• The Obama General Motors Duplicity

    For three years our consciousness has been bombarded with assertions from Obama, his handlers, and his justifiers, that he is pro-business, understands the private sector, and is a leader -- after all did he not singlehandedly “save” General Motors and America’s auto industry? Enough with the lies already!

    Now that there is an actual businessman running against him for the Oval Office rather than a pol, the President’s machine has been turning up the volume on Obama’s GM escapade. We too easily recall his preening three years ago as the media declared him the new CEO of General Motors. Today Obama claims that without him, there would be no auto industry in America and he further claims that GM is a roaring success.

With admiration from the vast majority of the media, Obama is spiking the football on his prime example of crony-capitalism. This is not just any version of capitalism. This three year saga of GM has been a White House mandated, directed, orchestrated, manipulated, sleaze filled, top-down, “I-know-better,” abuse of laws and industry with taxpayer money to achieve egoistic and self-serving purposes.

This Administration persevered in abusing its power to ignore laws and common sense, in order to pull-off the biggest heist in US government history. And it did so in broad daylight.

The fourth estate’s fear, adulation, and mostly uncomplicated ignorance, allowed this larceny to occur. Law makers allowed it to materialize without backlash. Taxpayers watched, confused. Some, not so confused, but unable to act.

Geithner orchestrated the redirection of TARP funds for the bailout - yes, that very same slush fund specifically established to bailout financial institutions, NOT corporations. While we may never fully know the total cost to taxpayers, and we will never know the full extent of the damage done to individuals harmed by the process, we can accept as a base amount the initial $80+ billion dollars from TARP and the government stock purchase of 60% ownership. Why is this a “base” amount?  On behalf of the Nation’s taxpayers, and circumventing the country’s bankruptcy/tax laws, the orchestrators of the GM scheme ALSO sacrificed taxpayer treasure in the form of a $45 billion gift of business-loss tax credit.

Section 382 of the tax code, limits net operating loss carry-forwards in ‘loss corporations.’  Did this restrict Obama, Jarrett, Axelrod and Geithner in any way? Not when they were buying the permanent financial backing of a powerful union. The same union which this year committed one half billion dollars to Obama’s re-election campaign. Did the rank and file have ANY say in what their leaders did with their union dues?

To circumvent laws limiting transfers of Net Operating Losses” (NOL), Geithner, (that infamous tax expert of tax cheating notoriety), issued “Notices” claiming the laws would not apply to the Treasury’s machinations as it converted TARP loans to GM for shares, and then sold those shares.

 

By law, accumulated tax write-offs evaporate in bankruptcy for ALL corporations, unless they are enjoying the process of Obama-commanded-bankruptcy. Do we really wonder how other auto manufacturers such as Ford, or any other corporations for that matter, felt about this serious breech of the Nation’s laws and assault on the capitalist system? This is politics at its worst.

Taxpayers were not provided an opportunity to opine on this $125 billion being used by an out-of-control Administration to purchase the eternal support of the AWU/UAW leadership. Keep in mind that the UAW was an unsecured creditor, unlike most of the creditors pillaged by this Administration. The union was gifted a 17% share position in GM in trade for some health and pension commitments and the UAW sold a third of this position for $3.5 billion when GM made a public share offering in 2010.

When you consider how team Obama handed control of GM to its union cronies while on the other hand it obliterated 100% of the original broadly held common shares; gave pennies on the dollar worth of shares to bond holders composed of families, retirees, middle class average Americans and pension funds; wiped out the debt held by GM supplier Delphi; gifted $1 billion to Delphi UAW retirees, but nothing to Delphi’s non-union and non-UAW retirees; stiffed the bond holders; terminated the existence of thousands of long-time dealerships who were not Obama funders; unceremoniously fired the GM CEO Rick Wagoner, replacing him with car czar Steve Rattmer who in turn placed crony Ed Whitacre as titular CEO while czar Rattner made all critical decisions (against all common sense, and corporate law and governance); politicized the restructure and politicized the eventual actualization of action plans for GM; wiped out non-union salaried employee pensions; enabled GM to pay for ads in China promoting the “The Birth of a Party” – a party for the 90th anniversary of the Chinese Communist Party (CCP), . . . . you begin to understand the full meaning of crony-capitalism as it is practiced in Beijing and Moscow.

 

Ask the retirees who depended on those bonds or the Pension, Mutual and Hedge funds which Obama so cavalierly demeaned as “speculators,” how they feel about the Obama version of “redistribution.”

The vast majority of individuals who were scammed weren’t aware of all the minutia of the complex deal. Many are very likely still in the dark about Obama’s redistribution of taxpayer cash, NOT to the needy, but to this Administration’s UAW friends, and in turn to himself. This is redistribution for Obama’s personal gain, and the personal gain of his crew.

Is it any wonder the top of the UAW’s food-chain has permanent passes to the White House?

Did the media admonish the President or Treasury Secretary for failing to carry out their fiduciary responsibilities?  Did the media support the free enterprise system which the country’s economic health depends on? Not at all. The media still yawns as laws are trampled, and rights are assaulted.

 

When you have access to a camouflaged, almost limitless mountain of cash to purchase ‘friends,’ your dreams of world-grand-mastership might just take on a veneer of reality, particularly when over 85% of your nation’s MSM is championing your cause, though it doesn’t understand what your cause really is.

The lying and nauseating demagoguery continued unabated at a recent Colorado pep rally, “. . . we created 4½ million new jobs. We saved an auto industry on the brink of collapse. . . . . what we did with the auto industry, we can do it in manufacturing across America. . . . ,” bragged Obama.

Would it educate the President to point out the fact that before the bailout, 75% of GM cars were built in the U.S., while today 2/3 of GM employees are overseas and 75% of its automobiles are made outside the country with most of the manufacturing occurring in China? Such questions might trouble his evidently limited capacities and confuse his mind about his claims that Romney  “Led the outsourcing of American jobs to India and China.”

