Does Obama’s bullying of investors portend real problems for the US?
Johnathan Pearce (London) Globalization/economics • North American affairs
I have not written about the subject of the Chrysler bailout so far since, not being close to the action in the US, I did not feel I had much to say that was not already voiced by the US blogs. But it does occur to me that there is a general problem right now in the way that the US administration – and arguably the UK one as well – has been acting in respect of bailouts of certain industries, such as carmakers as well as banks. What do I mean? Well, this report (H/T: Instapundit) suggests there is real fear about the “Nixonian” tactics employed by Mr Obama’s administration against bond-holders who have been angered by the expropriation of their capital via the Chrysler bailout.
For those who have not been following this story, bond-holders have been pushed to the back of the queue, as far as potential recovery of capital is concerned, with the auto union membership getting preferential treatment. Maybe Mr Obama figures that investors can be rained on right now because it is more important to get the votes and support of traditionally Democrat-leaning car workers. With mid-term Congressional elections a couple of years away, he will have his sly, Chicago machine-politics mind working out how to garner important support in the event that the US economy is still sluggish by that time. But pissing off investors – such as, let it be noted, pension funds – is not smart. The US requires large amounts of capital for any economic recovery that may take place. Ask yourself one of the most basic questions any investor should ask: can I get my money back if I need to? If the answer is no or only maybe, and if there is the threat of governments robbing investors, then less investment occurs. The problems of such behaviour explain why, for example, Africa has been such a bad investment bet for so many years.
It is an ugly business. Part of the trouble with the automakers is that even if they had been put into a Chapter 11 bankruptcy process, with the banks and bondholders put on a more even footing for any recovery of assets, there is still the issue of what to do about the enormous unfunded pension obligations that these heavy industrial companies have. It is the same with airlines and steel. I have heard it said of British Airways – to take a UK example – that is is a pension scheme that happens to have a lot of aircraft. The pension tail can wag the corporate dog. And that is a hideous issue to deal with against the background of an ageing population. So in fairness to US policymakers, running down Chrysler involves dealing with a lot of tricky contractual issues.
Even so, it strikes me that the Obama administration is showing a level of political ruthlessness and “bugger-the-investor” attitude that is hardly going to endear people towards investing in that economy. My fear is that Mr Obama is making the cynical calculation that memories will fade; after all, how many investors in the UK remember how the Blair government, in the form of the charmless Stephen Byers, the-then industry minister, shafted investors in Railtrack?
Like I said, an ugly business.
Still, the North Carolina Democrat said he realized that tracking so much money will be difficult, acknowledging that “we’re trying to spend $500 billion quickly.”
Mr. Devaney, though, said his board – made up of 10 IGs – has a dual mission: “First, the board is responsible for establishing and maintaining a Web site.” Oh, and second, it’s supposed to “help minimize fraud, waste or mismanagement.”
Corrected paragraph: While Mr. Miller and the panel’s top Republican were there, only Rep. Kathy Dahlkemper, Pennsylvania Democrats, came to the hearing. Absent were Democratic Reps. Steven R. Rothman of New Jersey, Lincoln Davis of Tennessee, Charles A. Wilson of Ohio, Alan Grayson of Florida and Bart Gordon of Tennessee. Republican Rep. Ralph M. Hall of Texas also skipped the session, while Rep. Brian P. Bilbray of California dropped by for the final hour of the nearly three-hour hearing.
Still, to a sparse crowd, Mr. Miller got right to the point. “President Obama promised a level of transparency, through the Internet, Recovery.gov. … How do you intend to provide that level of transparency, to see how – who actually got the contract to pour asphalt?”
“As I mentioned in my testimony,” Mr. Devaney said, “that Web site is evolving. … I would probably be the first to admit today the Web site doesn’t give you that kind of information.”
Dear government, if money isn’t that important to you, then pay my school debts for me. Thanks. Signed, a taxpayer.
