March 22, 2009

Bailed-Out Car Cos. Want More Money; Bloomberg Fails to Challenge Conservative Assumptions Claim Despite Past Flubs

NoToGMandChrysler0109.jpgAnyone who has followed the decline of General Motors and Chrysler since the two companies received a combined $17-plus billion in bailout money in December won’t be surprised at the news that they need more — or at the government’s convenient weekend timing of the news.

The financial cliff on which Chrysler stands was a given by the time its first bailout installment arrived. But, as shown in early March in a post by yours truly at BizzyBlog (mostly mirrored at NewsBusters), GM’s sales non-performance has deteriorated to the point where it has become worse than Chrysler’s during the two months following the George W. Bush-decided, Barack Obama-supported bailout decision:

CarSalesBig6Dec08thruFeb09

January’s and February’s disastrous sales results have probably made GM’s situation at least as perilous as that of its smaller competitor.

On Saturday (naturally), we learned via Bloomberg that GM and Chrysler “may” need more money (“may” apparently now means “as sure as the sun rises in the east”) — lots more:

GM, Chrysler May Need More Aid Than Requested, Rattner Says

General Motors Corp. and Chrysler LLC may need “considerably” more than the $21.6 billion in aid they requested, which was based on optimistic recovery plans, said Steven Rattner, the Treasury’s chief auto adviser.

President Barack Obama’s auto task force is assessing proposals from GM and Chrysler to decide whether to recommend U.S. assistance or tip the carmakers into bankruptcy. Rattner made the comments yesterday on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

The task force will give its “sense of direction” by March 31, Rattner said. The companies have received $17.4 billion since December and asked for the additional $21.6 billion in aid last month, an amount that depends on achieving turnaround plans that are “somewhat ambitious,” Rattner said.

“It could be considerably higher, I won’t deny that,” Rattner said, when asked whether U.S. aid sought could rise. “Like all management teams they tend to take a reasonably, slightly perhaps, optimistic, view of their business. So it could be more, I can’t rule that out.”

Greg Martin, a GM spokesman, said yesterday its restructuring plan has “a conservative outlook.” The company will continue working with the task force “and we’ll keep them informed of our liquidity needs,” Martin said in an e-mail.

What is particularly galling is that news organizations like Bloomberg that should and probably do know better are letting the companies get away with saying they were overoptimistic before. GM pointedly claimed the exact opposite twice in the past four months:

  • In early December, in its aid request to Congress, GM said that it would “only” need $18 billion to “weather the current economic stresses, and …. position the new GM to be profitable.”
  • On February 18, GM, as paraphrased by the New York Times, “vowed ….. that its latest request for federal aid would be the last it would need to carry it through the biggest reorganization in its history.”

But now we’re supposed to believe that the companies’ forecasters have finally gotten it right.

There’s a high probability that they are still wrong. GM, and the government, badly underestimated the bailout’s impact on consumers’ willingness to buy its vehicles, either for ideological reasons (opposed to bailouts), practical ones (concerned about warranty and repair issues), or both. The company’s request for even more money than anticipated are likely to worsen that perception problem.

Here’s a former pet phrase notably missing from news coverage of both GM and Chrysler: corporate welfare. The low-rate loans involved, especially if they are never repaid (which appears more and more likely), dwarf the amounts those who have complained about “corporate welfare” in the past could ever hope to cite.

Mark Zandi of Moody’s is looking smarter with each passing day. In early December, he “suggested during one of the auto bailout hearings on Capitol Hill that the Big Three could need between $75 billion to $125 billion over the next two years if they are to survive.” The additional requests by the bailed-out will push the current number to over $40 billion ($17.4 + $21.6 plus “who knows?”) — well past halfway to the Zandi’s low end of $75 billion. Even that doesn’t take into account the $5 billion bailout of suppliers that Treasury whipped through last week, and previous bailout billions provided to GMAC and Chrysler Credit.

Also missing from news coverage: How candidate, president-elect, and now President Obama’s relentless pessimism, his promises to starve the nation of fossil-fuel energy, and his pledges to raise taxes in the teeth of an economic downturn convinced consumers, perhaps in the millions, to postpone major-ticket purchases, particularly of vehicles.

The consequences of these positions, echoed in earnest by congressional leaders Nancy Pelosi and Harry Reid since June of last year, are quite ironic, given that the Democratic Party is supposedly best buds with Big Labor. United Auto Workers union members have borne the brunt of an auto-industry downturn that Obama, Pelosi, and Reid helped to make much worse than it should have been. But the well-being of the rank and file was apparently unimportant compared to scoring electoral and then vindictive points. This is yet  another crucial connection the establishment media probably won’t make any time soon.