This restructuring of a failing company by dictatorial decree was nothing more than theft from the highest power in government. If and when the details of this heist become clearer in the minds of all taxpayers, we may yet see legal recourse taken on behalf of those whose lives were damaged irreparably by the abusive and despotic actions of this Administration.

The return of America toward sustainable healthy economic growth, and away from 15% real unemployment, will only occur with leadership which comprehends and respects business and the entrepreneurial spirit, and not from a leader who has done nothing but live off the largesse of others and government.

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• America’s Overnight Transformation

The centerpiece of the Administration’s rushed, colossal bailout and stimulus program is the taxpayer support of the nation’s 20 largest banks. Treasury Secretary Geithner, former Federal Reserve Bank of New York President, is Obama’s point man on the aggressive plan to bolster the financial system. As he leads the charge to inject hundreds of billions into banks, he cringes from applying the term, “nationalization,” to his strategy.

In the American lexicon and consciousness, nationalization of corporations steps across the threshold of socialism. Obama and his team are being careful not to overtly to be taking that gambit so early in the game.

By allowing this strategy to move forward, taxpayers are betting their futures that the collective mediocrity which mismanaged the financial institutions into an incomprehensible mess, will suddenly become masters of rational thought, and will transform into diligent financial management. Are there any taxpayers in America who would independently place their hard earned cash with any of these failed speculators? Not likely, so why is the greater collective mindset rushing into the abyss?

While he is not an economist, Geithner is supposedly an expert in monetary policy, yet he has no idea of the depth of the banking problem and cannot evaluate the viability of the financial institutions. He is also unable to establish their near term or long term solvency. Unfortunately, neither can anyone else, it seems. America is looking for guidance from a man who was one of those who not so long ago believed the banks were strong and their risks were distributed broadly enough to satisfy expectations for long term stability.

Bottom line, the government’s approach for instilling a return to “confidence in America,” means taking mountains of debt raised dollars, and placing them into giant unfathomable baskets of risk. Countries around the world are looking to America for a return to stability, but do they really care if the U.S. taxpayers drown in debt as the U.S. government rushes into territory it knows nothing about?

We are subjected to emphatic statements that the government must take these drastic measures of a scale never experienced, because the alternative will hold consequences of a far worse crisis. How can the Administration make such absolute and foreboding claims, when the government doesn’t fully comprehend the problem. It has also been unable to satisfactorily explain the specifics of its plan, or the expected outcome. Is the problem really insurmountable, or is this a massive cash grab and a government bloating exercise being quickly actualized while the historically unique opportunity presents itself?

It appears everyone in the MSM supporting the current plan uses Lehman Brothers in the argument, suggesting that its collapse almost destroyed the global financial system. That is a fabrication based on vacant assumptions, fuelled with panic. Are we expected to accept that the calamitous repercussions awaiting us are so overwhelming, they must be true? Surely Obama, Geithner and a list of well-educated experts along with NYT can’t be wrong, nor would they lie. When they tell Americans that Citigroup, Bank of America and Morgan Stanley hold the future of the world in their hands, surely they must know what they’re talking about.

On the surface, adding capital to an undercapitalized bank might seem to make sense. Unfortunately, the capital is coming from the taxpayer, and however the Administration camouflages it, this will be a nationalization of banks because the capital injections will exceed current market values of these financial institutions. In any case, this nationalization has already begun under the FDIC, and will accelerate as the largest banks get bailed. Equally disturbing is that the degree of undercapitalization enjoyed by all these banks is unknown. The taxpayer is being forced into guaranteeing the credit and balance sheets of these banks without any measure of as to the size of liabilities awaiting them. Such guarantee of unknown obligations isn’t even “throwing good money after bad,” it’s worse. And don’t believe them when they tell you taxpayers will get money back when the distressed assets are sold.

This panic driven overreaction will siphon an anticipated $3 trillion or $4 trillion from taxpayers over the coming three or four years. The strategy, being energized by Wall Street and its stockowners, reminds us of placer gold miners using overpowered firehoses that completely destroyed the landscape in the hope that it would render an occasional nugget and some gold dust. Somewhere on the side of that mountain, might be some gold. Somewhere out there, if trillions are immediately thrown at financial and other institutions, some jobs will be generated. The parallel isn’t quite appropriate of course, because miners of nineteenth century Northern California actually knew which hillsides sheltered the wellhead to their fortunes.

The administration suggests that once the economy recovers and these banks become viable once again, they will be returned to private status once again. Given the degree to which these banks are undercapitalized, such anticipation would appear to be an impossibility, and is therefore either disingenuous or lacks basic knowledge.

It would be more prudent for the Administration and Congress to reign in the panic, take control of The Fed and regain control of the U.S. dollar. The Fed did not do its job, and did not step in to restrain the out-of-control leveraging that allowed the crisis to bubble. Showing the world that the U.S. is changing the ways of its wayward financial community with specific plans, would bring back some confidence. It would also be more responsible to apply measured responses to specific pressure points in the financial industry, as the extreme demands surface, that are not efficiently answerable with bankruptcy protection. Taking the term “bankruptcy” out of the financial lexicon is a mistake regardless the size of the institution. Such attitude will only lead to further inappropriate consolidations such as the many we have already witnessed. There are many viable and well-capitalized banks remaining that will gladly lend, with minor inducement to take on risk from The Fed and the FDIC, but without bailout capital.

In its rush, the new administration does not appear to have come up with any creative or novel programs to address the financial industry’s decay. We appear to be coaxed into a dark alley, still drunk from two decades of profligate spending, and expecting magical overnight answers hoping the walls will keep us upright. Much more had been anticipated from this Presidency, or at least much more had been hoped for from a majority of the voting public. Much more, and certainly not the short-term uncreative thinking Taxpayers are being presented with. We are, however, witnessing a rapid transformation of America.

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• Obama Mitigating Mortgage Foreclosures?

Obama announced that between $50 billion and $100 billion will be spent on making mortgage payments affordable, as part of the giant gamble he and Congress are making, under the title of “stimulus.” No help will be provided for those who made rational decisions on purchases, but ample support will be provided to those who couldn’t afford the homes they signed up for. Rationalizations for such a move are being promoted by the administration, Congress and the MSM. They are easy to dispense, but is such policy right?

