GM Pays Its Loans Back - One of the More Brazen Prevarications We've Seen Lately

GM CEO Ed Whitacre claimed in widely aired ads this week and a guest column in the Wall Street Journal, that the company had paid back its loans from the government early and in full. Not to put too fine a point on it, this is a flat-out lie. Even the New York Times isn't buying the claim. Not only that but the NYT reporter, Gretchen Morrison, goes so far as to accuse the Obama Administration, and Treasury Secretary Tim Geithner in particular, of encouraging the claim and even actively echoing it.  In fact, the company paid back $6.7 billion in loans not from operating earnings, but from TARP funds placed into escrow for it to tap for working capital purposes. In other words, they paid the taxpayers back with money the taxpayers had provided. Reason's Nick Gillespie illustrates for us:

I went and took a look at the company's latest SEC filings. The 10K (annual financial statement) for the year ended 12/31/2009 was just filed on April 10 (late, it should have been filed on March 31) and for the period between the government takeover of the company in early July and December 31, the company had a negative EBITDA (earnings before interest, taxes, depreciation and amoritzation) of ($348 million). In other words, it didn't generate enough cash from operations to even cover interest expense incurred on the debt, $694 million,  let alone any principal. Also notable is the fact that the company filed a 10Q (quarterly report) on the same day, for the quarter ended 9/30/2009, so almost 5 months late. Its 10Q for 3/31/2010 is due on May 15th. So we don't really know how the company has done since the end of the year or if it will file on time.

Ed Morrissey has more over at Hot Air, as does Scott Johnson at Power Line.

It looks like the standard lefty MO is in play here. If the facts don't support you, lie. If called on the lie, attempt to brazen it out. If that doesn't work, question your interlocutor's motives and if all else fails, change the subject. We appear to be in the brazen-it-out stage still. I can't wait to see what they come up with next.

Chrysler Dealership Closures May Be Driven by Owner Political Sympathies

It seems there is a positive correlation between the announced closures of Chrysler dealerships and the propensity of their owners to make political contributions to Republicans. Obama and his minions are just common Chicago machine thugs.

(via GatewaPundit )

Jake DeSantis: "I Quit"

AIG Exectutive Vice President of AIG's Financial Products unit has tendered his resignation to Edward Liddy, the company's CEO. Mr. DeSantis has been working for the princely sum of $1 per year, trying to help unwind the credit default swap mess that has put AIG in such dire financial straits. He could have accepted other employemnt opportunities but was promised a completely just reward for staying. So far his unit has manged the CDS portfolio down from $2.7 billion to $ 1.6 billion. I'd say that what he was paid was a pittance. Now, grandstanding, know-nothing politicians like Barney Frank and Andrew Cuomo have driven off a good man, who was trying (and succeeding) to do the right thing, all to score cheap political points and cover their own posteriors. Both of them are utterly contemptible thugs. They have been threatening to publish the names and addresses of retention payment (not bonus, as they have described it) recipients. Why do this, if not to encourage a lynch mob to harm them and their families?

From Mr. DeSantis:

"After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down."

Read it all.

Another Mark Steyn Must Read

Mark Steyn writing about the "stimulus" package and TARP nails it again:

This is the biggest generational transfer of wealth in the history of the world. If you're an 18-year-old middle-class hopeychanger, look at the way your parents and grandparents live: It's not going to be like that for you. You're going to have a smaller house, and a smaller car – if not a basement flat and a bus ticket. You didn't get us into this catastrophe. But you're going to be stuck with the tab, just like the Germans got stuck with paying reparations for the catastrophe of the First World War. True, the Germans were actually in the war, whereas in the current crisis you guys were just goofing around at school, dozing through Diversity Studies and hoping to ace Anger Management class. But tough. That's the way it goes.

Read it all.

Why Do We Have a Budget Deficit? Look to Congress, Not the President

When it comes to budget deficits, the sitting President usually seems to get the blame for them. In fact, the President can't spend a dime of taxpayer funds that the Congress doesn't appropriate. It's true that President Bush left office with a budget deficit but the deficit President Obama has inherited is mostly the creation of a Democrat controlled Congress. At the end of fiscal 2006, when Republican control of congress ended, the budget deficit was $248 billion. That's bad enough and the Republicans lost control in large part because they forgot why they were sent there in 1994 and acted like Democrats. They spent every thin dime of tax revenue that came into the Treasury and then some. And it certainly didn't help that it took until 2006 for President Bush to find his veto stamp. Perhaps if he'd reined in the Congress, the Republicans might have held onto it.

