tag:blogger.com,1999:blog-1174301114218706899.post8079959215934322889..comments2023-05-28T11:33:45.579-04:00Comments on Who Will Lead?: Bailouts and Bankruptcies: What’s the Right Thing to Do?Who Will Lead?http://www.blogger.com/profile/03743247788371223606noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-1174301114218706899.post-35869908258990461262012-03-01T11:11:05.133-05:002012-03-01T11:11:05.133-05:00Bryan Baquer • It was surely NOT leadership! When ...Bryan Baquer • It was surely NOT leadership! When you have an individual under your command that is not meeting the standard, do we lower the standard or provide that individual a crutch? When providing the crutch, does that make the individual stronger and the unit stronger? I don't care to debate the quality of the American automobile industry. The issue is can ANY business/company provide a product or service that the public deems of value, and be responsible enough to meet their financial obligations? In the case of the auto industry, having the HUGE overhang of UAW obligations made the Big 3 uncompetitive. Why would it then be "reasonable" to (break the law, bend the law, disregard the law...take your pick), and re-direct the assets (the perceived value of the company) from the rightful owners, i.e.bondholders, and others that legally put their financial capital at risk (assuming that established securities and bankruptcy rules would apply), and give them as a gift, wrapped with a bow to the UAW? I guess it is because the UAW has such a terrific track record of managing the contributions (dues) of their members for their members health and retirement benefits. We are not creating a stronger country by continuing to lower standards and failing to require businesses and individuals to be strong enough to support themselves, ....without a crutch. We have a systemic problem. We need a leader that RECOGNIZES this problem first, before we can begin to formulate long and short term solutions.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-69588157029288600012012-02-29T15:00:04.345-05:002012-02-29T15:00:04.345-05:00@joseph, if California threatens to default on its...@joseph, if California threatens to default on its bonds, the US will bail them out. 30 years ago, the US Government bailed out NYC. Of course, NY committed to an austerity budget to which it adhered and paid back the US loan ahead of schedule. I don't see CA going on the austerity budget.Anonymoushttps://www.blogger.com/profile/06450950497954468546noreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-68944533221291251802012-02-29T14:59:31.585-05:002012-02-29T14:59:31.585-05:00Joseph Fatula • @John Thank you. The idea of "...Joseph Fatula • @John Thank you. The idea of "too big to fail" is also a subject in and of itself. It's a good argument for special regulations involving big institutions (not just business). Regulate, not over-regulate. <br />. <br />To digress a bit. With all due respect to those who live in California. This concept also applies to governments. Especially those that promise too much. CA's unfunded liabilties are reporteldy some huge figure which is some multiple of yearly state tax revenue. <br />. <br />For a while there was talk of having the US bail out California. Just fund the unfunded liabilities and add them to the national debt. Fortunately such talk didn't last (IMO) and now CA is claiming a small victory because their economy is slowly recovering and their latest deficit is less than expected.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-38521563000861560922012-02-29T10:56:38.778-05:002012-02-29T10:56:38.778-05:00Joseph, I recommend Andrew Ross Sorkin's book,...Joseph, I recommend Andrew Ross Sorkin's book, Too Big to Fail, (which I haven't read) or the HBO Movie by the same name (which I have seen). I have heard many commentators including some of the principals express their admiration for the accuracy of the account.Anonymoushttps://www.blogger.com/profile/06450950497954468546noreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-82448871658213794662012-02-29T10:55:52.335-05:002012-02-29T10:55:52.335-05:00Joseph Fatula • @John When Lehman went I'm not...Joseph Fatula • @John When Lehman went I'm not sure I understand exactly but they dragged others down with them. To some extent Freddie and Fannie. F&F had no one else to re-sell their securitized mortgages to perhaps. <br />. <br />Fair disclsoure: I'm a Republican--but for political and doctrinaire reasons most of them have philosophically turned seemingly against *** all *** bail-outs. Even when some may have supported bailouts in the past. <br />. <br />They blamed Bush for TARP for example. Very likely McCain too. McCain was leading until he decided to do what I thought was a statesmanlike thing and go to Washington to help. He suspended his campaign. When the house is on fire--it's all hands on deck. That's my philosophy. <br />. <br />Paulson and Bernanke went to Bush and pleaded for TARP. My question to my Republican friends was: "What would you have done?" Despite criticism leveled at both they are undeniably financial experts. Bush had some familiarity but of course lacked that expertise. I would have given them TARP. Many of my Republican friends would not have (more precisely most.) <br />. <br />Monday Morning Quarterbacking--some now say TARP was not needed. That's like saying why did you put that house fire out--it wouldn't have burned down the entire neighborhood. However--that's one reason we put fires out--the risk is *** always *** there.