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.

Billions In Auto Bonuses While Singin The Bailout Blues

First – The problem with the Detroit 3 is not new nor is it temporary. It is long term and systemic. It will not be solved by a bailout. Why are the “Detroit 3” looking for a bailout? It is not because the economy is in recession. It is because the Detroit 3 are badly managed and have been badly managed for so many decades that they cannot now obtain financing on the open market. The “international business marketplace” refuses to invest in the ‘Detroit 3″ so they are looking for a “public handout”. A “Bailout” with public funds will provide the UAW and Auto Exces one last chance to divide up one last “Big Payday” before they go under. Only after a bankruptcy and a wholesale change in both Mangement and Union Leadership will the Detroit 3 have a chance to survive.  

Secondly, to imply that GM, Ford & Chrysler LLC, are the “American” Auto Industry is disingenous. With global investing GM, Ford & Chrysler are no more American than Honda, Toyota or Hundai. Any American can invest in the “New American Auto” Industry as  the Wall Street Journal calls it – but Americans cannot invest in Chrysler LLC – it is a privately owned company and no one knows who actually “owns” Chrysler LLC because Cerebus Capital Management’s ownership is a closely guarded secret. http://online.wsj.com/article/SB122608860916209213.html?mod=article-outset-box

The largest investors in GM and Ford are Capital Management firms, hedge funds and Mutual Funds. There is no way to determine whether the individuals who have invested in those firms are “American” or from “Communist China”. Communist China controls a significant interests in many of the remaining “American” banks and investment firms.                                                             http://www.marketwatch.com/news/story/china-invests-3-bln-blackstone/story.aspx?guid={C8B110EC-2538-4461-97C8-0FD7F1CAEF15}&dist=hplatest            http://english.pravda.ru/business/103399-Citigroup-0                                            http://forbes.ccbn.com/conferencedetail.asp?client=forbes&event=1988907

Why do writers insist on calling these companies “American”. We don’t know who owns the stock or who the investors are. As for GM and Ford, either could be bought by a foreign corporation tomorrow the same way Chrysler was purchased, first by Daimler then by Cerebus. 

CHRYSLER LLC – CEREBUS Capital Management

Chrysler is owned by a private equity company – CEREBUS CAPITAL MANAGEMENT – Cerebus is named after the mythical three three headed dog that guards the gates of hell  http://www.hoovers.com/cerberus-capital-management/–ID__112328–/free-co-factsheet.xhtml?cm_ven=PAID&cm_cat=INK&cm_pla=CO1&cm_ite=cerberus-capital-management )

Cerebus is a private capital investment firm that owns shares in companies all over the world. Cerebus was formed in 1992. It has its own bank, a Japanese Bank not an “American” bank, named Aozora.

Cerebus’ Chairman is none other than former Vice-President Dan Quayle. http://www.vicepresidentdanquayle.com/biography.html

But who owns Cerebus – no one knows – it is a “private” and “unregulated” company. “It has come to this. A firm that made its name, and its fortune, feeding off companies in their death throes is demanding a government bailout.” http://www.cbc.ca/money/story/2008/11/07/f-pittis-economy.html 

No one knows if Cerebus is anymore of an American Company than Daimler was or the China Investmant bank is.          http://www.associatedcontent.com/article/244378/cerberus_buys_chrysler.html                 http://en.wikipedia.org/wiki/China_Investment_Bank                                             http://en.wikipedia.org/wiki/China_Construction_Bank                                             http://swfinstitute.org/fund/cic.php                                                      http://www.skadden.com/index.cfm?contentID=47&practiceID=33

The US government can’t own shares in Chrysler LLC and the Cerebus Investors have extremely limited liability for any bailout money we put in their pockets, “Chrysler is 81% owned by Cerebus Capital Management and 19% by Daimler AG. It is not a public company and you cannot buy or sell its stock. (It was a public company until last year when Daimler sold most of Chrysler to Cerebus.) An LLC is a corporate structure that limits the liability of its stockholders, similarly to a corporation.” http://smallbusiness.yahoo.com/r-answers-a-20080114050334AA9ZyJk-k-stock+trade

Cerberus is headquartered in New York City with affiliate and/or advisory offices in Atlanta, Chicago, Los Angeles, London, Baarn, Frankfurt, Hong Kong, Tokyo, Beijing, Osaka and Taipei. http://www.cerberuscapital.com/about_comp_prof.html

