but missing Isaac's point & reasons. The real goal is to get these institutions to take the bath on these worthless assets and that was not missing from Isaac's recommendations, he is simply recommending mark-to-market as a "wind down" method in order to not allow the banks to suck all the U.S. taxpayer money dry.
Not quite the same as what the corporations who are lobbying for this are up to.
and artificially inflates values of toxic assets. There are two potential problems and neither is any good:
1) Toxic asset prices are inflated to point that financial conglomerates keep them on their books - ala Japan; or
2) Toxic assets are priced too high for private investors and the Private Public Investment Fund which may make the bailout more costly.
Here is the thing: financial conglomerates can dress up these pigs all they want but it won't change the fundamentals any or even restore confidence and trust.
Cashflow is king and if these toxic assets are not producing cashflow because of loan defaults these securities are worthless.
Although over the weekend I saw a host of folks say the impeding derivatives implosion (they are not linear losses by their structured finance models (lovely)), is going to prolong the recession and take away any good news, recovery.
Then, in terms of auto sales, honestly the first thing I thought of when I saw D.C. incompetents killing GM was car sales. I mean how is one going to find parts if they kill GM for that will kill off hundreds of after market businesses as far as I know. What about warranties, service, repairs.
Now if I, the ultimate "go to the junk yard and find a transmission, run it into the ground, it doesn't matter if the side has a hole in it, it still runs" vehicle owner am concerned, what about that mom and pop who don't even get the idea on changing the oil, never mind an actual repair?
But note Bill Isaac's argument in favor of modifying mark-to-market. It's to keep the U.S. taxpayer's money in their pockets. Since Isaac's has also heavily recommended RTC from the S&L crisis in the 1980's and had a host of recommendations in order to take over these insolvent banks that didn't cost but around $200 or $300 billion, I think his views should be checked out. He also has "been there, done that" in that he managed the S&L crisis in the 1980's and any idea that beats dumping $1 trillion of U.S. taxpayer money down the throats of Zombie banks is worth investigating.
Of course he and many of the other experts testifying before the first TARP was passed were completely ignored (except to testify) by Congressional leadership.
Cerberus can go to hell, although I worry about the workers but GM? Good God. Although GM is a hydra of offshore outsourced everything. I wonder if that had come into play at all because GM created this Medusa of global sourcing that clearly wasn't to "profitable" .
In terms of quality, honestly I don't get this entire rap. Their cars are cheaper than Toyota, Honda quite often and the repairs are also way cheaper.
of the midwest, GM and to a lesser extent Chrysler are vital to our manufacturing base and possibly national security. Bankruptcy will not further those interests. This will require bold action on the part of the Administration and congress.
Appoint a nine person board that includes representation from unions. Hire a strong individual as CEO. Consolidate all assets of GM and Chrysler into this government corporation. The consolidated company would work to make the auto industry smaller and transition segments of the industry into other industries such as solar panels or wind turbines. Dept. of Commerce start developing a manufacturing strategy for the U.S
Cerberus Capital Management has plenty of cash it could use to try to rehabilitate Chrysler if it chose to do so. Instead, it was using the US taxpayer as a chump.
GM is another matter. Although it has been horribly mismanaged (just in the last couple of years have many of its cars become worthy of comparison with Japanese models), you couldn't ask for a bigger example of the disconnect between the treatment of Wall Street and Main Street.
Waggoner has left GM, been pushed out by the "Great One". They are demanding more cuts and immediate cuts because they/MI must sacrifice while Wall Street just gets more and more money to no use.
The only redeeming thing about the Obama machine is that I never gave it a dime. Didn't like him, didn't trust him, and he is making it plain why.
They're asking for another four years -- in a just world, they'd get 10 to 20 ~~ Dennis Kucinich
and ya know about the only thing I can think about is how I want Geithner fired immediately. I'm reading the GM debacle and it just terrifies me this guy has his fingers not only in the financial ripoff crises but also the auto industry.
Wagoner, no love lost there, although I am almost positive no one will analyze the constant focus on labor arbitrage, offshore outsourcing and now they destroyed GM and those two are connected .....
but what kind of disaster is going to be introduced tomorrow.
I do know on the financial sector the White House just throws up it's hands and says "oh we can't break contracts, that's illegal" yet when it comes to the auto industry suddenly they can do a few things, especially when it comes to labor contracts.