Banks are temporarily suspending foreclosings on some home loans until they have had time to understand what the government really intends, and they’ve had a chance to negotiate their way into the handouts. Financial corporations such as Citigroup, Chase & Co., and Morgan Stanley will set a moratorium in place until early March, by which time it is expected that the mortgage modification details will be finalized.

The hard sell for this program uses supposedly sincere reasoning such as, “If the house next to yours is in foreclosure, your home drops in value as well.” That is the big one since instilled fear is an instrumental motivator. At first blush, it sure sounds convincing, but then it settles into your consciousness, and a discomfort begins to shade it’s seemingly benevolent intent. You begin to dissect the soundness of the argument and stand back to look objectively at the whole picture. Where is the common sense?

Who else is thrilled with the Obama and Congress decision to rush into a cash dispensation of such magnitude? Everyone in the bad mortgage food chain is in support of stemming the foreclosure rate. Banks, large and small, are clamoring for more bailout money to cover bad loans they were responsible for providing, and their executives don’t really want to give up the summer home in the Hampton’s. Mortgage brokers, real estate brokers, and homebuyers who are underwater on their house purchase decisions are cheering Obama and Congress. The only ones not in favor are those who made financial decisions diligently, having saved their money and minimized the outlay for shelter as much as they could. We don't need to explore how millions who are renting while saving and waiting for prices to become affordable for their first home, feel about taxpayer money being used to attenuate the drop in real estate values.

Aside from unknown hundreds of billions that will be required to implement such shocking endeavor, Rep. Barney Frank intends to introduce legislation to change bankruptcy law that will enable judges to adjust the principal on mortgages held by homeowners who cannot afford the payments. He plans to provide protection to lenders who reduce already set and contracted interest rates, or change the terms on troubled loans. This movement has enormous ramifications for the long-term viability of the financial services industry. It will certainly impact investors who invest in mortgages with set interest rates and steady returns on investments.

The plan is to reduce potential delinquent borrowers’ payments to as low as 31% or their pre-tax incomes. Evidently those facing foreclosure will get preference on the priority list. It is doubtful that anyone in government will be capable of differentiating fraudsters from intentionally bad decision makers. Who is not on the list? Those who purchased homes well within their financial means. These are also the people who will be paying for their wayward neighbors’ well being. Should renters be given a financial break for having made good decisions, NOT having been seduced by the “no money down” siren’s song, and NOT having lept into the froth of the real estate pool?

We are witnessing the government sliding the country into forced rewarding of bad behavior. This was bad behavior by borrowers, by lenders and by all the middlemen eating off the mortgage loan buffet. In such a program the opportunity for abuse will be significant, and probably uncontrollable. Why would people who purchased automobiles they couldn’t afford not also get bailed out? Didn’t many of these mortgages finance giant TVs and second cars?

The argument for “help” will originate from all corners of the economy. Across the U.S., businesses are preparing their theatrical presentations for requests of a piece of the bailout pie. With the trillions of dollars being loosened from the grasp of future generations by the government, it is understandable that the line-up extends invisibly over the horizon. There is no indication from any source, and certainly not from Obama, Congress or their economists friends, as to how any of these trillions will be repaid. They are probably afraid to face the real answer. Public reaction would be immediate.

Some of the answer for return to a healthy economy rests in individual responsibility for reasonable behavior, enhanced with large doses of education. The government should consider spending money on educating the whole population on the management of money, and on making sound financial decisions, particularly those pertaining to housing. The result would be much less self-destructive behavior. It wasn’t the fine print that burned borrowers, it was the big, bold print. This is one of those areas where even a little knowledge would go a long way.

This dramatic shift of government intervention into the economy from the backs of future generations with no plan or concept for recovery is a realm never before experienced, not even in the 1930s. The added measure of placing additional burden, even punishment, on those who have made the right financial decisions in their lives, is also beyond the pale of reason. The only ones in support of these measures are those with a stake in the game, or those panicked into thinking it is necessary, or possibly those who don’t pay taxes. It would be more reasonable to offer strong incentive such as long term zero interest loans to new home buyers who can come up with large down payments. There is also ample room for the government to positively influence the "renegotiation" of underwater mortgages, however, the government’s unreasonable and unbalanced current plans with this program are extremely difficult to comprehend.

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• Obama, Watch Consumers And Learn

American consumers are being accused of closing their wallets. This is evidenced in three months of contracted spending into the end of 2008. The new year has brought more of the same, and consumers are being admonished for spreading “weakness.”

Politicians, economists, and the media, have strained to peculiar characterizations in describing the source of the current protraction in economic activity. Most renderings are not flattering to consumers, and are aimed at stimulating feelings of guilt or culpability. The use of imagery such as “weakness feeding on itself,” with the weakness being the consumers’ spending, borders on ridicule of the consumer. “Consumer confidence falls,” is another great headline we are subjected to. Why is there such negative perception attaching itself to what is in fact an extremely positive reversal of past detrimental behavior by consumers?

Consumers are not panicking the way their leadership appears to be doing. Taxpayers are being conscientious with their hard earned dollars. Consumers increased their rate of savings to 3.6% of disposable income in December, representing a significant month to month increase from a 2.8% rate in November, and overall a marked improvement from the only 0.8% of last August. Consumers are prioritizing their purchases, and cutting back on credit card use. This is a positive trend that will strengthen the likelihood of a return to economic health in the mid to long term. It also suggests that consumers are discounting endless prognostications, including Obama’s, of a restoration of the economy’s wealth and health within 6 months.

Consumers should ignore the mainstream media, the pundits, the economists and most of all should ignore implorations of “spending” from politicians. The economy will not be fixed in the short term, and believing otherwise is ignoring reality. The turn around can only be realized gradually through a diligent and patient ascent along a very gradual incline. Consumers are first taking care of absolute needs such as food and shelter, and they will then endeavor to save for an uncertain tomorrow. From those savings will emerge confidence that will very gradually ensue to gradual, rational, and conscientious increases in spending levels. Current signals strongly suggest that consumers have learned a lesson, and will in future spend within reasonable means of their disposable incomes. It is safe to expect that consumers will treat their homes very differently, and will no longer perceive them as rapidly appreciating sources of cash.