Cerebus was described this way, “Cerberus Capital Management is the very real private equity firm — one of the bidders in play for the Chrysler Group — that guards the privacy of its dealings almost as jealously. USA Today takes a look at the firm and reveals a company with a “fierce reputation” and “a combative, take-no-prisoners style.”The list of companies that are either owned by Cerebus or which the company has majority stakes include: Alamo and National rental car, Fila, Blue Bird yellow buses, Rafaella clothing, GMAC, Aegis Mortgage, auto suppliers CTA Acoustics and GDX Automotive, Remington Arms, Bell Canada, Tower Automotive, banks, mortgage companies, and property managers.” When it bought Chrylser, Cerberus instantly doubled its annual revenue, but revenue isn’t the prime concern for private equity firms — return on investment is. The issue is that no one knows how Cerberus would go about increasing return from Chrysler.” http://www.autoblog.com/2007/04/16/rare-info-on-chrylser-bidder-cerberus-reveals-a-fierce-reputati/                                                                                            http://www.washingtonpost.com/wp-dyn/content/article/2007/08/14/AR2007081401913.html     http://www.bcwf.bc.ca/documents/s=393/bcw1176303661611/  http://www.forbes.com/business/feeds/afx/2007/05/17/afx3731793.html           http://en.wikipedia.org/wiki/Cerberus_Capital_Management   http://iht.com/articles/ap/2007/03/29/business/NA-FIN-COM-US-Tower-Automotive-Bankruptcy.php                                                                                      http://www.cerberuscapital.com/

Now we know how they plan on increasing the return – a taxpayer subsidized bailout. “The UAW and the Canadian Auto Workers have publicly opposed the sale of Chrysler “to Cerebus or any other private equity group.” http://www.autoblog.com/2007/04/16/rare-info-on-chrylser-bidder-cerberus-reveals-a-fierce-reputati/
In 1984 Chrysler employed approximately 80,000 workers. (1984-09-01, Chrysler Corp. completed its 4-year employee stock ownership plan by distributing 1,661,691 shares of common stock to more than 80,000 employees, including 63,000 members of the United Auto Workers union.) http://resources.bnet.com/topic/chrysler+llc+and+stock.html
In October 2008 it was estimated that Chrysler/Dodge/Jeep combined employed 49,000.        http://search.yahoo.com/search;_ylt=Ak0_ss1oGMILRC6Sai7xc3KmN3wV?p=Chrysler+LLC+Employees+2008&fr=att-portal&toggle=1&cop=&ei=UTF-8
http://www.sullcrom.com/offices/detail.aspx?office=3                                     http://www.chinadaily.com.cn/bizchina/2008-07/17/content_6854442.htm                         http://www.ml.com/index.asp?id=7695_7696_8149_8688_8558_6274
Chrysler is only a very small piece of the Cerebus pie. Why should the American taxpayers “bailout” a huge, private, mulitnational firm with hundreds of Billions of dollars in assests and dozens of companies under its control?
Cerebus would like to sell Chrysler, but Chrysler is so dysfunctional Cerebus cannot find a buyer.  If Chrysler is a bad bet for Daimler and Cerebus, it is a bad bet for the US taxpayer.
General Motors Corporation
For those who argue GM is the victim of a sudden economic downturn, let me remind you that GM’s largest individual shareholder at the time. Kirk Kerkorian, was reported to have said this in January 2006. “General Motors Corp must cut its dividend, executive salaries and brand structure if it hopes to return to profitability”. Jerry York, an adviser to investor Kirk Kerkorian’s Tracinda Corp, said GM is currently burning through 24 mln usd per day, Agence France-Presse reported. He said the automaker must change its mindset to operate in ‘crisis mode’ and recognize the challenges it faces in the coming months. But unlike a number of analysts who have warned that GM is at risk of bankruptcy, York expressed confidence in the automaker’s ability to create shareholder value even after its shares fell more than 50 pct in the past year.
Lets see; near bankruptcy, lost 50% of stock value in the last year, “must act in crisis mode”, and this situation wasn’t new in January 2006, GM had been facing the same issues for at least 8 years running. In November 2006 Kerkorian sold his GM stock, see below.  
As to General Motors, which is in business with Cerebus as joint owners of GMAC – what are they doing to improve their economic performance – stripping out their valuable subsidiaries and setting them up as private companies, “GMAC, the money-losing finance company, sold a reinsurance business to Maiden Holdings Ltd and plans to sell two insurance units to the Bermuda-based company, to bolster capital and add liquidity. Private equity firm Cerberus Capital Management LP owns 51 percent of Detroit-based GMAC, while General Motors Corp owns 49 percent.” http://blog.pennlive.com/leftcoast/2008/11/chrysler_death_watch_week_thre.html
Who is running “Maiden Holdings” – former GMAC executives. The same Executives who led to these types of problems, “GMAC is shedding profitable assets after suffering $7.2 billion of losses in the seven quarters ended June 30. The lender has been hurt by soaring credit losses at its Residential Capital LLC mortgage unit and by write-down of leases on sport-utility vehicles that drivers no longer want. GMAC’s credit ratings have fallen deep into junk status.” http://blog.pennlive.com/leftcoast/2008/11/chrysler_death_watch_week_thre.html
Who owns GM? Just two years ago Renault & Nissan offerred to buy a “significant minority interest in the carmaker. http://www.msnbc.msn.com/id/13630565/ Kurt Kerkorian, the Billionare American Investor, who owned 9.9% of GM through his Tracinda Corporation publicly favored the partnership. GM would not consumate the deal. In November 2006 Kerkorian announced he would sell 14 Million shares in GM, in a “private transaction”, at $33 per share. Later that month, Kerkorian “dumped” his remaining GM shares at $28.75 per share.
It was reported that Bank of America purchased the stock. It was unknown if Bank of America retained the shares (9.9% of GM) or re-sold them. Morgan Stanley owned 5% of GM in 2006. Morgan Stanley and Bank of America were, in turn, partially owned by the China Investment bank.  http://www.thestreet.com/stocks/automakers/10268781.html 
Three months prior to Kerkorian dumping his GM stock in November 2006, two other “Investment Firms” dumped GM stock in August 2006. The news reports stated, “Two Major Investors Sell Blocks of GM Shares”, “California-based investment firms that rank as the second-and third-largest institutional investors in General Motors Corp. have sold big blocks of the automaker’s stock, according to regulatory filings. Capital Research & Management Co. of Los Angeles, GM’s second-largest investor, sold 19.2 million shares, or 24% of its holdings in the company, according to second-quarter reports filed this week with the Securities and Exchange Commission. The company’s third-largest investor, Brandes Investment  Partners of San Diego, sold 2.4 million shares, or 4% of its holdings. Neither company would comment, saying they do not discuss their investments.” http://articles.latimes.com/2006/aug/17/business/fi-gmstake17
These firms also guard the identity of those who control the money they are investing. This article went on to note that, “Credit Suisse bought 11.5 million shares to become the sixth-largest investor in GM” at that time.  Credit Suisse is a Swiss Bank/Holding Company.    http://articles.latimes.com/2006/aug/17/business/fi-gmstake17   
The point is, there is no way to tell who “owns” GM. Many of the shares are “held” by Banks, Investment Firms, Hedge Funds and Capital Management firms, but “who” owns the money invested by those firms is unknown. Investors from all over the globe are free to deposit their money with these firms.
If GM is a bad bet for Kirk Kerkorian and the International Investment Community, it is a bad bet for the American taxpayer. 
  
