Our Man Scores with the Swedish Model
Last night, I debated Michigan Rep. Thad McCotter on the issue of further bailouts for the U.S. auto industry. Although a member of the House Republican leadership, Mr. McCotter says government support for the industry is justified because for decades Washington "declared war" on Detroit by mandating counterproductive fuel economy standards, onerous regulation and contradictory trade policies. I argued that foolish policies of the past were no justification for different foolish policies now, and noted that many companies have instead used bankruptcy to lessen the burden of crushing benefit packages for retirees, which is a major drag on the auto industry.
My own uncle, Paul Fund, worked for General Motors for over 30 years and tells me: "The unions and bad management agreed together to put the car companies in a straitjacket and now they both oppose doing what makes common sense."
Sweden, that paragon of socialist thinking, is of all places practicing common sense when it comes to car companies. The center-right government there has said "no" to throwing a government lifeline to keep Saab, an emblematic Swedish car company, afloat with government subsidies.
Enterprise Minister Maud Olofsson says bluntly: "The Swedish state is not prepared to own car factories." Officials are especially leery of bailing out Saab, which is owned in part by General Motors. Noting the poor management of the company, Ms. Olofsson told the New York Times: "We are very disappointed in G.M., but we are not prepared to risk taxpayers' money. This is not a game of Monopoly."
Instead, the company is going through "reorganization," which in Sweden is a process just shy of bankruptcy and allows the company to shed some of its obligations, hire new management and restructure its credit obligations. "It's painful," Johnny Munkhammar, an analyst with the Swedish think tank Timbro, told me. "But at least our government isn't propping up bad decision making with taxpayer money like you are in the U.S."
-- John Fund
President Obama offered a strange explanation on 60 Minutes last night for his administration's difficulties in staffing the Treasury Department. "You know, this whole confirmation process . . . has gotten pretty tough. It's been always tough. It's gotten tougher in the age of 24/7 news cycles. And a lot of people who we think are about to serve in the administration and Treasury suddenly say, 'Well, you know what? I don't wanna go through some of the scrutiny, embarrassment, in addition to taking huge cuts in pay,'" Mr. Obama told Steve Kroft.
Blaming the process is, of course, an old standby in these situations, but it rings hollow in this case. Mr. Kroft was all sympathy for the president's plight, but it's time to start asking tougher questions about why Tim Geithner can't find an able and willing support staff.
With the president's party in almost total control of the Senate, the only vote that has even been close to being close was Tim Geithner himself. Then it wasn't some onerous and picayune level of scrutiny, but whether Treasury should be put in the hands of an acknowledged tax scofflaw. For the most part Democrats have been in a remarkably forgiving mood toward the nominees of the Obama administration, and Republicans simply lack the votes to make an issue about any but the most egregious cases.
With the Senate willing to wave aside the tax shenanigans of Mr. Geithner, a better explanation of Treasury's staffing troubles would seem to be needed. The sense that no one knows what they're doing at Treasury is fast becoming a self-fulfilling prophecy -- thanks to the absence of qualified personnel. Potential appointees may simply not be inclined to board a sinking ship. Discussions in the media about whether Mr. Geithner's own job is in jeopardy obviously aren't a confidence builder. What may really be scaring them away, however, is Mr. Obama himself, who has not been much of a presence in his own bailout efforts. He leaves the impression he'd sooner see his Treasury Department flail while spending his attention elsewhere, rather than assume the political risk of acknowledging the financial crisis as the central task of his administration. If the administration doesn't solve this one soon, it won't just be the Treasury taking on water.
-- Brian Carney
Quote of the Day I
"The practical implications of [the Obama budget] is bankruptcy for the United States. There's no other way around it. If we maintain the proposals which are in this budget over the 10-year period that this budget covers, this country will go bankrupt. People will not buy our debt; our dollar will become devalued" -- Republican Sen. Judd Gregg, who was briefly President Obama's choice for Commerce Secretary until his withdrawal, on the White House's $3.6 trillion budget.