Like I said, all I can think of is to fire Geithner, Summers, I wish Hillary had won I think she would have been a much better administrator at least and the I don't like Ben Bernanke here either.
BTW, great post, and the amazement that somehow when the U.S. acts the same way so many other countries did which led to massive inflation at minimum, somehow we're just "exempt" is beyond denial to me at this point.
Today Geithner warned S. America (particularly Brazil) against "protectionism".
So, frankly, I'm sorry but I believe Obama has always been part of the problem. I'm not surprised at all by what is going on.
What is surprising is how quickly I see other bloggers, Americans catching on, very quickly.
But how to get non-corrupt politicians is another story.
Look, I think America needs to say "no way in hell" to this labor squeeze and it's like they have hypnotized the US Populist into a bunch of sheep and cattle.
In Europe, they are in the streets protesting in every country by the hundreds of thousands, each country, at the G20 summit.
Check out the link on the "letter to Obama" and see the "song a day" guy who clearly was an "Obamamaniac" during the election. I'd say that typifies the slow erosion to reality which I placed bets with NDD to break in another month.
I literally am seeing now demands from the left Obama fire both Summers and Geithner immediately.
You're suggesting that global manufacturing companies are pushing the U.S. into socializing many of their traditionally union negotiated benefits costs, such as healthcare, etc. Water tends to seek lowest ground. It's unrealistic for any union to think it can compete with hungry non-union global workers. I'm not sure it's a conspiracy of managements to "break" unions, at this stage.
We're competing for our very survival at the moment. Even Hb-1s and others that come here...and those in India that benefit from outsourcing: the SYSTEM is large and global at this point, and most workers are relatively atomized.
I take serious issue with this for it's the race to the bottom, 100%. They seriously do not have to. If the United States got trade agreements that encouraged U.S. manufacturing and believe me, every other nation does it, one wouldn't be in this race to the bottom on wages.
RO, trust me I truly wish the situation were different. The specter facing our workforce is a frightening one of third world wages in our country. It is something we should fight, given that the cost of living is still high. Saying this, surveying the economic landscape in regards to manufacturing, I see an unfriendly terrain. You metioned if the United States got trade agreements that encounraged US manufacturing. The key word was if, which from what I can tell isn't happening. The fact remains, our Department of Commerce sold us out decades ago. You are correct that every other nation tries to protect what manufacturing they can, but that isn't the case here. You can say "we should" this or that, but until the government does something major, I will be a cynic.
If anything, one wants to force Japanese car makers to meet the UAW on labor costs and increase those wages.
Sadly that will never happen. I don't think this Administration has the guts for it, to be honest with you. The President would have a massive fight on their hands from the various (mainly Southern) governors who have these foreign car operations. For them, it's really an "us versus them" situation, I truly believe this. A couple weeks back, on CNBC, they had a fellow from some southern business magazine who also served as a consultant to many of these mayors and governors down there.
He echoed what many down there were saying, that it was an open competition for jobs. Maybe this is pure conjecture, but I sometimes think that these governors believe in a two Americas idea where there is a zero sum gain. If its to Michigan or Ohio's benefit, then it can't be for Tennessee or Alabama's gain, that's the thinking.
Layer on top of this the fact that most of these states are run by a solidly arch-conservative political ideology, then the so-called competition takes on a new level. For many its a war against the unions which are a seen as a benefactor of the Democratic Party. Eliminate them and you weaken your political rivals.
The competition resembles one between two countries, where one is willing to accept a lower standard of living just to land the contract. It would be as if it wasn't Alabama or Tennessee competing against Ohio but Mexico against Ohio. For them it comes down to costs or at least the perception of it being more affordable to do business in their respective region. Do you really believe these people are going to surrendur this percieved comparative advantage?
Keep in mind that securitization was intended as a way of sharing risk, beyond smaller single note holders. It has become utterly abused, to be sure. Securitization is an innovation that is unlikely to go away, but one doubts that policy-makers and regulators fully grasp the totality of what it truly means on a global scale. Public Pension Plans in the Baltics connected to new subdivisions in Lancaster
or San Bernardino, California (and elsewhere). And, securities owners all interlinked in ways unbeknownst to even them. It's a beast, really. It's one thing to bundle 500 mortgages (aka a tranche) into a single security. But then all the other derivative instruments are designed to hedge, protect, manipulate, etc. against various market contingencies. No thought given to where the real action occurs, which is at the individual home price level. Home prices have been so inflated and methinks our leaders still just don't totally grasp true simplicity yet. (I think the Chinese leadership team does get it...very much so.)