GM, the largest of the “Detroit 3” may employ as many as 123,000 or as few as 74,000 at present.  Analyst state GM needs to downsize by half. (Retaining 40,000 to 60,000 workers). Optomistic analysts report GM has already reduced its headcount to 74,000 after announcing 4 more plant closing and the elimination of an additional 10,000 workers in June 2008.
These cuts follow 30,000 job cuts in 2005, http://money.cnn.com/2005/11/21/news/fortune500/gm_cuts/
34,000 jobs in 2006,
and 30,000 more in 2007. In February 2008, after posting a $38 Billion Loss, Business Net noted the 2007 job cuts and stated, “After cutting more than 30,000 employees in the last round of restructuring, GM is now offering buy-outs to all 74,000 staff.”
During this same time period, “foreign automakers have built or announced plans to build five U.S. assembly plants, he said. In 2007, foreign auto companies employed 113,000 people in the U.S., a number McAlinden projects will rise to 152,000 by 2011.”   http://www.msnbc.msn.com/id/24947044
International Financial analysts have stated that GM’s future, even given a “bailout” looks bleak,  “An analyst forecast their price would fall to zero, saying that even if there is a government bailout of the auto giant, shareholders would not benefit. “We are lowering our target on GM equity to zero dollars,” the Deutsche Bank report said. “Even if GM succeeds in averting a bankruptcy, we believe that the company’s future path is likely to be bankruptcy-like,” it said.” http://news.yahoo.com/s/afp/20081110/bs_afp/stocksusautocompanygm
Ford Motor Company
“Financier Kirk Kerkorian is pulling out of the stake he took in Ford Motor Co. just six months ago, selling 7.3 million shares at a fraction of his purchase price.” “Kerkorian announced in April that he had bought 100 million shares for an average price of $6.91. He then announced a tender offer under which he paid $8.50 a share for an additional 20 million shares. In addition he bought another 22.3 million shares between late April and mid-June at an average price of $6.54 a share, giving his total investment an average price of just over $7 a share.” “I don’t know if Ford’s North American operations are even going to profitable by 2010,” said Kevin Tynan, auto analyst with Argus Research.

Kerkorian sold his shares for a little more than $2 a piece, losing almost $5 a share and taking a Billion Dollar plus loss. If Kerkorian was willing to take a Billion Dollar loss to get rid of his Ford shares, why is Ford a good bet for American taxpayers?