I expressed hope after the 2006 elections that 1.) the Republicans would learn their lesson and remember that people vote for them because they profess to be in favor of small government and fiscal discipline and 2.) that the Democrats would act responsibly, now that they'd been handed the car keys. No such luck. The deficit for the end of fiscal year 2008 ballooned to $407 billion and that was before the ill-conceived and hastily passed $700 billion TARP. Now President Obama is demanding that the Congress pass an $800 billion to $900 billion "stimulus" bill that will deepen the deficit even further and leave the bill for future generations to foot. Remeber who controls the purse-strings. It's the Congress. The hole may have started under a Republican Congress, but it's the Democrats that have kept on digging. The first rule of holes states that when you find yourself in one, you stop digging.

How do we stop this hole from getting deeper? We have to stop spending more than we bring in. No matter where you set marginal tax rates, receipts to the treasury will not exceed about 19.5% of GDP. Congress is currently spending about 21.5% of GDP. Spending has to be brought into line with GDP and if we want to really increase tax revenues (not rates, revenues) we need to grow GDP and the quickest way to do that is to reduce tax rates. Leave money in the productive economy, i.e., the private sector and we will start to come back. Unfortunately the Democrats are more concerned with punishing the "evil rich" and redistributing wealth than they are with actually solving the problem. They can do a lot of damage over the next two years and the Republicans need to point this out loudly, often and stick together to resist the systematic looting of the private economy by the statist, power hungry monster that is the Democrat Congress.

Free Market Capitalism Isn't at Fault - It Doesn't Really Exist

Via Instapundit, I ran across this post at Notablog. It has become fashionable in certain circles lately to blame unfettered free-market capitalism for the current mess in the banking system. The author of the post, Chris Matthew Sciabarra, argues that it can't be true, because unfettered free market capitalism has never truly existed:

"The current state and the current banking sector require one another; neither can exist without the other. They are so reciprocally intertwined that each is an extension of the other.

Remember this point the next time somebody tells you that "free market madmen" caused the current financial crisis that is threatening to undermine the economy. There is no free market. There is no "laissez-faire capitalism." The government has been deeply involved in setting the parameters for market relations for eons; in fact, genuine "laissez-faire capitalism" has never existed. Yes, trade may have been less regulated in the nineteenth century, but not even the so-called "Gilded Age" featured "unfettered" markets."

I think he has a valid point. This just lends more credence to my own frequent assertions that we are where we are due to politcal interference in the market, which leads to irrational behavior. When the government stops trying to "help", that is when the markets will start to find their equilibrium. That isn't to say there won't be further ugliness. There will be. It just means that they can finally find clearing prices for toxic assets and get back to business without all the uncertainty that political interference breeds, and that markets hate

Read the whole post.

Regulatory Statism, (that's Government) Is What Precipitated the Banking Crisis

So says Mike Oliver (Mr. Integrity) guest-blogging at Samizdata:

"The lovers of statism (and of we the people) decided to pull out all the plugs and defend the market at each and every low - to try to fake reality. Instead they super-charged the downside. What would have been a normal correction in the market ballooned into a disaster. Why?

Benanke allowed in summer of 2007 for an asset class never previously allowed to be used as collateral in fed borrowings by financial institutions, and even expanded what institutions could come to the Fed. In effect the Fed was "pricing" this debt (sub prime mortgages, etc.) at a level such that it would not have to hit the market and be priced openly and fairly.. The Fed was apparently afraid of the real consequences of seeing it priced openly. So they in effect took it off the market and froze it at the Fed window as "acceptable collateral" but as an unpriced asset. Hence from that point forward these sorts of assets on bank books were not "priced" in an open and market manner. Hence those who wanted to invest in the bank were uncertain as to the value of these assets. Hence uncertainty arose as to any and all bank valuations."

Read it all, of course.

Hilarity Arises from Near Tragedy

The successful ditching of US Airways flight 1549 on Wednesday was a masterful piece of flyng and happily no lives were lost. Within 24 hours, an enterprising Photoshopper was able to come up with this:

Now that is an apt metaphor.



(from the Dealbreaker)

Mark Steyn Takes on Bailouts.....

... in his unerringly to the point but humorous style.

"General Motors now has a market valuation about a third of Bed, Bath & Beyond, and no one says your Swash 700 Elongated Biscuit Toilet Seat Bidet is too big to fail. GM has a market capitalization of about $2.4 billion. For purposes of comparison, Toyota's
market cap is $100 billion and change (the change being bigger than the whole of GM). General Motors, like the other two geezers of the Old Three, is a vast retirement home with a small money-losing auto subsidiary. The UAW is AARP in an Edsel: It has three times as many retirees and widows as "workers" (I use the term loosely). GM has 96,000 employees but provides health benefits to a million people."

President Bush seems to think that it would be a mistake to let the Big 3 file for Chapter 11. His decision to go ahead and bail them out anyway, despite it failing in the Congress, will probably prove to be a bigger one and will not actually bail them out at all. Go read it all of course.

Hey, Big 3, If You Let Government Get Into Bed With You, You'll Never Get It Out Again.

