Obama Administration Continues to Waste 100’s of Billions In US Taxpayer Funds

Time Magazine recently pointed out that the new “GM” or “Government Motors” will employ approximately 40,000 individuals, down from the historical high of 600,000 workers it employed less than a generation ago. Through mismanagement, unreasonable unions and improper Government intervention, 14 out of every 15 jobs at GM have been lost. http://www.time.com/time/business/article/0,8599,1901345,00.html?xid=rss-biztech-yahoo  https://mcauleysworld.wordpress.com/2009/05/28/with-14-out-of-5-gm-jobs-gone-why-is-the-government-spending-100s-of-billions-of-taxpayor-dollars-on-a-company-that-will-employ-less-than-40000/

So, where does the waste come in? The Government continues to spend taxpayer dollars recklessly. Universally, the “price tag” for the Government’s purchase of GM has been estimated (best case scenario) at 100’s of billions of dollars. You might ask, “What is the current market value of GM”?

Clearly, the Obama Administration has not asked this question. Today, May 28, 2009, GM has a “market cap” or “market value” of something less than $700 Million dollars. GM is not worth even $1 Billion Dollars, let alone the $100’s of billions being committed to this “political folly”. With this type of business acumen the entire endeavor is doomed to failure. A “Market Cap” is the “total value” of all of a Companies outstanding stock. At the close of business on May 28, 2009, the total value or “Market Cap” of all GM stock was $683 Million dollars, something  just over 1/2 a Billion Dollars.

So why, exactly, is the Obama Administration paying 200% of GM’s current value to take over the failing company? I have no idea and Congress hasn’t bothered to ask. I can tell you this, no business consortium, no group of private investors would ever embark on such a course of action. No investor group would pay that amount for GM. To do so would result in a Bernie Madoff type “perp walk”. GM’s stock is currently trading at $1.12 per share, yet the Obama Administration is “investing” upwards of $150 a share in taxpayer money in this boondoggle. Only a politician woudl refer to paying 130 times the true value of anything an “investment”.  

You may have heard of Toyota Motor Car Company, a major rival of GM and the most successful car company in the world. Toyota’s “Market Cap” at the close of business on May 28th, 2009, was $137 Billion Dollars. http://finance.aol.com/quotes/toyota-motor-corporation/tm/nys

The Obama Administration is having American Taxpayers pay a “Toyota Price” for  a “GM value”. This is beyond the ridicuolus, it is criminal. The Obama Administration is paying for Toyota and getting GM in return.  

No wonder the Country is in such a mess.

With 14 Out Of 15 GM Jobs Gone Why Is The Government Spending $100’s Of Billions Of Taxpayor Dollars On A Company That Will Employ Less Than 40,000 Workers.

Less than a generation ago, GM employed 600,000 US workers. The GM of tommorow will employ fewer than 40,000. Why is it that the US Government (The Obama Administration) is “buying” this Company with $100’s of Billions of US Taxpayer Dollars today when GM has a net worth (Market Cap) under  $725 Million Dollars. (Market Cap = The price per share of stock multiplied by the number of shares). Today, GM is not worth even $1 Billion, yet the Government will spend hundreds of times that amount for GM. http://finance.yahoo.com/q?s=GM

Just what, exactly, does the government think it is doing. One thing you can be sure of, someone is stealing both the US taxpayer and the Auto Workers blind. How is this for an example: It would only cost $40 Billion to pay a million dollars apiece ($1,000,000) to everyone of the 40,000 GM workers. That is right, a MILLION DOLLARS A PIECE, to 40,000 workers is $40 Billion, well less than half of what the Government will pay for GM. Is there any chance the Government knows what it is doing? What do you think? Didn’t the Government create this mess in the first place?

TIME.com

Government Motors: Can a Reinvention Really Save GM?

By David Von Drehle Thursday, May. 28, 2009

General Motors is in the process of axing 1,100 of its 6,000 dealers. When the march of time, the sins of management and the scythe of a bad economy conspire to bankrupt once great companies, who pays?