Art Hogan, chief investment strategist at Jefferies & Co., said that Kerkorian signalling that he wants out of the auto industry is yet another nail in the industry’s prospects in the eyes of investors.”Do you need a good excuse to pull out of Ford? What you need is an excuse for getting in in the first place,” said Hogan. “It’s been in demise for a decade.” http://money.cnn.com/2008/10/21/news/companies/ford_kerkorian/index.htm?eref=rss_topstories

“GM, Ford stock sell-off contributes to Dow’s drop”, GM lost half of its value — or $2.7 billion — and Ford has lost 60 percent, or $7 billion. [The combined value of the Detroit 3 is estimated at 9.2 Billion, $2.7 Billion for GM, $4.7 Billion for Ford, 1.8 Billion for Chrysler]              http://www.detnews.com/apps/pbcs.dll/article?AID=/20081010/AUTO01/810100386&imw=Y

“Ford to sell $500m in new stock”, In an effort to secure more capital and reduce debt, Ford plans to sell $500m in new stock. Ford will use the cash infusion to buy bonds from Ford Motor Credit, which has been strugling with the slow economy and nation-wide credit crunch. Goldman Sachs is handling the stock sale, and Ford has given no timetable for when the stocks will enter the market. Ford has already exchanged debt for equity to the tune of $927m in the past year. With shares of Ford stock at under $5 per share right now, anybody can own a share of the Blue Oval for the price of a value meal.” http://www.autoblog.com/2008/08/15/ford-to-sell-500m-in-new-stock/  

Unfortunately, there were no takers, the International Investment Community is just not interested.  

 

In September Ford announced plans to close nine plants by 2008 and another seven plants after that, more than half of its U.S. hourly employees recently agreed to take one of the various packages to leave the company in the coming months.

PLANT CLOSINGS & LAYOFFS –

The New York Times reported, “Highly Rated Auto Plants Set to Close”, Some of the most productive automobile factories, as rated by an influential study released Thursday, are closing down or losing large numbers of jobs in the motor industry’s upheaval. “Among the factories scheduled to close are a General Motors minivan plant in Doraville, Ga., and the Ford Motor Company’s midsize pickup truck plant in St. Paul, both of which ranked first in their segments in this year’s Harbour Report on automotive productivity. The top-rated full-size pickup plant, a Ford factory in Norfolk, Va., closed a year ago, showing that even the best-run plants are not immune to cuts. Two of the top three large S.U.V. plants are closing, as is the second-ranked midsize S.U.V. plant. The plant that ranked fourth over all, where Chrysler builds compact cars and crossovers in Belvidere, Ill., recently lost one of its three shifts. G.M.’s plant in Orion Township, Mich., ranked last in the midsize-car segment, taking 65 percent longer to build each vehicle than the top performer, while its plant in Moraine, Ohio, ranked second in midsize S.U.V.’s. But this week G.M. said it would add a third shift in Orion and close the Moraine factory.” http://www.nytimes.com/2008/06/06/business/06auto.html

Plant closings are negotiated with the UAW.

SINGING THE BAILOUT BLUES – BONUS CHECK IN HAND

Ford Motor Company Happy With Profit                                                                Australian News.Net
Friday 25th April, 2008                                                                                      
The Ford Motor Company in the US has posted a US$100 million profit for the period from January to April. Most companies reported losses for the first quarter of 2008 due to the economic slump and the subprime mortgage crisis, but Ford has attributed its success to its job reduction scheme in North America and triple earnings in Europe. http://www.australiannews.net/story/352149

Chrysler leaders get millions                                                                  Automaker defends payouts amid looming bailout talks                                      As Detroit’s crumbling auto industry asks Congress for a bailout, Chrysler is in the awkward position of paying about $30 million in retention bonuses to keep top executives while the company cuts thousands of jobs.

http://www.freep.com/article/20081113/BUSINESS01/311130002/1014

HEAD OF FORD DEFENDS BONUS

DEARBORN, Mich., May 4 – Philip Caldwell, the chairman of the Ford Motor Company, today defended the large bonuses paid to auto executives last year …..

AN IMAGE PROBLEM FOR DETROIT

To some people, the decision of General Motors and Ford, the two largest automobile makers, to pay record bonuses to their executives while enjoying protection

http://topics.nytimes.com/top/news/business/companies/ford_motor_company/index.html?s=oldest&&query=BONUSES&field=des&match=exact