Government’s artificial injections of taxpayer borrowed stimulus billions, over and above normal and required spending, are unlikely to deliver reliable foundations for establishing solid and sustainable economic pillars. Does no-one sitting at the new Presidential round-table of experts understand that a $15 trillion dollar economy is a “long build?” Short term thinking is what brought us the current mess. Why agitate taxpayers through fright and terror? Is this an attempt to justify incomprehensible spending programs to placate special interests? Will this lead consumers to remain uninquisitive as to the structures of the bailout packages, and their lack of contractual arrangements? Is this an attempt to win over the almost 60% of the population strongly against the stimulus and bailout package Obama and Congress are implementing? Rebuilding of the economy will be a lengthy process, and other than providing consumers with incentives to continue their current trends, government should get out of the way of its materializing.

The political leadership should listen to American consumers. Listen and observe. Doing so would temper the rush to explode the National debt to 70% of GDP. You can help no-one else, if your house is not in order. Consumers are not rummaging for “boom times.” They are searching for shelter in stability.

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• Should Bailout Beneficiaries Be Outsourcing Offshore?

Congress and the White House have left a moral dilemma for American taxpayers to resolve for themselves. Government has not shown diligence enough to install common sense agreements onto the multibillion dollar bailouts. Should recipients of taxpayer favors continue to send jobs offshore?

In the past year thousands of jobs, some very high paying jobs, have been eliminated across the country in companies receiving bailout money. The jobs have been terminated for U.S. workers, but they have reappeared in other countries. The benefactors? Hundreds of thousands in the Philippines and India, for example. These are beyond the usual consumer service and support types of jobs. These jobs are in research, bill payment and collection, credit analysis, and investment banking.

Why would Citigroup and Bank of America, among others, be gifted tens of billions by American taxpayers, without restrictions or conditions on use of the funds through contracts? Who is really handing out bailouts with no requests for the repatriation of jobs, where possible, such as all those jobs these companies outsourced? Are these stalwarts of American capitalism also receiving “bailout cash,” to swaddle their failures, from India and the Philippines perhaps? Not a chance. Why are senior corporate executives complaining about not being able to find necessary expertise when the competence was fired and replaced with talent on the far side of the globe? Any chance that this is rationalization by CEOs for the hiring of cheap labor?

Companies should be allowed freedom to manage as they see fit, …unless. When the Administration and Legislature decide to put taxpayers on the hook for trillions of dollars to bolster failing businesses, it is NOT right that those very same taxpayers be sent to the unemployment lines by those very same companies.

This lack of interest, ethics, humility, inquisitiveness, attention and duty by the Obama White House and the Pelosi Congress is confusing. Is no-one paying attention? Is leadership delinquent? Is pomp and circumstance the new prevailing flavor in Washington, overriding any expectation of thoroughness over such significant decisions? This leads one to become extremely suspect of the rush to implement stimulus packages. Nothing ever receives proper attention, or is ever effectively implemented behind the leadership of panic. This is not a welcome sign for the onerous road ahead. And don’t bother looking for any other signs pointing to creativity.

Of course, emerging markets have a right to continue flourishing, but this is not a debate on protectionism. This is a questioning of common sense. Taxpayers are not served well with the continuing export of jobs by the very companies they are sinking into debt for. Is the creation of JOBS not the principal objective of a "stimulus package?" It appears the navigators are too unfamiliar with the terrain, and diligence over the cordial doling out of billions is under the administration of extremely poor negotiators.

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• Disrespecting Taxpayers & Shareholders

As CEOs beg for Troubled Asset Relief Program (TARP) handouts, the new corporate mantra is, “maintain shareholder trust,” … sorry, make that the new corporate mantra is not, but should be, …”maintain shareholder trust.”

All Congress and White House promises of oversight on the bailouts don’t seem to apply to financial institutions. Bank of America received $45 billion from trusting taxpayers, and after its sloppily structured acquisitions of Merrill Lynch and Countrywide Financial, taxpayers watched helplessly as hundreds of millions were paid out in bonuses to the failed company executives. $2 billion went to the senior talent at Merrill for delivering $15 billion in losses for the last quarter. The excuse from B. of A., the 100 year old largest financial services company in the world, was that it couldn’t legally challenge the previously made promises for absurd payouts and bonuses to people who destroyed the companies they managed. Truth likely resides closer to lack of due diligence prior to the acquisition, and forgetting to impose much needed conditions upon closing.

How do The White House, Congress and B. of A. CEO Ken Lewis forget to make the cancellation of these extraordinary payouts part of the negotiation when the acquisitions of Merrill and Countrywide were being so brilliantly conceived? Now the Bank is looking for more bailout money from taxpayers. That’s after destroying one quarter of a trillion dollars in shareholder value. Why are taxpayers continuing to be so generous? Why are Obama and Congress not refusing to provide more money? Why are they not demanding removal of B. of A.’s Board of Directors and CEO? What has been perpetrated on taxpayers and shareholders is well beyond the bounds of abusive, and certainly not within the definition of “trust.”

Leaks of Merrill CEO John Thain spending over a million dollars to renovate his office pales compared to the $83 million he paid himself, before his company imploded, receiving $10 billion from taxpayers last October. Is anyone really paying attention? Handing out bailout money appears to be very easily done. Could it be dished out a little less sloppily perhaps?

The Citigroup version of abuse after receiving its $45 billion bailout from taxpayers includes a very visible $50 million executive jet. No flying coach for these managerial failures. Is there someone coaching these folks on effective PR? Now that the public distaste has become an impossible pill to swallow, Citigroup announces a decision not to take delivery of the plane. And this incompetence requires that it be paid millions in compensation so that it does not leave the fold for greener pastures? Who would hire these decision makers? Another bank adept at taxpayer and shareholder abuse?