The honest truth of the government’s approach to the Constitution
What’s interesting is that a good majority of the people involved in the Chrysler dispute, including the lawyers, VOTED for Obama
To hell with the Constitution, the rule of law, the integrity of contracts and any other written limitation on their power – they will do anything they can get away with. Which means that we are all at risk, and the only reason some of us haven’t been targeted is that Obama simply hasn’t turned his attention to that particular sector yet. But he will – it’s only a matter of time.
Two, the moment anybody gets in the way of their grandiose communist plans, the Obama Administration’s first instinctive reaction is to threaten people with personal destruction. This suggests both a childishness – throwing a temper tantrum the moment it seems their object of desire might be put beyond their reach – and an evil large in scope.
When you stoop that low right out of the gate, the extremity of it indicates a total lack of conscience. Just ask Robert Bork, Clarence Thomas and Sarah Palin how it feels to be so instantly targeted by the left for annihilation. And the haste of it portends an intention to go much farther than that one area – hence the need to get it over with quickly, so as to proceed to the next victim.
Third, the fact that the Obama Administration would so confidently wield the press as a weapon indicates that they aren’t merely vomit-inducing in shoving their tongues up his teleprompter-dependent bunghole in blind worship. The media, by the White House’s own de facto admission in having issued this threat, will not only refuse to report and thus cover up the malicious misdeeds of their “messiah,” it will happily and obediently destroy his enemies upon his marching orders. They are, in essence, his club-wielding goon squad. (Whereas a Republican president so threatening people would result in screaming for impeachment and ululating echoing through newsrooms as they wrote veritable fatwas of jihad against him.)
That sound you hear is Thomas Jefferson rolling over in his grave, as the two entities he presumed to be natural antagonists – the press and government – join forces to trash the founding documents and the nation he helped create.
Just what country and time are we living in? The United States of 2009, or Stalin’s Soviet Union of the 1930s?
FIRST, there is news that the Treasury Department REFUSES to keep tabs on how money is being spent:
It is safe to assume, however, that the investigations now in progress represent not even the tip of the iceberg. The most troubling feature of the SIG’s report is its documentation of reluctance on the part of Tim Geithner’s Treasury Department to make even modest efforts to protect the interests of the taxpayers. To take just one glaring example, Treasury has refused to require banks to account for what they do with the billions of dollars they receive in TARP money:
Treasury has indicated, however, that it will not adopt SIGTARP’s recommendation that all TARP recipients be required to do the following:
• account for the use of TARP funds
• set up internal controls to comply with such accounting
• report periodically to Treasury on the results, with appropriate sworn certifications
In light of the fact that the American taxpayer has been asked to fund this extraordinary effort to stabilize the financial system, it is not unreasonable that the public be told how those funds have been used by TARP recipients. Treasury is now conducting regular surveys of the banks’ lending activities; however, with the exception of Citigroup and Bank of America, Treasury has refused to seek further details on TARP recipients’ use of funds.
Not just failed, but “refused.” The report adds:
The American people have a right to know how their tax dollars are being used, particularly as billions of dollars are going to institutions for which banking is certainly not part of the institution’s core business and may be little more than a way to gain access to the low-cost capital provided under TARP.
Barack Obama’s hundred days have not gone as badly as Napoleon’s. In money terms, however, they have been considerably more expensive. Since his inauguration on January 20, 2009, President Obama has proposed new spending programs that will add over the next 10 years $6.5-trillion (all figures U.S.) to the American national debt. That’s $6.5-trillion over and above the debt that would have been incurred had the existing policies been left alone. (Not that those existing policies were so great either.)
That’s $65-billion in new debt every single day of the first 100. Expensive.
And this figure is surely too low, because it is based on (1) almost certainly unduly optimistic assumptions about the growth of the U.S. economy over the next few years and (2) unduly optimistic assumptions about the costs of President Obama’s health-care ideas.
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