More UAW workers bankrupt                                                                                                     Autoworkers who used to thrive on overtime now find it tough to keep up their lifestyles. Oscar Gray achieved the good life during 28 years of hard work at Delphi Corporation — a six-figure income, a nice home in Holly and two vehicles. But as Michigan’s auto industry tanked in recent years, the forklift operator lost huge amounts of overtime pay and gradually sank into financial ruin. Saddled with $469,000 in debt, he declared bankruptcy last month. Gray didn’t lose his job. His health isn’t failing, and he is not going through a divorce — the typical reasons many declare bankruptcy. Gray has been losing overtime. His gross pay was cut $16,000 one year, sliding to $87,000, and may dip again …. Despite the loss of time-and-a-half pay, some Michigan autoworkers continue to live large. Many bankrupt autoworkers own two homes — one is usually up north — which means multiple mortgages. Most have two or more cars and sometimes a boat or snowmobile payment, according to information culled from cases filed by autoworkers in U.S. Bankruptcy Court in the Eastern District of Michigan. http://www.detnews.com/2005/autosinsider/0509/18/A01-318432.htm

At the time this article was written, the median annual income (half above/half below) in Michigan was just under $40,000. The article doesn’t address the increases in Michigan’s personal and property tax rates that now make ownership of two homes extremely difficult ….. not only overtime been cut, but taxes on both income, sales and property taxes on homes have gone up. Michigan’s tax rates are not “consumer” or “business” friendly – rather than address those issues the proposed solution from the Michigan Politicans is for the rest of the Country to come up with a “Public Bailout” ………..   

Ford workers get $733M in profit-sharing checks. http://www.usatoday.com/money/autos/2001-03-07-ford-profit-sharing.htm

DETROIT, Jan 25 (Reuters) – Ford Motor Co., is considering paying bonuses to managers for 2006, despite record losses and massive job cuts. Ford reported a record loss of $12.7 billion for 2006, during which its U.S. sales fell 8 percent and it announced plans to close 16 plants and cut over 40,000 jobs in a bid to restore profitability to its North American operations by 2009. http://www.reuters.com/article/idUSN2528789420070125

Apparently, absenteeism at GM’s North American plants is such a huge issue that the automaker has to offer more than just a paycheck to get workers to show up. The new labor contract the General signed with the UAW includes an incentive for workers that go a full year without missing a day. Their reward is to be entered into a drawing that gives five lucky employees $15,000 to put towards a new GM car or truck. While the idea of offering an incentive for employees to do their job might be a surprise to the rest of us working stiffs, the auto industry’s hourly workforce has one of the highest annual absenteeism rates in the U.S. A 2004 study showed that about 10-percent of workers aren’t manning their positions during any one point in the year – three-times higher than other industries. Naturally, this has a massive effect on labor costs and quality control. http://www.autoblog.com/2007/11/12/do-your-job-at-gm-win-cash-for-a-car

“New” Auto Industry Plants Pay More Than “Detroit 3” –

UAW Losing Pay Edge: Foreign Automakers’ Bonuses Boost Wages in U.S. Plants as Detroit Car Companies Struggle – February 1, 2007 – The UAW is losing its edge in pay compared with non-unionized U.S. assembly plant workers for foreign companies, even as Detroit automakers aim for deeper benefit cuts to trim their losses. Workers for a foreign automaker for the first time averaged more in base pay and bonuses than UAW members working for domestic automakers, according to an economist for the Center for Automotive Research and figures supplied to the Free Press by auto companies. Toyota Motor Corp. gave workers at its largest U.S. plant bonuses of $6,000 to $8,000. Honda Motor Co. and Nissan Motor Co. are not far behind Toyota and UAW pay levels. Comparable wages have long been one way foreign companies fight off UAW organizing efforts. http://www.aftermarketnews.com/Item/28594/uaw_losing_pay_edge_foreign_automakers_ bonuses_boost_wages_in_us_plants_as_detroit_car_companies_struggle.aspx

DETROIT 3 – CONDITIONS NO WORSE FOR THEM THAN ANY OTHER COMPANY

You may have read this headline, “Citigroup to cut another 53,000 jobs”, “The company said total headcount is being reduced by 20 percent from its peak of 375,000 at the end of 2007; the company had already announced in October that it was eliminating about 22,000 jobs from those levels. The total workforce reductions include thousands of jobs that will be lost when Citigroup completes the sale of Citi Global Services and its German retail banking business.” http://news.yahoo.com/s/ap/20081117/ap_on_bi_ge/citigroup_jobs;_ylt=AvI.vrNuJO1e5AeczxKJB2Ks0NUE

Even after making these horrendous cuts, Citi will still employ 1 1/2 times the number of employees currently under contract to all of the “Detroit 3” combined. After the cuts Citi will employ approximately 325,000 to approximately 200,000 employees at the “Detroit 3”.

The Detroit 3 are not the only companies dealing with the economic slowdown, all business and all employers are forced to deal with this economy.