Are Obama and Congress making good on their promises? It appears that such lack of interest is as extreme in disrespect of taxpayers and shareholders, as the extent of transparency, control and disclosure is lacking. Their response to the public outrage is disheartening and rather pathetic. What category of oversight does, “… (Citigroup) should not be spending its precious greenbacks on frivolous luxuries,” represent? Getting a Treasury Department official to ask Citigroup to rescind the decision after the furor became deafening was proof of incompetence in the execution of the duties to represent taxpayer interests. Should parameters for use of funds not have been decided on and agreed to before the cash bags were delivered?

Where in the rainbow of possibilities contained in the term, “accountability,” does the taxpayer-funded influence peddling of politicians by these companies, get such interpretation? Should taxpayers be grateful that B. of A. has decided to curtail its visible lobbying for bailout money? It will do so more privately from now on, and the rest of its lobbying activities will advance unabated. Politicians will continue to be influenced with taxpayer bailout money, but the manner of this manipulation will be much less embarrassing to taxpayers. Whatever partial non-lobbying the bank is not participating in, seems to be working. It’s expected to receive another traunch of TARP funds as its own exotic and toxic securities ferment into further billion dollar losses.

All of this has nothing to do with tightening regulations on the banking industry, though some is required. This is about setting in place firm agreements and conditions under which the hundreds of billions are to be accepted and spent on behalf of the taxpayers who will be on the hook for the money. This is about establishing a government agency that would, on behalf of taxpayers, become the guiding body watching over the complex intricacies of the whole financial system and its ability to create derivatives no one understands or analyses. This is also about showing respect for sweat that America’s broad middle class will endure to pay back all of this bailout money.

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• A New And Different Shattering Of Assumptions

You have done your share. You work exhausting hours, sometimes at two jobs, and you have succeeded by any definition in fashioning a good life for yourself and your family. You accepted that while you were taking care of your part, others, some perhaps with more knowledge, power, influence and wealth, were taking care of theirs. Good for you, and well, … not so much.

Assumptions are a foundation of society’s functioning processes. As you travel at 55 miles an hour down a busy highway, you assume. You assume your automobile’s wheels will not suddenly part ways and decide to retire in a roadside ditch. You assume others driving in the opposite direction will continue enjoyment of life long enough to pass by your left window at a relative 110 miles an hour, with no sudden change of heart that might cause your abrupt transition into a hood ornament.

You assume that those you have elected to office will ardently carry their impassioned campaign trail promises to Washington or The White House. You assume that all knowing sages who have been given the keys to the National Safe will be diligent in the management of its contents. You assume that the Harvard educated captains of industry will manage the corporate world in testament to their prodigious capacities. You assume that others must have special insights far exceeding your own on the big picture.

We all assume. We have to. The faculties of human endeavor expect it. Without assumptions, the evolving ritual dances of the social, political and other conventions would disjunct into paralysis. Our behavior holds certain expectations of its ambience. In the event that those expectations are violated, we have enacted laws that will impose a collective retribution.

Current economic, political, corporate and social events are shattering our assumptions with impudent and invasive intrusion into the core of our lives. Our centers of gravity are undergoing some dislocation somewhat similar to that experienced three generations back during the Great Depression. The global interconnection and interdependence allows for a more pervasive impact on the earth’s population by the current version of high anxiety.

Do you remember the day when that parent you thought archaic told you, “Things are rarely as they seem?” This assertion pertained to perceptions. You were convinced that government bailouts were foreign concepts too far down the politically impossible spectrum to warrant serious thought. Now you listen to unwavering shouts from experts telling you that bailing out banks and financial institutions is not only good for you, it is mandatory for your future well-being and peace of mind.

Will the best-connected voices, the CEOs cap-in-hand, be the most rewarded in the bailout line-up? The taxpayer will continue to borrow trillions of dollars to enable these bailouts of Wall Street, and it will be left to our children and grandchildren to figure out how these debts will be repaid. Can’t we just assume that they will? That would be easier. The dogmatic nudging of our perceptions is disquieting. We are perhaps observing, and financing, the dawning of a new capitalistic system and a metamorphosis of the corporate entity.

Surely somebody knows what he or she is doing. The assumptions return. This new Obama administration with its dozens of experts must know something we don’t. It will make things better with a stimulus package on top of the bailout packages. This stimulus package will be the biggest in history, setting new incomprehensible levels of national debt. Shall we assume once again that for that singular reason, this package will work?

The cycles of our presence on this Earth are not all within our control, and these times are an experience along our journey for which our spirits will draw a learning. New assumptions will advance on our percepts, reframing our outlooks and expectations, and your parent was right, things will rarely ever be quite as they seem.

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• Cerberus Leveraging Billion Dollar Connections In Congress

It is agonizing to watch Congress publicly stumbling through its analysis and qualification of the auto industry, providing appearance that it is doing its homework on a bailout. Over 40% of Congress is made up of lawyers, with little grasp of finance, economics or business. Congress should not be negotiating the bailout.

Chrysler and Cerberus Capital Management are seeking an unholy bailout and Congress understandably struggles when Cerberus owned Chrysler CEO, Bob Nardelli, cannot explain why his bosses will not put up cash to bailout one of its many subsidiaries. Cerberus does not work that way, and it does not have to. Its political clout will do the heavy lifting on salvaging a failing investment.

Taxpayers won’t know any better since neither the current nor the incoming administrations will take oversight seriously and neither seems to understand Deal Structure. Unfortunately, neither will Congress which is simply lacking understanding of some critical components of business, wealth creation and negotiations. Certainly its actions suggest absence of such comprehension. American taxpayers have a particular interest in the outcome, and should be paying particular attention to the bailout, and to the Chrysler deal in particular.