Cross-posted at NewsBusters.org.

Has the POR (Pelosi-Obama-Reid) Economy Bottomed Out?

Note: This column first appeared at Pajamas Media on Friday morning. See the Update below for a look at where the stock indices stood as of the markets’ close on Friday, March 20.

_____________________________________________

A time to hope that the worst is over –- and to benchmark its awful record thus far.

_____________________________________________

The performance of the stock market since March 9 provides reason to hope that the POR Economy’s wealth-destroying damage has, at least for the time being, reached its lowest point.

The markets’ broad-based 15% bounce-back since then (as of when this column was written), which has brought cheer to battered investors for the first time in many months, has had four primary causes.

First, there has been decent economic news. January’s retail sales increase was revised upward from 1.0% to 1.8%, representing the largest jump in three years. February’s 0.1% drop beat expectations of -0.5%. Housing starts jumped nicely in January, defying the decline-expecting consensus.

Second, several key companies have reported earnings and other news beating analysts’ predictions.

Third, after months of nearly daily warnings of dire catastrophe, President Barack Obama has altered his public statements on the economy to reflect the type of qualified optimism one ordinarily would expect from the country’s chief executive.

A final, less appreciated reason is that there were signs of a pushback by the bailed-out. Citigroup’s chairman said that the bank doesn’t require any additional government investment. Bank of America’s chairman echoed that sentiment. Even GM, while still on the brink, said it doesn’t need its next cash infusion right away. This seems to indicate that managements chafing under existing, imminent, and/or proposed bailout-driven restrictions on how they run their businesses are either trying to get out from under them, or to minimize their damage. I believe the markets were pleased at the possibility that the creeping nationalization we’ve seen in the past six months may be halted before it goes all-in.

This is all well and good. But before the markets’ trough is forgotten, it’s important to document the damage that POR Economy architects Nancy Pelosi, Barack Obama, and Harry Reid have inflicted on the nation, and to demonstrate just how far the markets have to come back before we can be said to have recovered completely.

The POR Economy began in earnest in June of last year. At that point, as the economy was coming back nicely from a mild fourth-quarter 2007 downturn, two things about the Democratic Party’s presidential nominee and congressional leadership became crystal clear to businesses, entrepreneurs, and investors. First, Pelosi, Obama, and Reid were, and still are, willing – no, make that eager — to starve the economy of energy in the name of global warming, one of the biggest hoaxes in human history. Second, they were, and still are, bound and determined to sharply raise taxes on the most productive 5% of the population in the name of “spread(ing) the wealth around.”

The POR Economy kicked into overdrive (or is it under-drive?) in September when the decades-in-the-making Democratic debacles at Fannie Mae and Freddie Mac (aka Fanron and Fredron) came to a head, forcing those “government-sponsored enterprises” to become “government conservatorship enterprises.” The accumulated effect of Fan’s and Fred’s irresponsible-lending, foreclosure-generating machine finally wrought its long-feared havoc. This in turn led a panicked Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke to push for the $700 billion bailout that gave us the Troubled Assets Relief Program. TARP quickly morphed into a partial bank nationalization program.

The stock market tanked badly in the face of this withering assault. That assault continued through Election Day, Inauguration Day, and all the way through March 9. Obama’s non-stop negativity, through victory, inauguration, and his first four weeks in office were all designed to ensure the hasty passage of his precious mislabeled “stimulus” package before the economy began showing enough visible signs of recovery. For several weeks after that, the flailing of new Treasury Secretary Tim “Tax Cheat” Geithner, his persistent failure to fill key positions, and the budding overall perception that Team Obama might be in over their heads further shook the markets. It’s not like any of these problems ended on March 9, but by that point the markets had priced in these factors’ effects.

So what has the POR Economy wrought? The chart below shows where the three major stock market indices stood on the following dates:
- Each index’s October 2007 all-time high.
- June 1, 2008, the approximate start date of the POR Economy.
- November 4, 2008 (Election Day).
- January 20, Obama’s Inauguration Day (at market close).
- March 9, 2009.

MarketTroughBenchmarking030909

Additionally, in the table below, I have adjusted each index’s mid-1990s year-end values for inflation, demonstrating that the market lows of March 9 brought us back to index values that were last seen in real terms in 1995:

MarketIndicesInfAdj030909

Thus, after considering inflation, it’s fair to say that the POR Economy has undone almost all of the stock-market gains achieved since the Gingrich Revolution.

Even ignoring inflation, it won’t be fair to say that we’ve recovered from the ongoing POR Economy until the market indices get back to roughly double their March 9 troughs.