Throwing good money after bad at the Detroit 3 is no solution. The “Detroit 3” only accounts for 1/2 of 1 percent of the Gross National Product, slightly less than that produced by the “New Auto Industry Plants”.  The current combined “value” of the entire “Detroit 3” is something under $10 Billion Dolllars. Prior to the election Congress passed a $25 Billion bailout targeted at “retooling” at the ‘Detroit 3″ and the production of “green agenda autos”. That money is currently tied up in the Energy Committee in Congress. Detroit is now asking for an additional $50 Billion Dollars for a  total of a $75 Billion handout. $75 Billion is 7 1/2 times the current value of three companies combined and is equal to a payment of $375,000 for every employee under contract to the “Detroit 3”.

From a business point of view this proposal makes no sense. If the proposal is passed, it will be the biggest political payoff in the history of the Country.

Taxpayer Alert – The Bailout – What Happens In January

WHICH DEMOCRAT IS PROMISING HER CONSTITUENTS FREE HOUSES COME JANUARY?

Steve
stevem_brown@hotmail.com | 174.153.210.108

I am total agreeing with you in all respects, except for one. There is more ‘debt’ that is not being disclosed from the ‘financial intuitions.’ The anticipated $850 Billion Dollars is just the icing on the cake. I speculate that it will cost the tax payers more to the tune of $1.8-2.5 Trillion Dollars.
Thanks for the insight, looking forward to your blog after the vote.

From Analysis Of Senate Bailout Bill – To Be Considered By House On Thursday, 2008/10/01 at 11:27 PM

mcauleysworld
markdaoust@sbcglobal.net | 69.209.137.126

Steve – I agree –
If you want my estimate of where the “total” might go once the banks can start dumping their bad debt on the public – on Joe Taxpayer – my guess is $7 Trillon – there is $14 Trillion in “late” loans around the world.

Then we have an added unkown – The Liberal Democratic Congress. Did anyone else see Rep Maxine Waters (One of the infamous Fannie Defenders) on Fox Business News last night – Live from the Capital – Representative Waters plans on getting involved further – after the first of the year – when “we have a Democratic President and Congress”. Her plan – forgive the mortgages of her constituents and let them keep their Houses for free”. Free for her Constituents – The Working taxpayer will be picking up the tab.

From Analysis Of Senate Bailout Bill – To Be Considered By House On Thursday, 2008/10/02 at 6:00 AM

CALL YOUR CONGRESSPERSON AND TELL THEM TO VOTE NO

Contact Your Senators Here:  http://www.emailyoursenator.com/senators.html  Click on your Senators, Select the Contact Folder and then  click on the email address.

Contact Congresspeople: http://www.house.gov/zip/ZIP2Rep.html You’ll need your zip  code

Analysis Of Senate Bailout Bill – To Be Considered By House On Thursday

The voting on the Senate Version of the Bailout Bill has not started 08:56 PM (est) – but it is expected to be passed and sent to the House where an up or down vote will be required. The last word is that the House will not be given an opportunity to amend or change the bill.

After reviewing all 451 pages of the bill – I’m very surprised – minimal changes were made to the Bill that the House of Representatives defeated two days ago. Very minimal. The additional 331 pages concern completely unrelated items.

The Senate included these unrelated bills in this package to provide “cover” for those Congresspeople  who intend to vote for the passage of the Bailout, but are looking for an excuse to justify their vote. You can expect to hear this spin tomorrow, “Oh I didn’t really support the Bailout, I was voting for – fill in the blank – instead”.

The following items have been included for passage with the “Bailout Bill” when there was no impending emergency that required the items to be passed in the late evening of October 1st,  2008:

Pages 113 –  165  ENERGY SECTION: Energy Tax Credits, Steel Industry Fuel Credits, Carbon Mitigation Credits, Coal Gasification Credits, Black Lung Funding.

Why are these items attached to the “Bailout”, so a Congressperson can tell their irate Constituent, I didn’t really vote for the “Bailout”, I voted for Energy Tax Credits or Black Lung Funding – Of course we know better.

Page 254 – Information Authorization for Covered Securities to Brokers – I’ll bet you had no idea that this was a topic that required immediate attention. I’ll bet that 80 of 100 Senators didn’t know this was an emergency either.

Pages 261 -266  Temporary Relief from the Alternative Minimum Tax. I’d like to see the Alternative Minimum Tax eliminated, however, this section should not be attached to this bill. I can hear the Congressperson now – I was really against the Bailout – but I was voting to end the Alternative Minimum Tax – for a time. If your Congressperson says this, ask them why they didn’t pass this legislation in September?

Page 279 – Rum Excise Tax Relief for Peurto Rico – Ok, truth be told, I’m all for tax relief on adult beverages – but did it really need to be attached to the “Bailout”.

Page 280 – Funding for Mine Rescue Training

Page 288 – Depreciation of Business Property on Indian Reservations (The actual Bill language – I thought our Native Americans were Native Americans and not Indians).