Better to break hearts locally than shatter the greater economy — and that’s what the collapse of GM and Chrysler threatens to do, according to the White House auto task force that is undertaking the monumental rescue mission. In the deal being cobbled, GM’s stockholders will be wiped out, replaced as equity owners by the Treasury Department, with 70%, and the United Auto Workers (UAW), with 17.5%. GM’s business in Europe, Opel, will be sold. As many as 14 U.S. factories are marked to close. The iconic Pontiac brand is probably finished. Under a new labor agreement with the UAW, GM’s hourly domestic workforce, which numbered 600,000 at its peak, will drop to 40,000. In other words, 14 of every 15 GM jobs have vanished in roughly a generation.

Holders of $27 billion in GM bonds have refused the company’s debt-for-equity swap, making bankruptcy all but inevitable. For purist capitalists, the lasting significance of GM’s pending Chapter 11 (and Chrysler’s bankruptcy, filed a month ago) is the overwhelming intrusion into the private sector by Barack Obama and his auto task force at Treasury. “The day they fired the CEO of General Motors” — Rick Wagoner was dismissed by task-force co-chairman Steve Rattner in late March — “is a day we will look back on with great regret,” predicts Senator Bob Corker, Tennessee.

Critics of the government’s involvement maintain that bondholders have been punished, union workers coddled and laws flouted in the process. And they worry that should GM emerge from Chapter 11 with the U.S. Treasury as majority shareholder — Government Motors — we will have crossed a frontier separating capitalism from socialism, even though the company will be run by existing management.

Which brings up another sore point among skeptics of the Administration’s actions. Is it feasible now for GM and Chrysler, which made money on pickups, SUVs and minivans, to small-car their way to prosperity? U.S. carmakers have not earned a dime selling automobiles in a decade. “There’s no question it’s a challenge,” a task-force official allowed. “It’s something the domestic car companies haven’t done successfully in the past.” Whether it will work in the future is “a fundamentally significant question.”

These hopes float on the audacity of deficit spending. By the time taxpayers are done cleaning up the books of the two companies and refilling their tanks with enough cash to keep them going — along with their finance arm, GMAC, and their key suppliers — the public price tag will exceed $100 billion. Add billions more in subsidies for researching and developing green technology and still more billions in tax credits to motivate buyers to go green. If someday GM and Chrysler become consistently profitable, the government loans will be repaid and both companies restored to total private control. The operative word being if.

http://www.time.com/time/business/article/0,8599,1901345,00.html?xid=rss-biztech-yahoo

AND JUST WHAT HAPPENS IF THE GOVERNMENT DOESN’T RUN GM SUCCESSFULLY? 100’s OF BILLIONS OF ADDITIONAL TAXPAYER DOLLARS TO KEEP THE COMPANY AFLOAT? HOW ABOUT THE MILLIONS OF AMERCIANS WHO DON’T WORK FOR GM BUT ARE RUNNING OUT OF UNEMPLOYMENT BENEFITS NEXT MONTH? WHO IS LOOKING OUT FOR THEM? 

GM To Announce 14 Plant Closures, Monday June 1, 2009

GM to announce 14 plant closures MondayAP

DETROIT – The news no one wants to hear is coming Monday morning to General Motors Corp. factories across the U.S.

The troubled auto giant will identify 14 factories it will close by the end of 2010 as part of its restructuring plan, according to a person briefed on the plans.

The announcement could coincide with GM’s all-but-inevitable bankruptcy protection filing, expected to come by Monday.

Factory-level union leaders have not yet been told which plants will be shuttered, but four vehicle assembly plants will be among those to be closed, along with parts stamping, engine and transmission factories, said the person, who asked not to be identified because the plans have not been made public.

GM has said it plans to close 16 more U.S. factories by the end of next year, shedding 21,000 jobs. Two have already have been announced — an engine plant in Massena, N.Y., and a parts stamping plant near Grand Rapids, Mich.

United Auto Workers union officials in Detroit have been telling plant-level officials that the company will make the announcement rather than the union, according to the person.