In the shadows of enormous private equity investment firms lurk shareholders who remain anonymous, and who hire directors, senior staff and advisors who have political connections deep inside the private rooms of Washington decision makers (Congress & Administration), enriching the deals and enhancing ultimate financial returns. John Snow, the current Chairman of Cerberus and Bush’s former Secretary of the Treasury before Paulson, has apparently been earning his employer’s favor by lobbying directly, and through influential lobbyists at Treasury and elsewhere, for a Chrysler bailout.

The Cerberus investment of $7.4 billion in Chrysler is underwater. Their elimination of 30,000 jobs has not helped them or their former employees, so now Nardelli uses fear to energize congress into action. Most firms like Cerberus don’t acquire control of companies to turn them around, rebuild them and create wealth. They either acquire for position in an industry, then apply and leverage influence for strong ROI, or they pluck low lying fruit in the hope that political polishing and some finely tuned connections will enable a flip of the asset for a significant profit. Cerberus has for years had a nasty reputation on Wall Street as a fierce player and hard nosed negotiator, which is its right. Everything Congress is not. In this game of risk, connections and being ruthless make all the difference. In the Chrysler deal, these warm associations and substantial sphere of influence will bring access to taxpayer funds. Snow called his friend Paulson for the cash.

There may be media clamoring for transparency on the wealthy and secretive Cerberus, yet I feel this is an unwarranted forensic hunt for indeterminate ghosts. If Congress structured the deal properly, Cerberus and who owns it, how much it has, what companies it controls, all become irrelevant. Implementing a bailout program as delineated in this recent article on this post, would remove any Congressional concerns of the Cerberus share position, which would be drastically diluted to a minority in the event of any bailout cash injection. Unfettered, Cerberus could then slide back into the shadows, to await some future Congressional discomfort with its unnatural influence.

Should Chrysler take any money from the taxpayers, as it now appears it will, structure can be simple and effective as noted in the above referred-to article and “…take preferred share positions at the current market value for funds provided as and when the investments are made.” This, and other suggestions therein, such as clearing all Directors for the Boards, renders Cerberus shares inconsequential and provides taxpayer complete control over a company they will have funded, until all funds are repaid.

Congress, please pay attention. American taxpayers don’t need another blunder committed on their behalf.

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• A SOLUTION FOR DETROIT, GM, & FRIENDS

General Motors tells us it has plans for the long term. Long term plans are dreams. Unfortunately, GM’s horizon reality isn’t long enough for those plans and dreams to be realized. Pelosi and the Democratic leaders are urging Bush to provide more aid to the beleaguered auto industry. Congress bungled the specifics on the $700 billion bailout, and now it wants to extend the bungling to other areas of the economy, beyond the financial institutions. Panic is a dangerous condition, however, while it appears everyone is being conciliatory, or afraid to lose his or her job, there is an opportunity to take radical action. There exists a brief window of time when reconstruction can be enforced on a broken U.S. auto industry.

Here’s the fix:

Dear General Motors, Chrysler, Ford (yes, you too Ford, you’re in trouble, but just won’t admit it), and all suppliers and sub-contractors.

c.c.: UAW (pay attention because this is really going to affect you)

We, the ever hopeful Taxpayers, agree to come to your rescue, but feel it is time for some overhaul. We’ve been embarrassed for long enough. Over the past couple of decades most of your vehicles have looked like they were designed by committees ensconced in the shoebox concept of beauty. We don’t need to address all the other awkwardness, such as your failure to deliver reliability, while Toyota and Honda humbled even the German manufacturers. We are familiar with the rationalizations, and to some degree empathize with your being trapped in untenable labor relationships that have over the years stalled efficiencies. It is time to clear some decks in the management ranks as well as in the labor contract details. The now presents a perfect opportunity.

Please note that neither Congress nor Mr. Paulson will be negotiating the details on deals with each of your companies. Congress has demonstrated it cannot be trusted, and as for Mr. Paulson, we have been less than impressed with his ability to step back and act with objectivity, diligence or any sign of creativity and wisdom. How he became a billionaire is truly the extreme of the American dream waylaid on the road to fulfillment. Reaching dizzying heights of power and wealth with so little …, but enough of that for now. Here is the plan:

Each company will receive the same deal. All you have to do is throw up the white flag indicating that you can’t go it alone, and it becomes activated. There is no negotiation on the broad strokes. A bill will be passed, ensuring that all parties, including all employees, all executives, all Directors, and all related Unions, particularly the UAW, as well as all related contractors, sub-contractors and suppliers, abide by the terms since this will affect all of them very directly. We plan to end the excesses in the executive offices, and in the labor unions that have withered your companies.

We will take preferred share positions at the current market value for funds provided as and when the investments are made. Given the severity of the situation, the preferred shares will carry a dividend premium, we will settle for a total of 10%, and their buyback will also carry a 10% premium.

Considering the current share values, we will end up holding majority positions, which will sit in abeyance awaiting their return to your treasuries. We do not demand board representation, nor do we wish to dictate the agenda.

Since we are primarily interested in a long term success of your companies, we will not demand attached warrants on the preferreds, as other investors might be wont to do. We also recognize that adding to the overhang on the market would not be fruitful. We are not interested in promulgating evidence of greed here, just positive intentions for a significant industry we care to stimulate. Forget about going the loan guarantee route. We already have to borrow these funds, so enough borrowing already. We are anxious to get on with taking drastic action for the revival of your companies. We look forward to launching them into the twenty first century without too much surprise.

All employees, including management and officers, will take a full 25% cut in salary other than those recently hired for “non-core” jobs at $14 per hour or less. The salary cap will be $250,000 per annum, with no bonuses whatsoever. We are dealing with survival here, so whining that your personal overhead is higher than $250,000 will fall on deaf ears, and how can we say this with sensitivity, …you screwed up. Blame your egos for the extravagant lifestyles, and then move to a more moderate neighborhood. You’ll enjoy some peace of mind.

All employee agreements, unionized or executive, will be revisited. We realize that you compete in an international economy, and face competition that does not have the encumbrance of your labor history or your retired labor force. We will be reconsidering and renegotiating health care coverage as well as all 401(k) contribution programs, to bring them into line with the rest of work forces in America. While on the topic, we’re not getting with the program to shift the worker and retiree health care program responsibility from GM to the union, for example. That one smells, and workers will not get the better end of any such deal.