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-77942719189005451642012-02-29T06:05:37.350-05:002012-02-29T06:05:37.350-05:00John Calia • Joseph, I agree with your assertion t...John Calia • Joseph, I agree with your assertion that the government can do what it likes in most cases. They can always say, "so sue me". Lehman appears, in retrospect, to be the first domino; however, there was lots going on at the time -- not least of which were the failures of AIG and Fannie Mae. Imagine what might have happened had the government not stepped in to prevent those failuresAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-64779091430901013852012-02-29T06:05:09.890-05:002012-02-29T06:05:09.890-05:00Joseph Fatula • In retrospect the one bailout whic...Joseph Fatula • In retrospect the one bailout which was *** not *** done but IMO probably should have been done was Lehman. They should have kept it on life support and wound it down in an orderly fashion. If the economy ever recovers from Lehman Brothers it will be a very long time. It might not ever recover. After Lehman went everything changed. It was like a heart attack to the financial services industry. <br />. <br />I know Bernanke said they did not have the legal authority to do so but the could have tried obtaining it. BTW--since when does legalities stop the government from doing some things. I digress but look at this ruling against church-related organizations that they must pay for morally objectionable products and services if they offer their employees health insurance.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-4840070384589423762012-02-29T06:04:48.048-05:002012-02-29T06:04:48.048-05:00Joe Van Steen • It seems to me that there is an un...Joe Van Steen • It seems to me that there is an unrecognized and unaccounted for interdependence between the "societies" in which these mega-corporations operate, and the corporations. This is especially true "at scale." Allowing a small enterprise that operates in a major city to go bankrupt creates no great social issues outside the business (including employees, owners, creditors and customers). The labor market is not significantly impacted and other job opportunities are likely nearby (a relative term). The "owners" and "creditors" pay the price in loss of capital - which was a function of the risk involved in the investment. The customer needs to find another (more costly? less convenient?) place to acquire the product. But socially, the society in which the business operates is not itself threatened. <br /><br />Acting as though this equation between the company and society does not change as "scale" comes into play is nonsense. In fact, it's beyond nonsense. It's stupidity to think that a society should allow the level of massive disruption that can ensure from some of these failures and just sit by idle. The only thing dumber would have been to do just what we did - at least in the case of the banks. Bail them out, and then NOT do what we should have done in terms of regulation to ensure we won't have to do it again.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-75754707444733540862012-02-29T06:00:11.953-05:002012-02-29T06:00:11.953-05:00Robert, thanks for your comments. You take a pragm...Robert, thanks for your comments. You take a pragmatic rather than dogmatic view which I support. <br /><br />As for JD Powers: what the mainstream media do not report is the method of determining the number of defects. The NY Times article to which you refer, published in October, was about the survey of new car owners. Owners reporting the number of defects include in their reporting those features that are merely disfunctional. So, Ford dropped 10 spots because they introduced new electronics not because something didn't work. In this example, they report defects in design not reliability. The 3 year survey, on the other hand, looks at reliability.Anonymoushttps://www.blogger.com/profile/06450950497954468546noreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-41495848251900584392012-02-29T05:59:48.725-05:002012-02-29T05:59:48.725-05:00Robert Prodoehl • John, I thoroughly enjoy reading...Robert Prodoehl • John, I thoroughly enjoy reading your posts and always look forward to your next entry.