King Obama Will See You Now
The WSJ's Holman Jenkins goes off on the Obama administration's treatment of GM and its bondholders and applauds the bondholders for standing up for themselves.
I'm actually glad that Obama is smacking GM around -- without our money, the company would already be bankrupt. But it's the inconsistency I can't stand.
How can my favorite president (seriously) let car czar Steve Rattner charge in, fire CEOs, and demand that bondholders voluntarily give up 85 cents on the dollar...while Treasury Secretary Tim Geithner just keeps sounding and acting like a lobbyist for Wall Street? What's up with that, Mr. President?
It's good to be the king -- until you start tripping over your own robe.
So King Barack the Mild is finding as he tries to dictate the terms of what amounts to an out-of-court bankruptcy for Chrysler and GM. He wants Chrysler's secured lenders to give up their right to nearly full recovery in a bankruptcy in return for 15 cents on the dollar. They'd be crazy to do so, of course, except that these banks also happen to be beholden to the administration for TARP money.Wasn't TARP supposed to be about restoring a healthy banking system? Isn't that a tad inconsistent with banks just voluntarily relinquishing valuable claims on borrowers? Don't ask...
Why on earth would GM's creditors -- who include not just bondholders but the UAW's health-care trust -- want any part of this deal?
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Because he is afraid of Wall St. The President once described these banker to suicide bomber with their finger on the trigger. He is afraid that these clowns will let the financial system tank and run off with millions. He doesn't want to nationalize because that would cost so much it would almost be impossible to get health care, education, and energy legislation passed. There are no good options.
"The President once described these banker as suicide bombers with their fingers on the trigger."
If Obama said that, I have more respect for him than I had before. [And I had a lot already.] He gets it.
The narcissists have always called the tune and most of the rest of us can only dance to it. The faces change, but the syndrome remains the same.
It does cut right to the bone, doesn't it?
I only wish Obama would be as tough with the bankers as he is with GM. if we can demand union and stockholder concessions at GM, why not demand pay cuts at AIG and an end to perks and frivolity at Citigroup.
The auto Industry in its present state finally reached its level of total catastrophic death this has been coming for a long time, time moved on, the auto industry did not let it go ,and be reinvented to something better
Just wondering---IF America didn't rush to bail them out, would the gas companies have done so?
Face it, Big Oil's number one customer is the U.S. auto industry..
The US oil industry doesn't car what brand of car they get their product into. They care more that it isn't too efficient and cuts down consumption. That is probably more the reason they would have supported the Big 3.
"if everyone starts driving fuel efficient Japanese hybrids then Exxon-Mobil can kiss their Uber-profits goodbye:)"
Don't worry, for every 1 Pious that Toyota finds a sheeple gullible enough to buy, it sells 10 each of its Tundras, Tacomas, Landcruisers, FJCruisers, L series, R Series, 4Runners, and Highlanders.
Finally, someone that has ideas based in reality. The Japanese auto makers don't have MUCH more efficient vehicles than we do. And the build quality is pretty much dead even. It just seems like people like the styling more and generally have misconceptions about the quality of the vehicles we build here. Support our economy, by American.
It is true that they build the WRONG types of vehicles, but it is not really their fault. People bought lots of SUVs, I would call that the fault of the consumer. GM was only giving their customers what they wanted. The only thing to blame is American excess and greed.
Excuse me but what are their bonds trading for now...? And the first proceeds would go to the government
Whats a closed down plant in Detroit worth today? Then there are dealer contracts.
And every week whats in front of the bondholders grows... Time only dimenishes what they could get of a BK. Lawyers fees are second in line... to the government.
The existing bondholders today for the most part did not buy at face value price... those buyer got out a long time ago. For many, 15% might be a 100% return.
Regards
You didn't address how much bondholders would have already lost had GM gone into bankruptcy? I dare to say it's more that 85 cents on the dollar!
"restoring a healthy banking system"
??????????????? don't know what you're talking about. ain't happening because it hasn't been healthy for so long. restoring it to when? what's healthy according to the middle class - the largest class?
come on now; don't be so negative.
there must be an accounting trick to make all of the trouble go away.
And who better to find new accounting tricks than Geithner/Summers?
