Rolling US Economy Into The Shitbin Thread

Naomi Klein in the The Nation:

In a moment of high panic in late September, the US Treasury unilaterally pushed through a radical change in how bank mergers are taxed--a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140 billion in tax revenue, lawmakers found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that "Treasury had no authority to issue the [tax change] notice." http://www.thenation.com/doc/20081201/klein

Of equally dubious legality are the equity deals Treasury has negotiated with many of the country's banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals, "Any use of these funds for any purpose other than lending--for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc.--is a violation of the act." Yet this is exactly how the funds are being used.

Then there is the nearly $2 trillion the Federal Reserve has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg News believes that this secrecy violates the law and has filed a federal suit demanding full disclosure.

Despite all of this potential lawlessness, the Democrats are either openly defending the administration or refusing to intervene. "There is only one president at a time," we hear from Barack Obama. That's true. But every sweetheart deal the lame-duck Bush administration makes threatens to hobble Obama's ability to make good on his promise of change. To cite just one example, that $140 billion in missing tax revenue is almost the same sum as Obama's renewable energy program. Obama owes it to the people who elected him to call this what it is: an attempt to undermine the electoral process by stealth.

"The Street" would cheer a Summers appointment for exactly the same reason the rest of us should fear it: because traders will assume that Summers, champion of financial deregulation under Clinton, will offer a transition from Henry Paulson so smooth we will barely know it happened. Someone like FDIC chair Sheila Bair, on the other hand, would spark fear on the Street--for all the right reasons.

I LOLed:

http://www.ritholtz.com/blog/wp-content/uploads/2008/11/24b6gt2.jpg

i agree w/toms skepticism as to his foreign policy chops - its not like china is holding our paper just to be friendly

― ice cr?m, Sunday, November 16, 2008 11:56 AM (1 hour ago) Bookmark Suggest Ban Permalink

that was roubini's point, not toms

― _/(o_o)/¯ (deej), Sunday, November 16, 2008 2:42 PM (3 hours ago) Bookmark Suggest Ban Permalink

i didnt watch the video but i assumed from peoples responses and correct me if im wrong here that roubini was suggesting china could use our debt as leverage in whatever various little tensions there are between our countries - point is this bullshit cause china buys our debt in order to manipulate the exchange rate and export things to us - so china isnt in any sort of position to threaten to cash out or whatever

http://blog.mint.com/blog/finance-core/a-visual-guide-to-the-financial-crisis/

^^^ does thia make sense?

and that particular example of trading debt for taiwan that tom was reacting to is beyond absurd

selfxp

doesnt that depend on us continuing to buy things

http://dealbook.blogs.nytimes.com/2008/11/17/our-risk-wall-streets-reward/

Money quote:

"Since compensation has historically consumed half or more of every dollar of revenue generated on Wall Street — what other business even comes close?"

Holy shit.

if we cant buy things then obv everyone just packs up goes home and starves to death - the chance of that happening w/o the assistance of some physical cataclysm is 0%

ok let me rephrase - it requires us to continue to buy things out of proportion to our percentage of the population worldwide

we may be in a tight spot right now but relative to the rest of the world yes were still some rich ass consumer goods loving motherfuckers - i dont see that changing anytime soon

lol

how did Dilbert turn out to be the one comic that doesn't suck anymore?

it's a refreshing oasis of consistent lols in the pages of the old tenured dinosaurs and unfunny Calvin & Hobbes ripoff upstarts

so who else thinks a post-General Motors era sounds kinda cool?

yeah, i don't know. i'm sympathetic to all of the reasons the big 3 should be made to pay for their sins. but i also sort of distrust the punitive instinct when it comes to entire industries, because industrial collapse is ugly and painful. i grew up in the rust belt, when things go bad it is not necessarily just a short-term "shaking out" that goes on. for a lot of people they can get bad and just stay bad. even if all govt. assistance does is make the decline a little more gradual, it might be worth it. shock therapy is philosophically attractive but i'm not sure it's actually a good idea.

shock therapy at this point would be disastrous for the country - losing a million jobs just from the auto companies then the ripple effect of bankrupt dependent businesses and all the associated long term fallout that losing our heavy manufacturing sector would produce

i am completely sympathetic to the view that the american auto industry has just sucked management wise for a long time - which is why im liking some of the creative restructuring thoughts ive heard floating around - sort of a chapter 11 for a situation where chapter 11 wont work - allow some creative destruction w/o completely wiping out the rust belt economy to do it

ay im sort of unhappy w/ my present job situation--should i submit my cv to the bailout ppl and see if theyll let me be the GM ceo?

worth a shot max! worth a shot!

i hope the Big O realizes just how much power he really has - how deeply and fully he has got the financial system and the auto industry over a barrel. govt won't have this kind of negotiating power for another generation, if then

too a lot of companies bottom lines could depending on the nature of the program immediately look a lot better upon the passage national health care

lol except health insurance companies amirite

haha yah were gonna fuck them so hard theyre gonna need surgery

this was a good comparison with the british experience of a nationalised auto industry

http://www.nytimes.com/2008/11/18/business/economy/18car.html?ref=business

Healthcare is part of the solution. I think chapter-11 and rescuing what is effective, possibly with government money is better than a wholesale bailout.

chapter 11 cause of the current economic landscape and the nature of the auto business would prob quickly turn into chapter 9

some sort of restructuring is def necessary tho

That's why I'm saying they should get some money but really they should be in a position to restructure radically before they do. Nothing off the table.

yah its actually a great opportunity of the american auto industry to be reborn as a viable business sector

I'm loving hearing that it's all the unions' fault.