GM spokeswoman Sherri Childers Arb would not comment on Thursday.

http://news.yahoo.com/s/ap/20090528/ap_on_bi_ge/us_gm_plant_closures

Government Update: 1 Out Of 8 Mortgage Holders Are Now Delinquent Or Are In Foreclosure

12 percent are behind on mortgage or in foreclosure

AP

NEW YORK – A record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn’t expected to crest until the end of next year, the Mortgage Bankers Association said Thursday.

The foreclosure rate on prime fixed-rate loans doubled in the last year, and now represents the largest share of new foreclosures. Nearly 6 percent of fixed-rate mortgages to borrowers with good credit were in the foreclosure process.

At the same time, almost half of all adjustable-rate loans made to borrowers with shaky credit were past due or in foreclosure. There were no signs of improvement.

The pain, however, is spreading throughout the country as job losses take their toll. The number of newly laid off people requesting jobless benefits fell last week, the government said Thursday, but the number of people receiving unemployment benefits was the highest on record. These borrowers are harder for lenders to help with loan modifications.

http://news.yahoo.com/s/ap/20090528/ap_on_bi_ge/us_foreclosures

Government Corrects Unemployment Numbers – 17 Straight Weeks With Over 625,000 New Claims. Continuing Unemployment Claims Set All Time Record

As unemployment benefit extensions begin to expire in the 1st week of June 2009, millions of unemployed Americans will start falling through the cracks this next month. Will the Government claim a “drop” in the unemployment numbers just because the workers have exhausted their benefits?

WASHINGTON (AP) — The tally of newly laid-off people requesting jobless benefits fell last week, the government said Thursday, a sign that companies are cutting fewer workers.

But the number of people continuing to receive unemployment benefits rose to 6.78 million — the largest total on records dating back to 1967 and the 17th straight record week. The figures for continuing claims lag behind initial claims by one week.

The Labor Department said the number of initial claims for unemployment insurance dropped to a seasonally adjusted 623,000, from a revised figure of 636,000 in the previous week. It was below analysts’ estimates of 635,000. THE GOVERNMENT HAD ORIGINALLY REPORTED THAT 570,000 NEW JOBLESS CLAIMS HAD BEEN FILED LAST WEEK – CLEARLY AN INTENTIONAL UNDERREPORTING IN ATTEMPT TO “SPIN” THE REALITY OF THE CONTINUING RECESSION AND JOB LOSSES IN THE US ECONOMY. 

Auto-related layoffs elevated the jobless claims numbers in recent weeks, but a Labor Department analyst said no states said their claims figures were affected by job cuts in that sector last week. THE CURRENT NUMBERS DO NOT REFLECT THE ANTICIPATED AUTO RELATED JOB LOSSES EXEPCTED IN THE NEXT 60 DAYS.

The four-week average of initial jobless claims, which smooths out fluctuations, dropped slightly to 626,750. That figure is about 30,000 below the peak for the recession reached in early April. The real question to be asked, “Will these numbers be revised again, upward and above the “peak” monthly job loss number of 656,750 just 2 months ago?  Has there really been any improvement, or just political spin on the real numbers? The fact is this, people are not returning to work, new intial jobless claims remain above 625,000 per week. 

Do you remember Candidate Obama telling us last year that we were experiecing “the worst economy in the history of the world!  “Still, new claims (2009) remain far above levels in a healthier economy. Weekly initial claims were 378,000 a year ago.” During the first 3 months of 2008, a total of 240,000 jobless claims were filed, compare that with the 1,900,000 filed during the 1st 3 months of 2009. During the 1st 6 months of 2008, the US economy was adding jobs not losing them!                                  http://econoindicators.com/2008/04/adp-employment-report-april-2008/

And the relentless rise in continuing claims for jobless benefit means the unemployment rate, which reached 8.9 percent in April, will rise in May, economists said. Many economists expect the rate to approach 10 percent by the end of this year. THE UNEMPLOYMENT RATE THIS TIME LAST YEAR? The National Unemployment rate for April 2008 was 5.0%. Year to year, the unemployment is almost twice as high as a year ago. (An increase from 5% to 9%).                                                                   http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS14000000  

Even if layoffs are slowing, jobs remain scarce. A net total of more than 5.7 million jobs have been lost since the recession — the longest since World War II.

