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Posts Tagged ‘auto bail out’

A relatively minor program captured the headlines over this past week end and promises to continue to arouse partisan political passion through this week until the final disposition of the ” cash for clunkers ” program is determined.  The White House is very much in favor of continuing the program which has burned through the initial one billion dollars that was allocated to the automobile purchasing stimulus.

The program provides for a $4,500. trade in on older automobiles. The program was so well received by consumers that the program quickly ran out of money. Last week the House quickly approved an additional two billion dollars for the program and the Senate is debating the issue this week prior to the beginning of the August recess.

With an economy in recession and the majority of voters  deciding  that the stimulus plan provided by Barack Obama under the guise of  the American Recovery Act has been a dismal failure,  it is no wonder that the White House is promoting the “success” of “cash for clunkers”. It is most likely the Senate will pass an appropriation to continue this program since the auto industry is a Government preferred industry as demonstrated by the bail outs provided by both the Bush and Obama administrations.

Ceo4aday believes that programs that stimulate the purchase of durable goods are welcome and truly provide a stimulus to the economy but do not believe they should be discriminatory. We have long advocated a program that is not discriminatory that would put dollars in the hands of consumers through a federal voucher with an expiration date that would expire within a specific period of time. The program  would consist of a spend it or lose it clause and the monies distributed to tax payers should be allocated on a proportionate basis per actual taxes paid.

Funds from the American Recovery Act could be reallocated from their current entitlement and union subsidization program to fund real stimulus. Under this plan all tax payers would receive in effect a rebate on prior taxes paid which would provide an economic stimulus across all sectors of the economy as opposed to being sector specific like “cash for clunkers”. It would also be class inclusive as opposed to previous attempts at consumer stimulus that omit those at the top rungs of the economy.

We recognize that the likelihood of reallocating funds from the American Recovery Act and converting them to real stimulus dollars is unlikely. The Obama administration and the members of Congress that rushed through this partisan $787 Billion bill during the first weeks of the new progressive administration would be reluctant to alter its current structure in any way that would divert funds away from the numerous liberal programs that were included in the bill to satisfy the various special interest groups of the left.

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We are fascinated by the alleged strong arm tactics the Obama administration allegedly introduced into their negotiations with senior debt holders of the Chrysler Corporation. A representative of the administration, car czar Steve Rattner, allegedly threatened an official representing Chrysler creditors. As reported on Fox news, Thomas Lauria, an attorney at White & Case, one of  this nation’s most prestigious law firms, Rattner suggested to an official of Perella Weinberg Partners, an investment bank, that the Obama administration would destroy the firms reputation through the press, if it failed to comply with the administrations wishes.

The Obama administration has denied the allegations by Lauria. Ceo4adayfinds the allegation by Mister Lauria, to be credible based on our belief, that the arrogance of this President and his administration may be unmatched in the history of our nation. We do not believe that the Global Practice Head of the Financial Restructuring and Insolvency Group at White & Case, with 130 lawyers in 20 nations reporting to him, would jeopardize his reputation or the reputation of one of the world’s premier law firms by lying or misrepresenting the event as reported.

The Obama administration has a singular goal with respect to the Chrysler bankruptcy. Their goal is to protect and where possible expand the interest of the United Auto Workers. The UAW, represents the largest special interest group in America, labor unions, which peeked in the 1950’s, when 36% of Americans were union members and have been declining as a percentage of our national labor force to approximately 10% toda .  However, the influence the labor unions have purchased with Barack Obama and the Democrat party, rather than decline, has expanded at a disproportionate ratio. The alliance between the progressive left and labor has formed the nucleus which funded the Obama campaign and provided the agenda for the inexperienced Barack Obama.

The Obama administration is intent upon restoring the American labor movement to the place of prominence it held in its golden era. Barack Obama in the past week indicated that the loss of manufacturing jobs in this country would not be an issue if WalMart would pay employees $25 per hour. A mission no doubt that he will continue to work toward in conjuction with his union supporters.

We should not be surprised by the allegation of  threats by the Obama administration to further their agenda. The administration since the inauguration has been focused on control. We have a President, who though he states he does not want to run the auto companies or the banks, relishes the role of shareholder in chief as he seeks to transform the auto industry to green favored electric cars produced by union owned companies.

The tactics deployed by the Obama administration in their desire to protect the UAW are nothing less than the execution of an administration agenda that equates to progressive fascism wrapped in the pageantry of the Presidency.

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Barack Obama, his administration and the Democrat party were celebrating the numerous events of the first 100 days of the Obama administration this past week, while a long suferring remnant of America’s former industrial dominance was rushed into a chapter eleven bankruptcy from which it may or may not emerge. The decision by Chrysler to seek the protection of  Bankruptcy was heralded by Barack Obama and members of his administration.

Obama, as has been his inclination since his ascendancy to the American throne was to take full credit for orchestrating Chrysler’s decision to seek chapter eleven protection when the greedy capitalist bond holders failed to accept the terms that the federal government had outlined. The government elected to protect the United Auto Workers union while shafting the capitalist ventures that invested in Chrysler’s debt and are in fact the first lien holders of the corporation.

It certainly is not a surprise that the Obama administration chose to protect the union over any corporate bondholders. The UAW after all represents the favorite special interest of the Democrat party and a group that played a significant role in supporting the candidacy and subsequent election of our teleprompter President.