Steven A. Schwartzman of the Blackstone Group has called this decline of an “unprecedented” destruction of worldwide wealth. It should not and will not be forgotten that one U.S. political party and it three principal unprincipled leaders drove the vast majority of this.

Barack Obama was big on “hope” during his presidential campaign. We can now only “hope” that the worst of the markets’ carnage is indeed over.

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UPDATE: Friday’s closes of 7278, 769, and 1457 for the Dow, S&P, and NASDAQ were:

  • 48.6%, 50.9%, and 49.0% below their respective October 2007 highs.
  • 42.4%, 45.1%, and 42.3% below their respective closes on May 30, just before The POR Economy began.

AP Gives Aid and Comfort to Spitzer’s Fiction-Based ‘I Told You So’ on AIG

SpitzerAP0309.jpgDisgraced former New York Governor Eliot Spitzer clearly sees the current AIG bonus controversy as an opportunity to redeem his reputation.

The Associated Press’s Michael Hill provided rehabilitation assistance in his Friday report.

Spitzer is best remembered for resigning as the Empire State’s chief executive after being caught patronizing high-priced prostitutes over a period of several years, and for having a reputation as an attorney general on a self-aggrandizing crusade against against corporate corruption prior to that.

Spitzer is attempting to capitalize on the public’s incomplete knowledge of his sorry saga to get back in its good graces.

The AP’s Hill gave Spitzer the print equivalent of a soapbox to do just that:

With AIG, Spitzer is Sheriff of Wall Street redux

Eliot Spitzer has a few words to say about the AIG bonus brouhaha: I told you so.

The former New York governor battered American International Group with charges of corruption long before his own dizzying downfall in a prostitution scandal. He has used this latest financial scandal to strike his old populist, Sheriff of Wall Street themes and, just maybe, mend his reputation — though critics contend that he bears a share of the blame for the insurance giant’s historic near-collapse.

….. As for all those politicians piling on AIG this week? Been there. Done that.

“We pursued AIG and Wall Street’s structural failures in a way that others shied away from because it was politically unpalatable for them to address those issues,” Spitzer told host Brian Lehrer Wednesday on WNYC Radio in New York City. “Now it is the flavor of the month. Everybody is jumping up and down serving subpoenas, beating their chests trying to be tougher than the next person.”

On CNN Thursday, Spitzer said his initial probes came from AIG’s “effort from the very top to gin up returns whenever, wherever possible and to push the boundaries in a way that would garner returns almost regardless of risk.

“Back then I said to people, AIG is the center of the web,” he told CNN’s Fareed Zakaria.

Spitzer pursued AIG for years when he was New York’s attorney general. The company eventually announced in 2006 that it would pay $1.64 billion to resolve allegations that it used deceptive accounting practices to mislead investors and regulatory agencies. AIG’s veteran chief executive officer, Maurice “Hank” Greenberg, was forced to resign in 2005 after a long and contentious, sometimes ugly battle with Spitzer.

“He obviously believes history has vindicated him,” said John Coffee, a professor of securities law at Columbia University, “and wants to remind America that he was there first.”

….. Coffee suspects Spitzer is more concerned about reclaiming a legacy than mounting a comeback. Jeffrey Stonecash of Syracuse University’s Maxwell School said the recent comments fit Spitzer, a natural crusader zealous about rooting out financial crimes.

Hill waited until his 19th paragraph to come back to the contrarian take on Spitzer’s legal legacy, noting that “Critics, mostly on the political right, claim that by forcing out Greenberg and creating turmoil at AIG, Spitzer laid the groundwork for the debacle roiling the country today.”

A year ago, in the wake of Spitzer’s resignation, the Wall Street Journal reminded us that the self-styled, media-assisted Spitzer was much more of a legal tyrant than crusader:

Mr. Spitzer’s recklessness with the state’s highest elected office, though, is of a piece with his consistent excesses as Attorney General from 1999 to 2006.

He routinely used the extraordinary threat of indicting entire firms, a financial death sentence, to force the dismissal of executives, such as AIG’s Maurice “Hank” Greenberg. He routinely leaked to the press emails obtained with subpoena power to build public animosity against companies and executives. In the case of Mr. Greenberg, he went on national television to accuse the AIG founder of “illegal” behavior. Within the confines of the law itself, though, he never indicted Mr. Greenberg. Nor did he apologize.

In perhaps the incident most suggestive of Mr. Spitzer’s lack of self-restraint, the then-Attorney General personally threatened John Whitehead after the former Goldman Sachs chief published an article on this page defending Mr. Greenberg. “I will be coming after you,” Mr. Spitzer said, according to Mr. Whitehead’s account. “You will pay the price. This is only the beginning, and you will pay dearly for what you have done.”