http://finance.yahoo.com/news/Initial-jobless-claims-drop-apf-15368339.html

 

Obama Administration Trashes Contract Law In Chrysler Bankruptcy – DIRE WARNING FOR EQUITY INVESTORS

U.S. court seen clearing Chrysler sale to Fiat

At the end of 2008 FIAT had a “Market Cap”  of 15 Billion dallars. FIAT is currently worth 6 Billion and on the verge of bankruptcy in Europe – Why the rush through the American Court system – who is making Billions on the back of American Tax payers? Why “push” a “politically spun” Bankruptcy through the Courts to the advantage of Obama’s “Big Dollar Contributors” and at the expense of pension funds and workers across this country? 

NEW YORK (Reuters) – Chrysler looks set to clear its last major hurdle in its sprint through bankruptcy court as soon as Thursday, when a judge is expected to overrule more than 340 objections and approve its sale to a group that includes Fiat.

Less than 30 days after it filed for bankruptcy, the automaker seeks approval to sell its stronger operations to a “New Chrysler” owned by Italy‘s Fiat (FIA.MI), labor and the U.S. and Canadian governments, in exchange for $2 billion paid to its lenders.

Ten hours of hearings on Wednesday centered on cross-examining Chrysler’s former president and vice chairman, Tom Lasorda; financial advisor Robert Manzo of Capstone Advisory Group; and Alfredo Altavilla, the chief executive of Fiat’s powertrain business.

That testimony will be used in Thursday’s hearing, when hundreds of objections to the sale will be heard. The judge said the hearings might stretch into Friday.

Those opposing the sale include the nearly 800 dealers Chrysler wants to shutter, as well as debtholders and retirees. Suppliers, which are owed more than $5 billion, have also objected.

The sale will complete the White House’s goal of reorganizing the automaker in 30 to 60 days, largely thanks to government financing of the bankruptcy and Fiat’s role as a buyer. Chrysler shut its operations when it filed for bankruptcy, which lent weight to the argument that the sale needed to be approved quickly.

The compressed time frame has forced the court to accelerate hearings and cut notice periods short. Lawyers trying to block the sale were scrambling to gather complete depositions on Tuesday as the hearing approached and to dig through hundreds of thousands of documents.

Why have the time frames been cut short? Why is the Obama Administration preventing a proper review of the documents and a normal examination of the records and competing claims? At what cost to Taxpayers and investors? At who’s cost and who will benefit?  

The sale would free the automaker of $6.9 billion in loans and cumbersome retiree benefits that it blamed for its struggles against more nimble competitors. By teaming up with Fiat, Chrysler could expand beyond the U.S. market and diversify a product line now heavily weighted toward trucks and SUVs. Please! FIAT is near Bankruptcy and has never had a market for it’s cars in the US – How is this transfer of US Tax Payer money going to change these facts? Why is the Obama Administration giving FIAT Chrysler and shipping Billions in taxpayer dollars to Italy? Why isn’t FIAT putting up any cash in this deal? Why are US Taxpayers baing asked to fund a delay in FIAT’s bankruptcy? 

Much of the questioning focused on whether Chrysler explored alliances with automakers aside from Fiat and the role of the U.S. Treasury.

The government provided more than $8 billion in emergency loans to Chrysler before the bankruptcy and nearly $5 billion financing to carry it through the Chapter 11 reorganization, which has proven contentious. That is right, $13 Billion in taxpayer money to a priavtely owned company worth less than $1 Billion! (Market Cap = Outstanding Shares Of Company Stock x price per share = Market Cap. GM’s market “cap” is under $1 Billion, Chrysler “net worth” is less than 1/2 that amount!.http://www.thetruthaboutcars.com/ford-market-cap-4x-gm/   What type of common sense or business acumen is being applied here? Who is stealing this money from the American Taxpayer?

Manzo testified that banks rejected an offer from Chrysler prior to bankruptcy to swap their secured debt for half the equity in a restructured Chrysler. The banks chose instead to negotiate only with the government.

Glenn Kurtz, an attorney for White and Case which is representing Indiana pension funds opposed the sale to Fiat, read a March email in which Manzo appeared to cheer a proposal from the government to eliminate the banks secured debt after they rejected Chrysler’s offer of an equity stake.