It is telling that in Obama’s remarks to the nation regarding Chrysler’s decision he stated that  ” Bankruptcy is not a sign of weakness “. There are few in American business that would agree with the President. If Bankruptcy were not a sign of weakness and would provide the cure all the company needed then why didn’t the Obama administration push Chrysler toward chapter eleven several weeks ago as oposed to providing a federal bail out.

Obama’s remarks regarding the bondholders and the obvious disdain with which he holds for them is an indication of the lack of free enterprise and capitalist grounding the this President possesses. For lack of a better term the President is a socialist with a progressive Eurotopian agenda that  in the first 100 days of his administration has delivered a clear message to business. American corporations must change by lessening their focus on the attainment of grater profits so that they may focus on the greater societal good. Corporations by their nature are not benevolent organizations. Barack Obama and his progressive supporters aspire to change that axiom. The bankruptcy of Chrysler and the protection of the UAW is another notch in this administrations belt toward weakening the corporate infrastructure in America.

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If one listens closely you can hear the trees falling in the dense, dark economic forest that we as a nation, are currently wandering aimlessly through, as we search for a path that will lead us to the light of economic recovery. We have arrived at our current location on our national economic journey as a result of a well documented series of implosions in the financial infrastructure that provides the frame for our economic portrait.

Events, such as the sub prime mortgage crisis, a commodity spiral that led to oil peaking at $147 per barrel, the collapse of the stock market, a bank and auto industry bail out from TARP funds and now the American Recovery and Investment Plan of 2009, are all evidence of the decline of the most productive economy in the world.

Cumulatively, the aforementioned seem to many to have created insurmountable hurdles of economic distress. The case is being made by a variety of economic pundits that America as we have experienced it is going through a transformational change in which standards of living will permanently decline. That in fact the aspirations of Americans will decline.

Americans are looking to the Federal government increasingly for leadership and resolution to this economic and cultural crisis. What our political leadership has provided in the form of President Barack Obama and his administration is an endless stream of rhetoric that serves to heighten consumer fears about the depth and length of the current recession. While Barack Obama’s rhetoric may have spurred a Democrat controlled Congress to pass a partisan spending bill, it has alienated wall street and undermined the confidence of a nation. A nation, which has prospered and developed on the backs of our cumulative aspirations, generation upon generation.

 Is our leadership today, so arrogant, that they would transform our individual aspirations and desires to achieve the “American Dream” into a collective nightmare. As the current administration extends their platform of economic fear we must look beyond the lowered expectations provided by the White House and maintain our individual aspirations for our national psyche.

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A year in which many investors have had frigid returns well below zero is not warming up as we approach the finish line in a historical year in the markets, in which volatility was one of the few constants. The long awaited Santa Claus rally in the stock market appears to be in a deep freeze in the North Pole. The markets fell for the fifth straight day today as the onslaught of negative economic data continued.

Investors have been traumatized this year by economic events which have included bail outs for financial institutions and the auto industry, a market crash that saw market caps of many companies drop by half and some as much as 80% or more  and a global recession that shows no immediate signs of recovery. Despite the aforementioned investors should take comfort in the unprecedented actions by the Fed and the support of both Congress and the White House to provide an economic stimulus to this ailing economy.

Unless Santa elects to steer his sleigh to Wall Street on an abbreviated trading day tomorrow, it looks like it is time to turn our focus toward a year end rally in the few days remaining in 2008. Does anyone hear bells?

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The price of a barrel of crude oil fell below $37 today. Despite the OPEC decision on Wednesday to further reduce oil output by 2.2 million barrels per day, oil has tumbled to a level not seen in nearly 5 years. It was only a few short months ago, that speculators triggered a run on the oil market, that drove the price of a barrel to nearly $150 and generated gasoline prices well in excess, of $4 per gallon, in most areas of the country.

The ripple effect of these extraordinary fuel costs were resounding and ripped through the economy, shredding transportation budgets at corporations and swallowing big gulps of discretionary income from consumers. SUV’s and other gas guzzlers were garaged, sold at significantly reduced prices or were parked in dealers lots collecting dust. Politicians promised numerous solutions via alternative energies, while smart cars and hybrids became more visible on our roads and highways. 

The effect on the auto industry has been devastating. The spike in a barrel of crude oil and a gallon of gas gave way to continued erosion in the housing market and pending implosions in the financial markets, as well as a crash in the stock market. Most Americans that own assets have seen a significant decline in asset valuations during the economic realignment of 2008.

The bright light for consumers and corporations is the rapid decline experienced in fuel costs over the past several weeks. The irony of course is that as fuel costs have declined an inverse relationship has existed in the auto industry which has General Motors and Chrysler Corporation teetering on the brink of a possible government organized bankruptcy. Now we can fill up our tanks at less than half of what it cost over the summer. It is likely however, that in the future,  the tank we are filling may not be in a vehicle manufactured by one of the Big 3 auto makers.

Last week, when the Senate failed to support a bill to provide bridge financing to the auto makers the White House indicated that they would step in and save the day. The presumption being that TARP funds would be made available to assist the auto industry with some short term cash needs, until the new administration, along with the aid of  Congress,  would provide longer term support for this ailing industry.

Now we are hearing the word bankruptcy from the President in reference to the auto industry dilemma. Even an orderly bankruptcy has the potential to generate an ugly chaotic effect on the economy. At this time, the White House needs to drive a decision to either support an auto bail out with TARP funds or crawl to the curb while these former bastions of American enterprise reorganize under bankruptcy and the American economy is dealt another blow.

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