Rattner needs to give GM 4 months starting with an announcement of 4 months worth monitary backing. Then he needs to make clear to the bond holders who are not cooperating with the restructurting, that they will get NOTHNG in a bankruptcy. He can make it stick by making all the Government loans to GM have precidence over the bondholders in the event of bankruptcy. Thus there will be no money left for the bondholders because the government is first in line. GM and the bond holders will have a more realistic schedule to both work out a restructuring with bond holders getting only 20% plus working out a plan where the bondholders will be frozen out completely and a quick return out of bankruptcy. The bond holders could not draw out the bankruptcy in court because it is clear there is no money left after the government is paid back. The government can use the returned bankruptcy money to re-loan to the new GM under terms that meet all the necessary parties needs (retirees, workers, suppliers).
He needs to minimize the loss of market share by not cutting product lines (except Hummer). GM can bounce bck from the impact of Recession/$4 gas/credit freeze with time. Obama should force foreign countries to stop under valuing their currencies (the reason GM is not competitive).
This is all too delicious for somebody who decided to get out of a GM town at age 12 & made a life elsewhere. Sorry, I'm too tired to use the German word that starts with s. GM became an incurable terminal case in 1958. GM took a long time to die. GM killed the people who depended on GM. They didn't live nearly as long. Flesh & blood is like that.
It doesn't look like many GM towns are going to live without GM. It will take at least 20 years for the former GM towns that survive to find things to replace GM. The recovery from GM is going to be slow & painful. There are going to be a lot of ghost towns in the rust belt. Sometimes it takes a ghost town a 100 years to fall into dust after the people leave the ghost town.
I love your post Larry278. The part about GM going on life support in 1958 was good. GM, Ford and Chrysler all but gobbled up the little guys around then. The multiple choices of car brands went away and it was called capitalism. No one cried when Hudson wasn't manufactured anymore except those who worked at the plant and had no job. The last Studebaker went off the assembly line and it was called survival of the fittest. We should let capitalism do what it does best. Heck, GM didn't care that they were making mini houses on wheels when the oil prices skyrocketed. They, like Chrysler, ignored the writing on the wall 8 years ago, heck, 20 years ago. I guess we'll see the tumbleweeds. My heart goes out to all those workers.
Larry, you hit the nail on the head. I watch auto-exec clowns do the same to American Motors while I was growing up in Kenosha, WI. They made too many models, and far too many cars that no-one wanted to buy. They also put themselves in a weak position by having no backup plans when the market changed.
AMC was a poorly run company, where the top execs got 23% pay increases the year before they went belly up and sold to Chrysler. It gives me no real pleasure to understand that the executives of GM were not a bit smarter, but they just had deeper pockets.
One hopeful sign... When AMC quit, 6,000 people were out of a job, the majority in Kenosha. Surprisingly, in that town of less than 100,000, things turned around at dramatic speed. The death of AMC was unimaginable, as they were the Kenosha "too big to fail." But when they did, it was more like the death of a family patriarch after a long illness; the family moved on, and Kenosha is something of a bright spot in all of Southeastern Wisconsin. It attracted a large number of smaller industries, and recast itself from rust belt relic to Chicago suburb, plugging into the larger community base for power. So much so that it has slipped out of the Milwaukee ratings book for TV and Radio, being a definite part of the Illinois market, despite being north of the border.
That comment about GM dying since 1958 is just plain not true. While Toyota and Honda are kicking GMs ass right now, they still have sold A LOT of cars and the vehicles they are currently producing, while not all the most fuel efficient, are of very high quality. You can deny that if you want, but try picking up a Motor Trend or similar publication and see for yourself.
Yeah, GM died when Datsun came out with the 280Z and Corvette wasn't the coolest car on the block anymore! Aesthetics and BETTER gas mileage was the death knell for the American car industry!
King Obama $30 for the bankers $1 for the people in the stimulus plan.
He gives peanuts to Detroit while rufusing to send AIG and other large corporations to
be split up!!!
http://www
What do people keep comparing GM to the banks. The banks are different than GM so I don't understand why people believe they should be treated the same way.
why do you think there should be a double standard is more my question?
the difference here is GM is a lot closer to your garden variety corporation than most of our giant financial institutions. if the financial industry collapsed businesses across the company would shut down because they can't make their payments because they have no credit. the spike in layoff numbers would be scary as every company would be forced into survival mode. this is a very basic fact that most people overlook. this is the way capitalism works, credit is the life blood.