<br />With respect to auto reliability, as with any topic, the source of your information can really sway your opinion. Although the JD Powers article supports your view that the domestic automakers are as good as the competition, the same JD Powers article had a link to the NY Times of October 25. 2011 with a very different headline: “Japanese Brands Dominate Consumer Reports Reliability Survey, While Ford Falls 10 Spots.” The lead paragraph of the story: “Taking the top nine spots in the magazine’s Annual Auto Reliability Survey, released on Tuesday afternoon, were Toyota’s youth-oriented Scion brand, which led the pack, followed by Lexus, Acura, Mazda, Honda, Toyota, Infiniti, Subaru and Nissan. Of the 91 Japanese models for which Consumer Reports had sufficient data, 96 percent received ratings of Average or Much Better than Average in predicted reliability. Ford, meanwhile, dropped 10 spots from last year, from its 10th place ranking to No. 20 out of 28 brands.”<br />But that’s not the true focus of your comment today, so I’ll change gears. I truly believe that the government made the right decision with the information at hand and without the luxury of hindsight. The economy was in steep decline, Wall Street was collapsing…or so we believed…unemployment was skyrocketing, and the last thing the country could withstand was the loss of hundreds of thousands of more jobs directly or indirectly tied to the manufacturing of American automobiles. The Big 3 had to remain standing at the end of the day! It was right and justified, if for no other reason than to save all of those jobs…which in turn staved off a potential doubling of the unemployment rate and an economy spiraling out of control. It’s not the nature of the industry that matters to me…it is the sheer number of jobs tied to that industry. (A topic for one of your future blogs…why do we continue to support the tobacco industry in this country? We know the toll it takes in health and human life…and yet the industry continues to flourish …because of the JOBS it provides…) <br />Although I happen to think that the bankruptcy process would have yielded an even stronger GM, I also believe that a long bankruptcy proceeding would have further damaged the economy and would have left us in a much deeper hole from which to dig. The bailout was the only option available if the goal was to keep them from sinking and pulling the rest of us down with them. Restructuring existing labor contracts would have been nice, but I think that would have protracted the process as well. So, as Bob pointed out, count me among those who believe that the end justified the means…at least in this case.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-64289277279542753942012-02-28T16:49:08.176-05:002012-02-28T16:49:08.176-05:00Joseph Fatula • I'm going to stake out the mid...Joseph Fatula • I'm going to stake out the middle between the libertarians and the progressives. The libertarians say bail outs are always bad and the progressive say they are always good because they save jobs. <br />. <br />Bailouts should be used sparingly and capital and the stakeholders need to pay a price for their errors. <br />. <br />For example bailing out the banks to prevent a greater problem (loss of deposits) made sense. Almost all of the money more or less is coming back. I forget the recovery rate. <br />. <br />The auto industry bailouts are a different story. They will *** cost *** the taxpayers money. Big money. Partial recovery only I forget the exact numbers and I don't think the story's over either. <br />. <br />I have an issue with the way they were done. It's one thing to make the union health funds whole with taxpayer money. That's a public policy decision. Instead--in effect--the federal government reportedly took money the bondholders would have recovered and gave it to the unions. I thought that was highly improper and against precedent. They had no authority to do this. <br />. <br />Of course this opinion may be demagogued as "you are just for the bondholders." No--the bondholders should not have come out worse than if GM and Chrysler had gone bankrupt. If the government had not intervened--that is what would have happened.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-49703625258965520822012-02-28T16:47:54.806-05:002012-02-28T16:47:54.806-05:00An interesting question.
May I suggest you per...An interesting question. <br />May I suggest you peruse the commentary of Judge Andrew Napolitano, a regular commentator on the FOX network, for which he was fired hours following his delivery. I believe he comes close to answering your question.<br /><br />TedAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-1174301114218706899.post-5155334294951135752012-02-27T02:36:40.359-05:002012-02-27T02:36:40.359-05:00Excellent information.Keep sharing such great post...Excellent information.Keep sharing such great posts. <a href="http://www.expertleadsource.com/bankruptcy-leads.htm" rel="nofollow">Bankruptcy Leads</a>Anonymoushttps://www.blogger.com/profile/02409187523954794975noreply@blogger.com