A key reason how lower wages can be paid elsewhere is the costs of housing are much less in many of these emerging spots. Again, the inflated cost of land and real estate can be traced back to the inflated cost of money, in real terms.
I take serious issue with this for it's the race to the bottom, 100%. They seriously do not have to. If the United States got trade agreements that encouraged U.S. manufacturing and believe me, every other nation does it, one wouldn't be in this race to the bottom on wages.
I also cannot recall the percentage but it's not the main cost of manufacture.
If anything, one wants to force Japanese car makers to meet the UAW on labor costs and increase those wages.
You cannot expect anything but a two class system, the slaves and the elites going down that continual labor cost squeeze path....and that also means selling fewer cars.
Also, GM is seriously mismanaged. Obviously the car market is not so big but they made mistake after mistake after mistake, including selling Aeros in China for $1200 bucks.
It will be a pleasant surprise if his replacement does a better job. But I suspect that Wagoner was the last holdout in opposing a structured bankruptcy. The Administration won't label it as such, but something tells me that's the route they're going. Now correct me if I'm wrong, but the only people who want the union to take shares was the company not the government or any task force. But I still think, sadly, that what we will see is bankruptcy-lite.
Regardless of who replaces him, management (which now I have to include government) has to realize that they need a company that is not for a 12 or 10 million car market but one that is 7-8 million. What were the last car sale numbers, 10 million? Even if the economy improves, folks who used to spend with credit won't as much. I see it here by me, people are keeping their cars longer. Lastly, and this was somewhat alluded to in that article, like it or not US automakers have to meet or beat Japanese automakers' US-based operations costs.
I seriously question this. I mean GM has been offshore outsourcing and creating this hydra of nonsense for some time but I feel he's just the sacrificial CEO lamb and the real ones who should be fired, i.e. Citigroup, JP Morgan Chase, BoA, etc. have their tentacles into the D.C. pie and the auto industry didn't.
General Motors Corp. Chief Executive Officer Rick Wagoner will step down after more than eight years running the largest U.S. automaker, people familiar with the situation said.
but missing Isaac's point & reasons. The real goal is to get these institutions to take the bath on these worthless assets and that was not missing from Isaac's recommendations, he is simply recommending mark-to-market as a "wind down" method in order to not allow the banks to suck all the U.S. taxpayer money dry.
Not quite the same as what the corporations who are lobbying for this are up to.
and artificially inflates values of toxic assets. There are two potential problems and neither is any good:
1) Toxic asset prices are inflated to point that financial conglomerates keep them on their books - ala Japan; or
2) Toxic assets are priced too high for private investors and the Private Public Investment Fund which may make the bailout more costly.
Here is the thing: financial conglomerates can dress up these pigs all they want but it won't change the fundamentals any or even restore confidence and trust.
Cashflow is king and if these toxic assets are not producing cashflow because of loan defaults these securities are worthless.
Although over the weekend I saw a host of folks say the impeding derivatives implosion (they are not linear losses by their structured finance models (lovely)), is going to prolong the recession and take away any good news, recovery.
Then, in terms of auto sales, honestly the first thing I thought of when I saw D.C. incompetents killing GM was car sales. I mean how is one going to find parts if they kill GM for that will kill off hundreds of after market businesses as far as I know. What about warranties, service, repairs.
Now if I, the ultimate "go to the junk yard and find a transmission, run it into the ground, it doesn't matter if the side has a hole in it, it still runs" vehicle owner am concerned, what about that mom and pop who don't even get the idea on changing the oil, never mind an actual repair?
What is Mark-to-Market and why should you care about the ability to keep toxic assets on the books, overinflating their value.
But note Bill Isaac's argument in favor of modifying mark-to-market. It's to keep the U.S. taxpayer's money in their pockets. Since Isaac's has also heavily recommended RTC from the S&L crisis in the 1980's and had a host of recommendations in order to take over these insolvent banks that didn't cost but around $200 or $300 billion, I think his views should be checked out. He also has "been there, done that" in that he managed the S&L crisis in the 1980's and any idea that beats dumping $1 trillion of U.S. taxpayer money down the throats of Zombie banks is worth investigating.
Of course he and many of the other experts testifying before the first TARP was passed were completely ignored (except to testify) by Congressional leadership.