Jack Welch, the former head of GE, said he was told to tell Ken Langone — embroiled in Mr. Spitzer’s investigation of former NYSE chairman Dick Grasso — that the AG would “put a spike through Langone’s heart.” New York Congresswoman Sue Kelly, who clashed with Mr. Spitzer in 2003, had her office put out a statement that “the attorney general acted like a thug.”

These are not merely acts of routine political rough-and-tumble. They were threats — some rhetorical, some acted upon — by one man with virtually unchecked legal powers.

Eliot Spitzer’s self-destructive inability to recognize any limit on his compulsions was never more evident than his staff’s enlistment of the New York State Police in a campaign to discredit the state’s Senate Majority Leader, Joseph Bruno. On any level, it was nuts. Somehow, Team Spitzer thought they could get by with it. In the wake of that abusive fiasco, his public approval rating plunged.

Spitzer’s campaign of public intimidation by press conference was rarely challenged. Firms that believed they were innocent mostly paid up and forced out key executives like AIG’s Greenberg to make him go away.

As AIG was publicly crumbling last September, I recalled that WSJ editorial, and added this:

Left unsaid, but obvious, is that Greenberg wasn’t indicted because he would have kicked Spitzer’s butt in court — which is why Spitzer avoided the inside of courtrooms like a plague. In the one case I’m aware of where someone stood up to Spitzer all the way through a jury verdict, the New York Attorney General was trounced.

….. Greenberg had at least three successors in the past 3-1/2 years (Frank Zarb (a caretaker), Martin Sullivan, and now-deposed Robert Willumstad.

Now there’s Edward Liddy. If he could get past the bitterness, and if regulators could admit that Spitzer’s publicity-driven ouster of him was wrong, Greenberg, even in his 80s, might have been a better choice.

Who’s at the top matters. So does drift at the top, even for a few months, especially at such a large and complex entity.

Note from taxpayers to Spitzer: Thanks for nothing.

It’s more like “Thanks for $170 billion or more less than nothing.” While AIG’s board of course deserves the lion’s share of the blame for the firm’s debacle, a strong case can be made that the biggest corporate crackup in history might not have occurred, or might have been much less severe, if Spitzer hadn’t chosen to make Hank Greenberg his personal piñata.

That Spitzer is getting unchallenged opportunities to appear on CNN and elsewhere to peddle his fantasies, along with barely concealed hosannas from an AP reporter, is disgraceful — and, sadly, typical.

Cross-posted at NewsBusters.org.

Positivity: Setbacks couldn’t stop wedding-bound couple

Filed under: Positivity,US & Allied Military — Tom @ 6:44 am

From Wyoming and ColoradoWYOweddingPic:

March 21, 2009

Love really can conquer all.

One Wyoming couple is living proof of that.

Travis “Trey” Vendella and Tiffany (Black) Vendella of Cheyenne had planned to get married in March of 2007.

“He had proposed to her and then left for Iraq,” said Sherry Mascarenas, co-owner of Rumors on Main Street, 612 Main Street.

That was when Tiffany had a “strange feeling” about the whole situation.

“Subconsciously I just knew something was going to happen,” she said. “I knew we had to get married soon.”

Unfortunately, she was right.

Travis was involved in an accident while in Iraq, right before his mid-leave in February of 2007.

“He almost lost his life,” Mascarenas said. “He came back with major scars and without his legs.”

The couple then decided to push the wedding back to give Travis a chance to recover and get used to his new prosthetic legs.

“We did that because he had wanted to walk down the aisle and be able to stand on his legs,” Tiffany said. “We also wanted to celebrate when he felt better.”
The wedding was held on May 24, 2008, in Loveland.

“After losing his legs he became really depressed,” Mascarenas said. “She had told him that of course I still want to marry you, I didn’t fall in love with your legs.”

“He was so grateful and thankful that she still wanted to marry him,” Mascarenas added, “that he decided to do something for her.”

Travis Vendella called the Montel Williams Show and asked if they could do something special for his fiancé.

“I didn’t know he had done that,” Tiffany said. “When they contacted us, I thought the theme of the show was about soldiers who had made sacrifices. I was shocked and surprised to find out they actually wanted to celebrate both of us.”

The show then contacted a local wedding planner, who then put in a call to Rumors asking if they would be willing to donate items for the wedding.

“There was no way that you would say no to that,” Mascarenas said. “It was absolutely an honor.”…..

Go here for the rest of the story.