America really sucks sometimes, doesn't it?

http://1.bp.blogspot.com/_djgssszshgM/SR652xnt46I/AAAAAAAAAqs/7qEUg8GmJis/s1600-h/big3a.jpg

not sure why that didn't work.

to wit:

http://1.bp.blogspot.com/_djgssszshgM/SR652xnt46I/AAAAAAAAAqs/7qEUg8GmJis/s1600-h/big3a.jpg

How scandalous that our expert fabricators are well paid.

the scandal is the way that management cries about compensation when they don't have the balls to confront the unions. As if they didn't sign the contracts, too.

your graph has convinced me

xxpost What is that an argument for or against?

the graph, I meant

As if they didn't sign the contracts, too.

Yep. It's almost as if they expected their product ranges to garner large profits that would be shared generously with the employees who make them!

If people are going to blame labor unions for the auto industry's problems, they should also take up torches and pitchforks and go after homeowners who defaulted on their mortgages. The responsibility seems about the same.

oh this thread is about to go places I can tell

The point of the graph is that the American car makers are paying 40% more in compensation than the Japanese car makers--and this compensation is in America, not overseas. That is largely due to legacy costs.

see also
http://mjperry.blogspot.com/2008/11/cancer-on-big-three-29hr-pay-gap.html

The bigger issue is the way that the Big Three have ridden their corporate culture (both from a management and labor perspective) into a wall. The system needs an enema. I'd need some examples of radical systemic change in another industry before I'd believe that any one of the Big Three could do it, let alone trust them with billions.

The system needs an enema.

http://www.reelmovienews.com/wp-content/uploads/2007/11/z4374466o.jpg

The US car industry has a choice of radical systemic change or ceasing to exist. The UK comparison bears a lot of looking at. The UK now has some of the most efficient and productive car plants in the world, owned by the Japanese.

Who made up the term "legacy costs"? It can't be an accident that it sounds immediately like something outdated that should be cut from the budget. "Legacy benefits" would at least convey how they are both an asset and a liability, albeit to different people.

If the only way the Big Three can survive is by breaking promises they made to the people who actually create their products then they DESERVE to fail! wait, shit

this seems like a fairly coherent case for a big-3 bailout, including recognition of how much has already changed or started to.

nb "create" as a verb puts a bit more onus on the laborer than I think you want. "We tried to make things that weren't ugly and huge, but the workers refused!"

xpost They deserve to fail for a lot of reasons, but the fact that they have made huge investments in the welfare of their workforce is not one of them.

I'm kinda thinking any and all bailouts right now are really just going to pay for one generation's retirement. It would appear that any business that isn't about raw materials, information technology, or service is impossible to run in this country and break even. If the Volt is worth saving, somebody will save it. If the Ford F-series is worth saving, and so on and so on. I'm not interested in this turnaround taking a decade. Fuck them.

xpost apparently, the computer industry made it up Kenan
http://en.wikipedia.org/wiki/Legacy_costs

they deserve to fail because they made BAD investments in so many arenas.

"starting to change" isn't a vote of confidence to bankroll a systemic problem. There's no real evidence that the systemic problems have inertia to change.

I'm not interested in the union arguments, because they don't hold any water with a reasonable person. I repeat: "We tried to make things that weren't ugly and huge, but the workers refused!" This statement is absurd.

Car jobs were, thanks to ford, the very epitome of what a skilled manufacturing job should be like, secure in work and retirement, good healthcare etc. That all seems to be a blip, an abbaration, thanks to the US (and before that the UK's) failure to produce cars that people want at a price people want and the failure of Unions and the wider left to come up with a response to globalisation that doesn't try and ape King Canute and now it has come to the stage where only radical surgery can save the big three, become the companies they should have evolved into over 20 years in 1 and it is going to be the workforce that suffers. there doesn't seem to be another way. just pumping money in to keep things as they are just delays the inevitable.

It's guaranteed that a bailout would still result in plants closing and people being laid off, losing benefits, etc. while management stays in place (they did a good job, because they were able to wrangle a bailout)! Not bailing them out means that management and its attendant institutionalized incompetence gets appropriately defenestrated.

OTM.

Industries come and go. The American car industry, as imagined from the 1900s to the 1970s, is in decline. There simply isn't any good evidence that I'm aware of--someone please give me an example--of an industry that was able to radically change (while in a decline) and prosper/innovate its way back to glory. Paying lip service to radical change when your competitors are KICKING YOUR ASS ON EVERY METRIC isn't good enough. You cannot radically change corporate culture that is so ingrained. It doesn't happen.