Cerberus can go to hell, although I worry about the workers but GM? Good God. Although GM is a hydra of offshore outsourced everything. I wonder if that had come into play at all because GM created this Medusa of global sourcing that clearly wasn't to "profitable" .
In terms of quality, honestly I don't get this entire rap. Their cars are cheaper than Toyota, Honda quite often and the repairs are also way cheaper.
IBM is now trying to patent their offshoring system that maximizes government subsidies while sending jobs overseas!
http://www.recordonline.com/apps/pbcs.dll/article?AID=/20090330/BIZ/9033...
of the midwest, GM and to a lesser extent Chrysler are vital to our manufacturing base and possibly national security. Bankruptcy will not further those interests. This will require bold action on the part of the Administration and congress.
Appoint a nine person board that includes representation from unions. Hire a strong individual as CEO. Consolidate all assets of GM and Chrysler into this government corporation. The consolidated company would work to make the auto industry smaller and transition segments of the industry into other industries such as solar panels or wind turbines. Dept. of Commerce start developing a manufacturing strategy for the U.S
Cerberus Capital Management has plenty of cash it could use to try to rehabilitate Chrysler if it chose to do so. Instead, it was using the US taxpayer as a chump.
GM is another matter. Although it has been horribly mismanaged (just in the last couple of years have many of its cars become worthy of comparison with Japanese models), you couldn't ask for a bigger example of the disconnect between the treatment of Wall Street and Main Street.
Waggoner has left GM, been pushed out by the "Great One". They are demanding more cuts and immediate cuts because they/MI must sacrifice while Wall Street just gets more and more money to no use.
The only redeeming thing about the Obama machine is that I never gave it a dime. Didn't like him, didn't trust him, and he is making it plain why.
They're asking for another four years -- in a just world, they'd get 10 to 20 ~~ Dennis Kucinich
and ya know about the only thing I can think about is how I want Geithner fired immediately. I'm reading the GM debacle and it just terrifies me this guy has his fingers not only in the financial
ripoffcrises but also the auto industry.Wagoner, no love lost there, although I am almost positive no one will analyze the constant focus on labor arbitrage, offshore outsourcing and now they destroyed GM and those two are connected .....
but what kind of disaster is going to be introduced tomorrow.
I do know on the financial sector the White House just throws up it's hands and says "oh we can't break contracts, that's illegal" yet when it comes to the auto industry suddenly they can do a few things, especially when it comes to labor contracts.
Like I said, all I can think of is to fire Geithner, Summers, I wish Hillary had won I think she would have been a much better administrator at least and the I don't like Ben Bernanke here either.
BTW, great post, and the amazement that somehow when the U.S. acts the same way so many other countries did which led to massive inflation at minimum, somehow we're just "exempt" is beyond denial to me at this point.
when one is funneling billions and billions to favored financial firms and certain executive bonuses to other favored people.
When it comes to workers, you see the brazen breaking of contracts right and left.
Today Geithner warned S. America (particularly Brazil) against "protectionism".
So, frankly, I'm sorry but I believe Obama has always been part of the problem. I'm not surprised at all by what is going on.
What is surprising is how quickly I see other bloggers, Americans catching on, very quickly.
But how to get non-corrupt politicians is another story.
Look, I think America needs to say "no way in hell" to this labor squeeze and it's like they have hypnotized the US Populist into a bunch of sheep and cattle.
In Europe, they are in the streets protesting in every country by the hundreds of thousands, each country, at the G20 summit.
Check out the link on the "letter to Obama" and see the "song a day" guy who clearly was an "Obamamaniac" during the election. I'd say that typifies the slow erosion to reality which I placed bets with NDD to break in another month.
I literally am seeing now demands from the left Obama fire both Summers and Geithner immediately.
You're suggesting that global manufacturing companies are pushing the U.S. into socializing many of their traditionally union negotiated benefits costs, such as healthcare, etc. Water tends to seek lowest ground. It's unrealistic for any union to think it can compete with hungry non-union global workers. I'm not sure it's a conspiracy of managements to "break" unions, at this stage.
We're competing for our very survival at the moment. Even Hb-1s and others that come here...and those in India that benefit from outsourcing: the SYSTEM is large and global at this point, and most workers are relatively atomized.