The hearings started with Gonzalez rejecting a request to postpone the hearings to give more time to opponents, including the Indiana funds, to review the “hundreds of thousands” of documents received in the last few days as part of the discovery process.

That discovery process turned up one email that seemed to show Chrysler’s attorneys from the Jones Day firm questioning the government’s demand for a tight schedule for the sale process. The email called the accelerated schedule a mistake that risked the loss of credibility and threatened to “stuff the judge.”

http://news.yahoo.com/s/nm/20090528/bs_nm/us_chrysler_4

Obama’s Economic Recovery Program Is Failing – New Wave of Mortgage Foreclosures, Unemployment Continues To Rise, Automakers Prepare to Shut Plants – Layoff 10’s Of Thousands

As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.

In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.

With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. [Remember, the Obama Administration predicted a maximum unemployment rate of 8.9 in its projections of economic recovery- McAuley’s World]

That could exacerbate bank losses, adding pressure to the financial system and the broader economy.

“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.

“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”

Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis. [Now that we have wasted 100’s of Billions in tax payer dollars helping the reckless and those not qualified to be homeowners, where is the assistance for those who played by the rules? Mc Auley’s World].

Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.

Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.

Under a program announced in February by the Obama administration, the government is to spend $75 billion on incentives for mortgage servicing companies that reduce payments for troubled homeowners. [The Obama Administration claimed the program would help 4 million home owners]. But three months after the program was announced, a Treasury spokeswoman, Jenni Engebretsen, estimated the number of loans that have been modified at “more than 10,000 but fewer than 55,000.” [Why can’t the Government be more exact than this – a 45,000 mortgage gap between 10,000 and 55,000. Where is the $75 Billion in Taxpayer money going? If the “true number” of modified mortagges is 10,000,  the Obama program cost taxpayers $7.5 million per mortgage. Who is kidding who? Someone is robbing the US Taxpayer blind] 

In the first two months of the year alone, another 313,000 mortgages landed in foreclosure or became delinquent at least 90 days, according to First American CoreLogic.

“I don’t think there’s any chance of government measures making more than a small dent,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

Last year, foreclosures expanded sharply as the economy shed an average of 256,000 jobs each month. Since then, the job market has deteriorated further, with an average of 665,000 jobs vanishing each month.

http://www.nytimes.com/2009/05/25/business/economy/25foreclose.html?pagewanted=1&sq=May%2025,%202009%20Mortgage%20foreclosures%20&st=cse&scp=1

GM announces an additional 47,000 job cuts amid palns to shut 5 US auto plants.   (February 2009). http://www.wilx.com/home/headlines/39750882.html

U.S. to steer GM toward bankruptcy … The Obama administration is preparing to send General Motors into bankruptcy as early as the end of next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and re-emerge as a global competitor, sources familiar with the discussions told the Washington Post. http://scoop.chrysler.com/2009/05/22/us-to-steer-gm-toward-bankruptcy/

Chrysler confirms 6 additional plant closings – May 2009. http://scoop.chrysler.com/2009/05/06/chrysler-issues-plant-closing-statement/ 

GM plans to shut 14 more auto plants, reduce employees by 20,000.  (April 2009) Gm announces planned cuts did not go far enopugh, additional cuts planned. http://money.cnn.com/2009/04/17/news/companies/gm_jobs/?postversion=2009041712

From the WSJ: Mortgage Defaults, Delinquencies Rise

… A spokesman for the FHA said 7.5% of FHA loans were “seriously delinquent” at the end of February, up from 6.2% a year earlier. Seriously delinquent includes loans that are 90 days or more overdue, in the foreclosure process or in bankruptcy.

The FHA’s share of the U.S. mortgage market soared to nearly a third of loans originated in last year’s fourth quarter from about 2% in 2006 as a whole, according to Inside Mortgage Finance, a trade publication. That is increasing the risk to taxpayers if the FHA’s reserves prove inadequate to cover default losses. http://www.calculatedriskblog.com/2009/03/fha-mortgage-defaults-increase.html

 

 

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