Gillespie takes about as much time to explain the shell game that is General Motor's "paying off" its TARP debt as the GM commercial.
Again, the sheer gall that Government Motors has in running this outright lie will compel us to update this regularly or repost from time to time whether or not there is an actual update.
(UPDATE #3): The nation's paper of record is now on the beat.
AS we inch closer to a clearer understanding of the products and practices that unleashed the credit crisis of 2008, it’s becoming apparent that those seeking the whole truth are still outnumbered by those aiming to obscure it. This is the case not only on Wall Street but also in Washington.
Truth seekers the nation over, therefore, are indebted to Senator Charles E. Grassley, Republican of Iowa, who in recent days uncovered what he called a government-enabled “TARP money shuffle.” It relates to General Motors, which on April 21 paid the balance of its $6.7 billion loan under the Troubled Asset Relief Program.
G.M. trumpeted its escape from the program as evidence that it had turned the corner in its operations. “G.M. is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse,” boasted Edward E. Whitacre Jr., its chief executive.
G.M. also crowed about its loan repayment in a national television ad and the United States Treasury also marked the moment with a press release: “We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,” said Timothy F. Geithner, the Treasury secretary.
Taxpayers are naturally eager for news about bailout repayments. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan.
The CBO estimates we will lose about $30 billion on the GM bailout. And in the article, GM officials are outrageously outraged that anybody would suspect that they are doing anything untoward with taxpayer money. Not that they are specifically denying doing anything untoward.
Greg Martin, a G.M. spokesman, said the company had made no misrepresentations about its repayment. “The bottom line is, our strong business performance has put us in the position that we don’t need these funds,” he said, referring to the cash in the escrow account. “G.M. is performing much better than anyone expected and that does represent a significant milestone for the company.”
And Ron Bloom, senior adviser to Mr. Geithner, bristled at Mr. Grassley’s criticism. “The Treasury Department has tried to be as straight as humanly possible,” he said in an interview. “We have never not been clear about exactly what we paid, exactly the terms of the investment. I’m finding it hard to find anyone obfuscating about this.”
(italics, ours)
They don't need the (TARP) funds... except that they need the funds to pay off the TARP debt.
We'll spare you the righteous indignation this time around because it's all there in black and white. A nice big F-you from General Motors leadership to the U.S. taxpayers.
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