RO, trust me I truly wish the situation were different. The specter facing our workforce is a frightening one of third world wages in our country. It is something we should fight, given that the cost of living is still high. Saying this, surveying the economic landscape in regards to manufacturing, I see an unfriendly terrain. You metioned if the United States got trade agreements that encounraged US manufacturing. The key word was if, which from what I can tell isn't happening. The fact remains, our Department of Commerce sold us out decades ago. You are correct that every other nation tries to protect what manufacturing they can, but that isn't the case here. You can say "we should" this or that, but until the government does something major, I will be a cynic.
Sadly that will never happen. I don't think this Administration has the guts for it, to be honest with you. The President would have a massive fight on their hands from the various (mainly Southern) governors who have these foreign car operations. For them, it's really an "us versus them" situation, I truly believe this. A couple weeks back, on CNBC, they had a fellow from some southern business magazine who also served as a consultant to many of these mayors and governors down there.
He echoed what many down there were saying, that it was an open competition for jobs. Maybe this is pure conjecture, but I sometimes think that these governors believe in a two Americas idea where there is a zero sum gain. If its to Michigan or Ohio's benefit, then it can't be for Tennessee or Alabama's gain, that's the thinking.
Layer on top of this the fact that most of these states are run by a solidly arch-conservative political ideology, then the so-called competition takes on a new level. For many its a war against the unions which are a seen as a benefactor of the Democratic Party. Eliminate them and you weaken your political rivals.
The competition resembles one between two countries, where one is willing to accept a lower standard of living just to land the contract. It would be as if it wasn't Alabama or Tennessee competing against Ohio but Mexico against Ohio. For them it comes down to costs or at least the perception of it being more affordable to do business in their respective region. Do you really believe these people are going to surrendur this percieved comparative advantage?
Keep in mind that securitization was intended as a way of sharing risk, beyond smaller single note holders. It has become utterly abused, to be sure. Securitization is an innovation that is unlikely to go away, but one doubts that policy-makers and regulators fully grasp the totality of what it truly means on a global scale. Public Pension Plans in the Baltics connected to new subdivisions in Lancaster
or San Bernardino, California (and elsewhere). And, securities owners all interlinked in ways unbeknownst to even them. It's a beast, really. It's one thing to bundle 500 mortgages (aka a tranche) into a single security. But then all the other derivative instruments are designed to hedge, protect, manipulate, etc. against various market contingencies. No thought given to where the real action occurs, which is at the individual home price level. Home prices have been so inflated and methinks our leaders still just don't totally grasp true simplicity yet. (I think the Chinese leadership team does get it...very much so.)
A key reason how lower wages can be paid elsewhere is the costs of housing are much less in many of these emerging spots. Again, the inflated cost of land and real estate can be traced back to the inflated cost of money, in real terms.
I take serious issue with this for it's the race to the bottom, 100%. They seriously do not have to. If the United States got trade agreements that encouraged U.S. manufacturing and believe me, every other nation does it, one wouldn't be in this race to the bottom on wages.
I also cannot recall the percentage but it's not the main cost of manufacture.
If anything, one wants to force Japanese car makers to meet the UAW on labor costs and increase those wages.
You cannot expect anything but a two class system, the slaves and the elites going down that continual labor cost squeeze path....and that also means selling fewer cars.
Also, GM is seriously mismanaged. Obviously the car market is not so big but they made mistake after mistake after mistake, including selling Aeros in China for $1200 bucks.
It will be a pleasant surprise if his replacement does a better job. But I suspect that Wagoner was the last holdout in opposing a structured bankruptcy. The Administration won't label it as such, but something tells me that's the route they're going. Now correct me if I'm wrong, but the only people who want the union to take shares was the company not the government or any task force. But I still think, sadly, that what we will see is bankruptcy-lite.
Regardless of who replaces him, management (which now I have to include government) has to realize that they need a company that is not for a 12 or 10 million car market but one that is 7-8 million. What were the last car sale numbers, 10 million? Even if the economy improves, folks who used to spend with credit won't as much. I see it here by me, people are keeping their cars longer. Lastly, and this was somewhat alluded to in that article, like it or not US automakers have to meet or beat Japanese automakers' US-based operations costs.
I seriously question this. I mean GM has been offshore outsourcing and creating this hydra of nonsense for some time but I feel he's just the sacrificial CEO lamb and the real ones who should be fired, i.e. Citigroup, JP Morgan Chase, BoA, etc. have their tentacles into the D.C. pie and the auto industry didn't.
Wagoner step down:
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