Quote of the Day II
"The more the Fed takes on its balance sheet, the more the long-run independence of the central bank is damaged. Monetizing so much government debt is what Third World nations do. Draining the new money from the system will someday be a problem. It may introduce a round of 'beggar-thy-neighbor,' central bank-engineered currency depreciations . . . . If this fails the U.S. economy, and the stock market, will test new bottoms" -- economist Tyler Cowen, writing at his blog Marginal Revolution.com, on the Federal Reserve's decision last week directly to finance government spending.
Everybody wants to change the subject from AIG, none more so than Tim Geithner, since it seems likely he was fudging (to put it charitably) in his claim to have had no knowledge about the retention plan for its Financial Products employees.
His former agency, the New York Fed, was lead agency for the government takeover. AIG had already committed to winding down its Financial Products unit and had repeatedly disclosed its plan to offer retention payments to the knowledgeable employees whose help was needed. The plan has been a subject of press discussion almost ad nauseum since the government takeover. In October, New York Attorney General Andrew Cuomo summoned Treasury-appointed AIG chief Ed Liddy to impose new monitoring on the company's pay practices. Said Mr. Cuomo in a statement afterward: "These actions are not intended to jeopardize the hard-earned compensation of the vast majority of AIG's employees, including retention and severance arrangements, who are essential to rebuilding AIG and the economy of New York."
The voluble Rep. Elijah Cummings has been railing about AIG retention bonuses almost continually, on air, in the print media, and in publicly released letters to Mr. Liddy, since Dec. 1.
On March 3, Mr. Geithner was quizzed during Congressional hearings in detail about the AIGFP retention plan by Democratic Rep Joe Crowley -- a week before Mr. Geithner now says he heard of the plan.
The Obama administration inherited a world of trouble, but the AIG bonus blowup it wholly owns. Mr. Geithner should have been the responsible official quelling this fury before it ever got started -- and explaining to Mr. Obama why it was unwise and untimely to play dumb. Instead Mr. Geithner played dumb and climbed aboard the outrage bandwagon.
All this ratchets up the stakes for his toxic asset plan, which increasingly seems like a convoluted, Rube Goldberg attempt to create higher quoted prices for bank-held assets. That problem is increasingly irrelevant, however, as government has already ensured funding for the big banks by guaranteeing their liabilities, and as their regulatory capital problem seems likely to be finessed by adjustments to mark-to-market accounting.
Though the market is up today, the Geithner plan's very Rube Goldbergness could quickly become a new source of instability and uncertainty. Hedge funds and vulture investors may not wish to participate out of fear of future Congressional eruptions. They may offer very low prices for bank assets to compensate for their political risks. Banks may refuse. All this would come at the wrong moment, as banks heal themselves thanks to the support already in place and a relaxation of investor fears due to mark-to-market. As American Banker newspaper reports today, new data suggest "commercial lending is on the rise." At a rate between 5% and 10% higher than last quarter, banks are requesting credit checks on commercial borrowers -- an indication of loans being processed.
Mr. Geithner's grand plan could end up doing more harm than good. The banking industry trade paper in the same issue quotes John Allison, newly retired BB&T chief executive and soon-to-be Wake Forest finance professor: "The markets need stability. The regulators have huge authority, but they have scared everybody with the ambiguities of their 'program of the week.' We don't need any more programs."
-- Holman W. Jenkins Jr.
THE WALL STREET JOURNAL
POLITICAL DIARY ONLINE
23 MARCH 2009
Barack Hussein Obama aka Barry Soetoro
is a usurper
because he is not eligible to be President of the United States
because he is not a Natural Born Citizen
as required by Article Two, Section One, Clause Five
of the United States Constitution regardless of
where he was born (Mombassa, Hawaii, Chicago, or Mars)
because he was not born of TWO PARENTS
BOTH OF WHOM WERE UNITED STATES CITIZENS
at the time of his birth. His father was a subject/ciitizen
of Kenya/Great Britain
and his mother was too young to pass on her citizenship
according to the law in effect when he was born.
Check it out:
His usurpation cannot be corrected by Congress,
it can only be corrected by his removal
by an amendment to the Constitution.