We will revisit the legislation that has governed labor relations, and become intrusive in the function of a prosperous enterprise. Unions abused their privileges, and executives abused their power, taking over-reaching compensation beyond common sense. Both exploited the system to selfish gain, almost killing the businesses. Executives went along with UAW coercion as long as their own incomes were skyrocketing. We are still shaking our heads at the 64% pay raise, Mr. Wagoner gave himself ’06-’07, while GM was hemorrhaging cash and it’s stock was crashing. While he was busy with his own bank account, GM was preoccupied with unproductive plant cutbacks to 80% instead of closing them altogether. The onerous position that carmakers have been subjected to by unions are no longer defendable or rational. Unions have also been taking care of their own senior executives, but their members are staring into the abyss. This will be changed. Oh, yes, and so will the “Jobs Bank” program or other arrangements such as paying “idled” workers almost all their take home pay plus benefits. You can expect us to rescind guarantees such as GM provided to keep all U.AW., U.S. factories operating.

The Board of Directors will experience an immediate restructuring so that we may implement much needed overhaul, and independence to the oversight process.

Accept this in a positive light which will stand you in good stead with the North American car buying public. Seeing some tightening of belts and constraint by unions and executives alike might endear your mobile armada to your primary market. We will not tell you how to run your business but folks, really, could you shrink the number of models? Too many of them look identical. GM, could we talk about your stake in GMAC? You’re supposed to be making cars, not financing homes. We’ll talk.

We would really like all three companies to demonstrate at least some of the vision their competitors have been actuating. We’re not talking about the kind of vision you used when you predicted a strong second half in 2008, but how about some vision on the future of the industry. This is just a “wishful” kind of thing on our parts, but we would be grateful if you could give room to the “vision” thing.

Few familiar with the auto industry would disagree that over-zealous unions have had obvious smothering impact on U.S. companies constraining their dexterity in fast changing markets. Without denigrating their significance to a labor force, we will do our utmost to ensure that common sense prevails in the relationship between unions and the auto industry. We are aware that labor isn’t the overwhelming cost factor, rendering you unprofitable, however, we are very familiar with what almost a century of accumulated bureaucratic strangulation from unions and government have done to your companies. We wish to remove all possible rationalizations and excuses on your road to recovery, and yearn to see it paved with ethical behavior.

Once your companies return to profitability, and our share positions are repurchased, your salaries will be revisited by new, and hopefully independent boards of directors.

We wish you much wisdom, foresight and plenty of good fortune. We also want our money back.

Sincerely.
The Taxpayers.

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• WHAT THEY DIDN’T TELL US ABOUT THE BAILOUT

We are about to witness more plundering of the American taxpayer. The 700 billion dollar bailout so quickly rushed through Congress under the threat of complete collapse of the U.S. economy, was slipped by American taxpayers who in majority were against the bailout. Democrats jumped in first, Republicans were slower to rush in. Both parties acted while drenched in fear and anxiety. The taxpayers were right. Obama and McCain were not, nor did they do the right thing right.

Taxpayers were threatened that with credit market paralysis, their jobs would be at risk, they would not be able to keep their businesses afloat, and they would not get loans to finance their lives. Without the passing of the Emergency Economic Stabilization Act, taxpayers would find their whole way of life turned upside down, and the specter of finding solace on a park bench would be just around the corner.

Neither Paulson, nor Congress, provided any real details on some of the critical concerns surrounding the bailout. Even expert analysts didn’t raise objection as to how some of the potentially explosive finer points might in practical terms find implementation. Taxpayers assumed that in such a world shattering moment, on such a historically critical decision, Congress would finally be diligent. Congress, filled with resident and elected lawyers, would understand the fine-print on the legislation. Taxpayers accepted or assumed that someone, somewhere, hopefully someone with talent, would do the right thing, and make sure that the legislation would in turn be subject to industrious and careful execution. Wrong on all counts.

The coming weeks will deliver further anxiety from wildly fluctuating markets, and distressing news that the bailout will finance hundreds of millions of dollars worth of salaries and bonuses. These millions will be paid to incompetent individuals who mismanaged their institutions into becoming beggars standing at the bailout wicket crying for taxpayer handouts. We can expect agreements between executives and their employers to surface, that Congress did not consider during the passing of the legislation. Don't think for a moment that those agreements won't stand. Paulson and his friends at the Treasury and the Fed will not be able to withhold money from those institutions. And that’s just the beginning of the abuse. Lawyers will rush to the trough, and taxpayers will stand-by, helpless, as large amounts of their added debt burden continues to be abused by many responsible for creating this disaster in the first place.

It will also surprise taxpayers that the lending institutions that will receive handouts, will be under no obligation to “lend.” Oops, sorry. Congress also failed on that one. Senators and House Members who rushed this rescue package through, will escape unscathed and untarnished, and one of them will even be rewarded with the Presidency next week. While government cannot be expected to solve all problems that face a nation, it is expected to act with prescience and prudence. Why Congress isn’t, is the real question. Is the mainstream media watching?

Oh, and hiding behind the skirts of PricewaterhouseCoopers and Ernst & Young to “help” in the administration of the bailout should not be accepted as a veil shrouding incompetence, and sanctioning abuse of power.

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• FANNIE MAE & FREDDIE MAC CONGRESSIONAL DONATIONS - NOTHING ILLEGAL?

American taxpayers should be upset at the amount of Congress directed cash from any corporation, private interest or organization. Whether such financial injection is in support of new drugs, insurance, medical services, or guns, corporate donations to Congress or even to election campaigns should be illegal. Entities with agenda currying favor for their products or causes should be run out Washington. Fannie Mae and Freddie Mac did much worse.