Page 289 – Railroad Track Maintenance

Page 290 – Cost Recovery for Motor Sport Racing Tracks

Page 295 – Duty Suspension on Wool Products

Page 297 – Child Tax Credit Extension – We all favor this – How many Congress people will hide behind this one. The question to ask is this – Couldn’t you vote this through on Thursday and not attach it to this stinker of a Bill. It will be represented and passed if the House Votes the Bailout Bill down again on Thursday Night.

PAGE 298 – Film and TV Production Tax Credits – Limits taxes to the first $15 Million of production costs. (On a $100 Million Dollar Movie – The last $85 Million are tax free. No wonder Hollywood is far left – it pays for them to be there). 

Page 300 – Excise Tax Break for Wooden Arrows used by Children.

Page 301 – Exxon Valdez Llitigation Income Averaging.

Page 310 – 334 Domenici Mental Health Bill – This bill has been debated for 10 years. I will not discuss the merits of the proposal, however, the cost to the American Public might exceed a trillion dollars. After 10 years of debate this bill should have been brought up independent of any other bill. Senator Domenici, the sponsor, is retiring at the end of this term.  

Page 334 – Secure Rural Schools

Page 364 – Special Projects Federal Land

Page 394  – Hurricane Ike Relief

Page 442 – Spending Reductions and Revenue Raisers to Support Tax Relief – I love this Sections name. It reminds me of an earlier life. We called them K-Rats, I believe they are called Meals Ready To Eat now. Now you get three lies, for the price of one. (Actually, MRE’s are much better than Krats ever were).

Now as to the “improvements to the Bailout Bill” that the House defeated. The changes are nothing more than window dressing.

1). Mark to Market – whether you like it or don’t like it – there is no mandated change. There is no specific rule change in this law. The language is identical to the defeated House BIll.

2). FDIC Increase in insured deposit limit from $100,000 to $250,000 – A purely cosmetic change. The “Bailout Supporters” claim it calms the markets. It may calm someone who doesn’t understand that individuals have either placed their money in separate accounts or used one of the “services” that have been available for 3 or 4 years to distribute funds between different banks so that all of a depositors money has always been insured. As far as helping liquidity – the change is irrelevant.

This provision may actually be a tax increase in disguise: Read the Myth of the FDIC Fund, By Bill Isaac, Former FDIC Chairman Here: https://mcauleysworld.wordpress.com/2008/10/02/fdic-insurance-an-accounting-myth-not-a-fund-bill-isaac-former-fdic-ch/

3). Additional oversight – minimal changes.

4). Executive Compensation (pg 30) is essentially unchanged – covers current but not past CEO’s and Executives. Only covers Executives from Companies who participate in the asset sale to the Government. Political claims that this provision covers all Wall Street Executives is false. Most Wall Street Executives won’t be involved in the Program.

Golder Parachutes are eliminated – in participating Companies – for 2 years (that 2 year limitation is found on page 112, 82 pages away from the main section on Executive Compensation). Gee, my bet is that no one is going to qualify for a Golden Parachute in the next two years – but I wouldn’t be surprised if someone’s Parachute opened in two years and one day.    

5) Mortgage Relief – Assistance – Modification: No Change here. The language is unchanged. The Government picks the winners and losers. While not completely defined – the Bailout only provides help to those homeowners who have a mortgage with a failed bank or lending institution. If the bank that holds your mortgage is not participating in the bailout – this plan provides no help.  

6). Fixing what got us here. Suspending the operations of the Communirty Reinvestmant Authority (The CRA is the agency that fostered the development of NINJA & LIAR Loans) removing the Boston Federal Reserve Manual on Mortgage Underwritng Reform from use (The Manual that set the standards for the worst of the sub-prime loans – the Manual that was used to coerce Banks into making these loans) or implementing  the 2003-2004 suggested Accounting and Oversight Reforms for Fannie and Freddie are not even discussed in the Senate Bill.  

The Bailout Supporters claim the “Bailout” will create easier credit (easy money) and improve the economy. They also claim that the “Bailout” will help liquidity. I wonder where that liquidity or money will flow to – the same scams that caused this problem in the first place?

The Senate Bill fails to reduce the burden on Taxpayors – there is no increased use of Insurance or Loan Programs. 

For those of you who are familiar with Dave Ramsey’s Suggested “Fix” – they have failed to adopt any of his suggestions.  

My estimate is that the current “Bailout Program” has an initial “buy-in” cost of $850 Billion Dollars – just for the “Bailout” (Not including Mental Health – etc). Not all of this tax payor cash is to be paid out up front. Of course there is no guarantee that the Government won’t be back for more once we start down this road.

CONTACT YOUR REPRESENTATIVE AND LET HIM KNOW HOW YOU FEEL – TELL THEM TO VOTE NO ON THE BAILOUT – 

Contact Your Senators Here:  http://www.emailyoursenator.com/senators.html  Click on your Senators, Select the Contact Folder and then  click on the email address.