I'm holding back a little in the title of this post. I'm addressing it to the Big 3 automakers, now seeking alms from the taxpayer. What I mean to say is that if you let the government in your bed, you will get screwed (still a little more polite than the word I'm actually thinking of). Todd Zywycki has an op-ed in today's Wall Street Journal in which he get it exactly right about why the automakers should prefer Chapter 11 not government "help".

Those Washington politicians who repeat the mantra that "bankruptcy is not an option" probably do so because they want to use free taxpayer money to bribe Detroit into manufacturing the green cars favored by Nancy Pelosi and Harry Reid, rather than those cars American consumers want to buy. A Chapter 11 filing would remove these politicians' leverage, [my emphasis] thus explaining their desperation to avoid a bankruptcy.

I agree with this, except that I don't think it's going to be a bribe. It's going to be naked coercion. Once you get Harry and Nancy dictating the kinds of cars they'll build, Maxine Waters dictating which dealers they may or may not close, etc., it's only a matter of time before the Big 3 really do collapse entirely. The Big 3, at least GM and Chrysler, should file now, before they completely lose control of their destinies. Chapter 11 gives the companies the opportunity to come up with a reorganization plan first and if management is smart (not demonstrated thus far) they'll take this opportunity before it's too late.

Vodkapundit Big 3 Bailout Ad

This ad poster says all that needs to be said. The best bailout package the big 3 automakers could have is a trip through Chapter 11. Tell your Senators and Congressional rep NO!

No Bailout for the Big 3

Powerline has a post this morning arguing against the bailout of the Big 3 auto makers that puts the issue in perspective. Giving them $25 billion would be throwing good money after bad. It's time for Chapter 11. Only if the auto makers can get rid of their crushing legacy costs will they have a chance to recover. A bailout will just delay the inevitable.

Why Didn't Passage of the $700 Billion Bailout Stabilize The Financial Markets?

Manuel Hinds, writing in the Wall Street Journal may just have the right answer, illustrating his point with a poker analogy. Read the whole thing of course but here's the meat of the article.

"What we are witnessing is what economists call a rise in the liquidity preference, which was the main factor leading to the Great Depression. By a rise in the liquidity preference we mean that investors aim to increase the share of liquid instruments in their total assets. For the banks it means they want to liquidate loans and transfer the proceeds to very liquid instruments, such as Treasury Bills.

This migration depresses the economy by reducing credit. In these circumstances, the solution is not to keep on throwing money at the banks, which are inclined to hoard it not lend it. Rather, what is needed is stopping the skyrocketing increase in their liquidity
preference and then lowering it. Doing that requires writing off the losses now lodged in the financial system as soon as possible.

A simple analogy will help illustrate this point. Imagine that you are playing poker with 10 people and that you learn that a minority of them is broke and would not pay you if
they lose. You don't know, however, who the ones are who won't pay. In this environment, the risk of losing would be too high even if you know that most of the players are perfectly sound financially and would pay up if they lose.

In this environment, any rational card player would stop making bets until the true solvency position of each player is revealed and the bankrupt ones are expelled from the game. Having insolvent players sitting at the table spoils the game.

This is what is happening in the banking system -- only worse, because in poker you would only fail to collect the pot if you played with an insolvent player, while in the banking system you would lose your bets if you lend to an insolvent bank. Liquidity preference will not subside until the losses are made explicit, written off and absorbed."

This sounds about right to me. I've quipped to more than one person in the last few days that it seems like every time the government tries to "do something" the market swoons again and maybe they should just stop. I may have been coincidentally closer to the mark than I thought.

Update: The day afer the first bailout bill was rejected by the House, i.e., the government failed to "do something," the dow rallied by 485 points. Yes, it dropped the day of the vote but could that be more due to the expectation of passage by some who expected the companies they invested in to benefit from the bailout and that was priced into the stocks? When the expectation didn't materialize, the market fell.

"We the People" Have Lost Control of Washington

As Tom Blumer says over at Pajamas Media, "the bailout saga proves the elites don't care what we think." I certainly agree with the sentinment shared by many that it's time the entire Congress was replaced. They barely even pretend to listen to the voters anymore. Back to Tom Blumer:

"In mid-September, when it became clear to Hank Paulson, Ben Bernanke, and George Bush that extraordinary measures were needed to address the mess that had built up in the financial markets during the past decade or so, their first instincts should have been to say:

• “We need to have a complete plan to deal with this.”
• “We need to make a case to Congress and the American people that our plan will work.”
  

They did neither of these things; nor did they even seem to consider whether what they wanted was even constitutional."

Does anybody out there know whether we can sue to block implementation of this bailout plan on Constitutional grounds before it gets any worse (and it will get worse if we don't start screaming even louder about it)?

(via Instapundit)

The Bailout and "The Blob"

Pajamas TV has this interesting little video perspective, presented by Bill Whittle, on the just-passed bailout bill and its growth metastasization from 3 pages to over 400 in the course of just two short weeks.

Hey, Congress. If you really want to help, don't help! And certainly don't help your self to all the goodies.