Howard Davidowitz on the Meaning of the Chrysler Bailout

[haha]

"That's Not the American Way" Chrysler's Bailout and the Road to Ruin: Tech Ticker, Yahoo! Finance

Watch it and weep.

Ha

[dex]

So far it looks as if the US Taxpayer is putting out money to keep these companies (for a short period of time) afloat and will (eventually) be getting the downside of them putting many people out of work (when the taxpayer stops funding them),

[haha]

Quote:

Originally Posted by dex So far it looks as if the US Taxpayer is putting out money to keep these companies (for a short period of time) afloat and will (eventually) be getting the downside of them putting many people out of work (when the taxpayer stops funding them),

The taxpayer hasn't been asked about this. Mr. Obama is our leader. Funnel a little money from the many taxpayers, to to the more concentrated smaller number of UAW members.

Might be bad economics, but as politics it looks good so far.

Ha

[Koolau]

Quote:

Originally Posted by dex So far it looks as if the US Taxpayer is putting out money to keep these companies (for a short period of time) afloat and will (eventually) be getting the downside of them putting many people out of work (when the taxpayer stops funding them),

Le French model (except the part about stopping the funding - that won't happen as long as the UAW exists IMO. I could be wrong. I was - once!)

[FIREdreamer]

LOL! At this rate, the new gold standard for dirigisme might be called l'Obama model not le French model.

[unclemick]

They're right - the guy is colorfull - I've caught his interviews before - now I'm afraid he may be right about the decade of reduced living standards for Americans as they shift into the savings mode - those that can.

One history I read - The British decline actually started in the Boer War - when they came to American banks to borrow.

Iraq/ ? - no free lunch.

I'm old enough to remember 'The Great Society/Vietnam' and my portfolio 1966-1982. Young and working then helped.

W*^K!!! Nah - perish the thought.

heh heh heh - a little offense, a little defense, a little football. Time marches on - things change - sort of.

[Independent]

I don't know anything about Howard Davidowitz. It does seem to me that what we're spending to bail out Chysler's workers is a small fraction of what we spent to bail out Bear Stearns' and AIG's creditors. So I have trouble seeing Chrysler as a "game changer". The game changed last year, this is just a variation on the same theme. Maybe he would say the same thing, but this interview doesn't make that clear.

If I heard him correctly, he's saying that people shouldn't own US stocks for the next decade at least.

[armor99]

I am waiting for the day when morningstar ratings etc are replaced by the number of lobbiests they have in washington.

[deserat]

OT - when I first read title of thread I thought it was David Horowitz not Howard Davidowitz - I pity the dyslexic with this one!

[Independent]

Quote:

Originally Posted by armor99 I am waiting for the day when morningstar ratings etc are replaced by the number of lobbiests they have in washington.

Good point.

[FinanceDude]

Howard knows a lot more about how things work than any of the Administration's so-called "financial guys".........

[HFWR]

Would that include all administrations, or just this one?

[wolfbay]

By the time this economic fiasco runs it's course calling someone an "Ivy league" economist will be the ultimate insult(Bernanke -princeton, Geithner-Harvard) The Austrian school of economics predicted this credit bubble collapse but let's hope they are wrong about what comes next.They maintain that either we reign in deficit spending and stop printing money(no way this is going to happen) or we face the collapse of the dollar.Hello Weimar Republic.

[samclem]

Well, this should at least slow the Chrysler steamroller a little bit. A group of bondholders will get their day in court. (WSJ article)

Quote:

The U.S. federal court late on Tuesday agreed to hear an appeal related to the bankruptcy of Chrysler LLC, potentially extending the auto maker's stay in Chapter 11 reorganization by at least several days. The U.S. Court of Appeals for the Second Circuit said it would hear an appeal by a group of Indiana pension funds challenging the sale of most of Chrysler's assets to the company's proposed partner, Fiat SpA of Italy. . . . The deal must close by June 15 or Fiat can potentially walk away from the deal, Chrysler has said. . . . The Indiana pension funds -- the Indiana State Teachers Retirement Fund, the Indiana State Pension Trust and the Indiana Major Moves Construction Fund have argued the sale of Chrysler is unconstitutional, saying the plan upends the rights of senior lenders to be paid off before junior creditors. The Indiana funds also contend that the U.S. Treasury Department doesn't have the authority to lend bankruptcy financing under the Troubled Asset Relief Program because Chrysler isn't a financial company. . . . The Indiana funds say that, under Chrysler's plan, creditors with less seniority, namely the UAW, would see a better recovery. The UAW's health-care trust has an unsecured claim against Chrysler for about $10.5 billion. In addition to the equity stake in Chrysler that the trust would receive, it would also get a $4.5 billion note. The Indiana funds bought the Chrysler debt at 43 cents on the dollar in July 2008. Most other secured lenders have agreed to the restructuring plan Chrysler has proposed in bankruptcy court that will pay them 29 cents on the dollar for their debt.

Good.

[ERD50]

Quote:

Originally Posted by samclem Well, this should at least slow the Chrysler steamroller a little bit. A group of bondholders will get their day in court. (WSJ article) Good.

Hmmm, interesting who is on opposite sides of this one. On one side, the Indiana State Teachers Retirement Fund. On the other, . . . The Indiana funds say that, under Chrysler's plan, creditors with less seniority, namely the UAW, would see a better recovery.

Those Lincoln quotes seem applicable here - you can't please all the people all the time? Though politically, I'm sure the UAW swings a bigger bat than a state teacher's retirement fund (though teachers across the country may take note).

But I do believe that the point made in the video haha linked to is an essential one. You can't expect investors to play the game at "market prices" if the rules of the game are subject to change. Some will want higher prices for the uncertainty risk, some will pick up their ball and find another park to play in. And that cannot help our economy. This makes me very nervous, and I'm not so sure I'd say that the other post linking the Pravda article was all "melodrama" (certainly a fair amount of melodrama in there though).

Pravda: In Soviet Russia, Newspaper Reads YOU

-ERD50

[FinanceDude]

Quote:

Originally Posted by HFWR Would that include all administrations, or just this one?

ALL.............