Contact Congresspeople: http://www.house.gov/zip/ZIP2Rep.html You’ll need your zip  code

I reviewed a copy of the Senate Bailout Bill through the FOX Business Channel Web Site:  http://www.foxbusiness.com/story/markets/economy/senate-version-economic-rescue-package/

Tommorows Post: What is wrong with tighter Credit? – Credit Availablity In America Today.

What Fannie Mae Did To America – Obama Did To Chicago

OBAMA’S HYPOCRISY ON THE FANNIE MAE CRISIS

National Review On Line

David Freddosso

Obama’s Real-Estate Bust

He did for Illinois taxpayers what shady mortgage lenders have done for the economy.

By David Freddoso

Last Week Sen.,  Barack Obama compared the Savings and Loan bailout of the late 1980s to the situation of the mortgage-securities markets today:

“Too many S&Ls took advantage of the lax rules set by Washington to gamble that they could make big money in speculative real estate. . . . [T]hey made hundreds of billions in bad loans, knowing that if they lost money, the government would bail them out. And they were right. The gambles did not pay off, our economy went into recession, and the taxpayers ended up footing the bill. Sound familiar?”

Indeed, it does sound familiar — it sounds a lot like what Barack Obama did to Illinois taxpayers as a state senator in Springfield. Using his elected office and his clout, Obama helped Tony Rezko and other unscrupulous low-income housing developers obtain millions of dollars in state grants, tax credits, low-interest loans, and regulatory advantages.

Taxpayers had no serious chance of recouping these “investments” in Rezko and other developers. And many beneficiaries went one step farther, depriving the public of even the benefits they could have gotten. These developers took government help to build low-income housing, and then let their buildings deteriorate into uninhabitable slums.

To date, the most complete account of this sad story is Binyamin Appelbaum’s piece in the Boston Globe. Not only does it demonstrate the monumental failure of the low-income-housing policy that Obama vocally championed as a state senator, it gives a detailed look at how some of Obama’s donors and friends — the beneficiaries of that policy — neglected their own housing developments at the expense of the inhabitants.

There is no indication that Obama approved (or even knew) of the massive and systemic neglect of these properties in his own state-senate district. But there is also no question that he was an enabler in these transactions. He cosponsored at least six bills to give special tax breaks, tax credits, building-and-maintenance subsidies, and zoning exemptions to the developers. In 1998, he wrote letters to state and city officials requesting $14 million for a project developed by Tony Rezko and another close Obama friend — the politician’s old law-firm boss, Allison Davis.

In his Globe piece, Appelbaum describes the low-income Grove Parc Plaza complex, which was developed by Davis:

Mice scamper through the halls. Battered mailboxes hang open. Sewage backs up into kitchen sinks. In 2006, federal inspectors graded the condition of the complex an 11 on a 100-point scale — a score so bad the buildings now face demolition.”

Sewage backups seem to be a common problem in Davis’s low-income slums — another of his buildings, Appelbaum reports, was cited in 2007 “after chronic plumbing failures resulted in raw sewage spilling into several apartments.”

Valerie Jarrett, Obama’s campaign adviser, is the chief executive of the company that managed that Grove Parc slum until just recently. Appelbaum writes that her company managed another housing complex until its condition became so poor that the federal government seized it in 2006.

Cecil Butler, another Obama donor, had his Lawndale Restoration complex confiscated by the government in 2006 “after city inspectors found more than 1,800 code violations.”

Appelbaum’s piece gives some sense of just how closely Obama was, and still is, tied to the slum-lord world. He’s taken contributions from its big players and pushed legislation favorable to them. His closest ally in that sphere has been Rezko, who raised $250,000 for Obama’s campaigns before being convicted on unrelated corruption charges earlier this year. 

Despite all this cheap and free taxpayer money, all of Rezko’s 30 buildings eventually ran into financial difficulties. As of 2007, 17 had gone into foreclosure. Six were boarded up and abandoned.

The City of Chicago sued Rezmar at least a dozen times for failing to heat its properties. During the winter of 1997, Rezmar claimed it lacked the funds to heat a 31-unit building in Englewood on the south side of Chicago — one of eleven Rezmar buildings in Obama’s state-senate district. Tenants there went without heat from late December 1996 through mid-February 1997. Despite his company’s financial hardship, Rezko signed a $1,000 check for the campaign fund of the newly elected state senator Barack Obama on January 14, 1997.

When Barack Obama talks about risky real-estate investments and failures of government oversight, remember how he put Illinois taxpayers on the hook for some of the worst real-estate investments of all — investments in his close friend and in other slum landlords who took the public’s money and betrayed their trust.

David Freddoso is a staff reporter for National Review Online and author of The Case Against Barack Obama. 

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