Fannie Mae and Freddie Mac senior executives have been supplying cash to Congressmen including Obama. Why? Why would organizations that were established by the Federal Government in the first place, and which serve the government and the U.S. taxpayers, be “lobbying” congress? Why would these two entities extend the largess of bundles of cash, sundry benefits and late afternoon caviar and champagne to legislators? Why should they care what a few handfuls of Senators think or do? The answer lies in the shadows that underlie the reasons for the financial “surprise” of this past century.

No-one knew. This disaster caught all experts and manipulators on Wall Street, off-guard. NOT A CHANCE. Don’t believe it.

The executives and all senior management at Fannie Mae and Freddie Mac, as well as management at numerous other financial institutions knew exactly what they were doing. Pay-offs to Congress maintained “friends” in the Legislative branch so that there would be no questions, and no oversight of their activities. The abuse continued unabated while personal bank accounts filled up quickly before the ships sank.

Discussions of implementing strict regulations or guidelines is simply a vacuous derailing of attention from the challenge. The strange attempt to instill panic into the minds of all Americans may be a slight-of-hand endeavoring to hide something underlying the mess. THIRTY to ONE leverage was no way to run a railroad, but that isn't what needed hiding since everyone was doing it. Misrepresentations in the books was rampant. Risks were hidden to ensure the packaging, flipping and re-flipping of bundled loans, thereby maximizing fees and bonuses.

Why is no-one digging into the credit rating agencies whose AAA ratings applied to securities riddled with risky loans or worse, injected confidence in undeserving investment vehicles, and minimalized capital requirements for too many lenders.

While Congress agrees to a $700 billion backstop which will provide ample confidence to the markets, it should pick and chose which bailouts to fund as they occur. Otherwise, who will be the final arbiter of good taste as to which tattered financial packages will receive the beneficence from the bailout bucket? Paulson? The long list of reasons against that suggestion starts with conflict of interest and lack of objectivity. Who will make sure the banks running to the trough aren’t coming with only their worst garbage bags after cashing in the good stuff they’ve picked over? How will Price for the decayed assets be decided on behalf of the taxpayers? Will the folks who either led or cheered the parade as it headed to the cliff be reliable decision makers in the process? No blank check should be provided to anyone, least of all any so called experts who had more than passing interest in the creation of the mess. Lets remember the, “burn me once, shame on you, burn me twice, shame on me” caution sign.

The current Congress has shown little propensity for decisive leadership. Today it should not panic, and should not succumb to outrageous demands being made by those who had insufficient foresight to see the looming catastrophe that millions of others pointed to as inevitable. While implementing a solution, Congress should also demand answers to serious questions. Long prison sentences should await executives such as those running investment banks who broke laws, as well as those in Congress who received kickbacks to ignore the duplicitous activities. All cash, and assets accumulated with obscene bonuses extracted through cooked balance sheets should be handed to U.S. taxpayers on a silver platter.

Taxpayers should expect and demand diligence as well as responsibility from Congress, and a monumental blank check is neither diligent nor responsible.

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• THE ROAD TO PANIC – GET OFF

Ten days traveling up and down the West Coast proved to me that the intent of those controlling the Wall Street joystick, with help of many ever-so-willing media pundits, failed to instill Panic and Fear in minds of most Americans. Concerns? Yes. Panic? Not so much.

Taxpayers have been hit with a hurricane of bad news, and have even been threatened with promises that if trillion dollar bailouts were not implemented overnight, the whole financial system of the U.S. and possibly the world, might collapse. The American economy is not failing, and unemployment is at a rate most other countries are envious of.

Since the real problem rests with lenders or repackagers of home loans that can’t be repaid, is anyone telling America’s taxpayers how much these losses really represent in total? No. Is it really almost a trillion dollars, or is it really much, much less? Is anyone asking where all this money went? When a house sold, affordable or not, someone cashed that check. Why are taxpayers told that Treasury Secretary Hank Paulson needs to be given a blank check because only he will be able to do what is right, and he will know what backstops will be needed to provide a soft landing to this calamitous financial unraveling? Did he do what was right when he was head of Goldman Sacks for six years? Is it that he should be respected because he made almost a billion dollars as CEO of Goldman Sacks? His power and dominance continue their trajectory, and if he is given a carte blanche on access to taxpayer’s money, we can expect more abuse. Providing even more latitude to the likes of Goldman Sacks to become banks, is simply a knee-jerk reactive agreement to further consolidation of power.

Congress is not stepping up to the plate and neither are the two Presidential Candidates who are too busy flailing on the stump. If this is really the calamity we are all being led to fear, then all should be in Washington, coming up with immediate solutions. Bailouts are not solutions, just like band-aids are not a cure.

Don’t believe the panic-button pushers. Panic misleads, and it blinds those led to panic from seeing reality, or discerning appropriate action. Panic also leads to extreme swinging of pendulums that create new problems rather than resolve old ones.

It remains that America is a country that billions of people wish they could live in. America is the country that people have confidence in and whose environments they wish could be replicated. Its environment stimulates the entrepreneurial spirit that is further fueled by its creativity. It is also the only country that all capital gravitates toward when it is seeking security. The economic fluctuations, even those such as the ones we are currently witnessing or getting hurt by, caused by abuse or bad management, or even from errors in judgment, are risks accepted by those whose cash is seeking safe harbor. Transparency is one aspect favoring foreign investments in America, however, it is not the principal one. The overriding element is America’s power and international presence.

Whether you are a dictator in Africa, or an oil monarch pillaging your country’s wealth, or a foreign government fund, you will always place a significant portion of your cash where it is safe. America will print more dollars because it can, and it will have a market for them. The doomsayers all make money somehow, somewhere in the game, or just repeat nonsense they’re been fed. There are also those who feint left, then go right. Remember Goldman Sachs’ forecast that oil was heading to $200 a barrel when it was kissing $150? The price immediately caved in following their announcement. Were they looking for fish onto which to dispose of positions? This is no time to panic. Tighten up the belt a little, and save a few dollars. Middle America will ride this out in spite of its Wall Street leaders. However, American taxpayers should make sure their representatives in Washington take action on oversight, and implement some visible house cleaning, punishment on those responsible for the outlandish abuse.

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