Because if GM dies a region is hurt, which is sad. If the banks die the whole country is hurt. See 1929. When banks don't function well neither noes the rest of the country. Basically the systemic risk is way higher with the banks. That doesn't mean that he can't get tough with the banks, but that is why they are shown more deference.
The banks do still have products that people want, which is more than you can say for GM. That said, both the banking and auto industries were consumed by navel-gazing, greed and stupidity, thinking that they had the magic plan to make quarterly profits. GM fouled that ball a few years ago, when they desperately pushed out the bargain basement sales plans, canabalizing future sales for a quick profit. They could certainly used those buyers now, but those drivers are out of the market for the whole creampuff to junker cycle - and even longer than normal, because of the poor economy.
Exactly---there is no comparison. Due to mis-management and egotistical behavior, dating from the 60s, America's car industry is in the tank. They produce cars no one wants to buy. The only reason they did not failure sooner is due to protectionist measures over the last 3 decades. We should just let these companies disolve and go away. But unfortunately, the government is then stuck with the economic backlash. So..."king
Yeah ALL of the banks were so well managed! LOL
Sorry, could only get part through another WSJ hyper partisan piece of BS.
The GM stockholders now are securely underwater. They are billions of dollars underwater. The only ownership rights they have left are the rights that the entity that is bailing out GM decides to give them. If it was my money I'd give them zero. Their equity was burned up years ago by the board they selected and the management that the board selected.
A legitimate discussion is whether GM creditors and unions should have been forced to make major concessions before any bailout money was provided or whether GM should have just been forced into bankruptcy. But now that the WSJ is just a partisan rag, it can't discuss that because it was their guy that pissed away the billions of taxpayer dollars spent on GM handouts before any real effort was made to stabilize the company.
So now they're left with carping at Obama who is dealing with the situation in a vastly more rational way than their guy did. The WSJ has descended into a petty band of Republican Party sycophants. Intellectual honesty and thoughtful advocacy of small government/ free market ideas have been abandoned for demagoguery and partisanship.
GM has been spending many billions to resructure heir operating costs. That is how they lost so much money the last couple years (they have been buying out the higher priced labor and keeping the lower priced labot (New UAW workers get $15 per hour). The Wall street Banksters are doing exactly the opposite with Geithner's help(hiding their toxic debt) and showing big profits. The other problem GM has is Wall Street Banksters. They speculated on oil pushing it to $5 a gallon which kllled sales. The banksters also froze credit through their unbriddled greed. All the auto industry is down about 40% because of Wall Street.
Ditto! Ditto!
WSJ owner = Rupert
What did you expect? Journalism?
A good counterbalance to NYT.
not so funny, not so cute.... the scarcasm. American investment is R-I-S-K fool, you took it knowing that GM bonds were toilet paper ... You ace was this taxpayer blackmail.
I am delighted to see GM and their bloated workforce decend into hell. I'm owned their cars, I've suffered personally through that decision. Good luck with your Volt idiots. I'm sure you'll sell a dozen of them.
I love your reference to the plebians in your profile name. It is more apt now than ever. I agree with your comment about the volt, not going to be a very big seller. maybe someone will drive them around instead of a golf cart at the country club.
So the GM worker plebes and their families and the retiree families (all plebes) will be economicall slaughtered by your proposal. Perhaps you consider working people mere slaves to be thrown to the Colluseum when no longer usefull.
I am a huge supporter of GM, own 3 GM cars! I only buy American! I agree that we needed to help GM but we can not continue to sink money into GM unless they are willing to re-organize! You can not retire at 45 and get full benefits for the rest of your life! I live in Pittsburgh, the steele mills weren't bailed out and all those people lost their retirement benefits. My husband just received a notice telling him that his retirement is at jeopardy too! I do not belief this is Obama's fault, he was handed a nightmare by Bush! I do not want anymore money to banks either! Let the banks pay us back! People should start using their credit unions and smaller banks and go tell those big banks to shove it up their ars! Things are gonna be tough for awhile!
Hey don't knock the Volt ...
It is going to be like a 4 year old Prius, at twice the price of a new one.
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