Is America at the Point of No Return?

[HFWR]

GM and Chrysler should have been allowed to go into bankruptcy.

That would have been a lot of jobs, and economic activity, lost...

 

[FinanceDude]

That would have been a lot of jobs, and economic activity, lost...

How many companies have filed for bankruptcy protection over the years, thousands? Now we own 29% of GM and there's talk of getting the rest of the taxpayer money out at a loss of $15 billion?

Ford seems to be doing well without taking Govt money............quite a model for the others to follow...........

 

[Independent]

The mutual influence and dependency between the supposedly "independent" entities of government and bond rating agencies deserves some thorough airing out. Here's an ABC News story from today that brings this home. In part: I want these discussions out in the open. No one in the government should be putting behind-the-scenes pressure on S&P to delay or modify their reports. It's different if the government requests that a news outlet avoid publishing sensitive information to protect lives, sources, or intelligence methods. This is an attempt to change the behavior of a rating agency simply for political purposes. I'll bet we get no investigation.

What would be the standard practice for S&P and a corporation? Do they notify management days or weeks in advance that a downgrade is likely?
If the downgrade is significantly connected to a losing division, would they hold off a few days because the CEO said he has a public announcement about that division that he'd like to get out before the rating?

Those are serious questions, not rhetorical. I don't work directly with rating agencies. My general impression from talking to people who do is that there is enough dialog between management and the raters that it's at least possible the answer is "yes" to both.

 

[Independent]

GM and CHrysler should have been allowed to go into bankruptcy. I guess the bailouts of AIG and Freddie and Fannie were necessary. AIG and Freddie and Fannie are permanent taxpayer black holes, might as well include them in the budget as a line item............

GM and Chrysler did go into bankruptcy. The shareholders were wiped out, the bondholders got equity instead of debt. The the taxpayers put money into the pot, but none of the private stakeholders walked away with 100% of what they wanted.

These are tough issues, but I think I would done something similar with F&F, Bear Stearns, AIG, etc. We could have put enough money into the pot to stabilize the system without giving their bondholders/creditors 100 cents on the dollar.

 

[FinanceDude]

GM and Chrysler did go into bankruptcy. The shareholders were wiped out, the bondholders got equity instead of debt. The the taxpayers put money into the pot, but none of the private stakeholders walked away with 100% of what they wanted.

These are tough issues, but I think I would done something similar with F&F, Bear Stearns, AIG, etc. We could have put enough money into the pot to stabilize the system without giving their bondholders/creditors 100 cents on the dollar.

When traditional bankruptcy happens, taxpayer money is not involved.........

 

[MasterBlaster]

GM and Chrysler did go into bankruptcy. The shareholders were wiped out, the bondholders got equity instead of debt. The the taxpayers put money into the pot, but none of the private stakeholders walked away with 100% of what they wanted.

These are tough issues, but I think I would done something similar with F&F, Bear Stearns, AIG, etc. We could have put enough money into the pot to stabilize the system without giving their bondholders/creditors 100 cents on the dollar.

I tend to agree.

But I would remind you that the world was teetering on disaster - remember the fear !

Quick decisions were made. Could they have done better now looking back with hindsight. Perhaps they could. There were also issues of getting banks on board fast before disaster occurred. Doing what you proposed may not have worked out like we planned.

In hind sight they did pretty good, considering.

 

[FinanceDude]

With regards to GM, the UAW got a seat on the Board and a pretty good piece of ownership of the company. GM STILL has a huge unfunded pension liability issue, about $27 billion. They need to sell a LOT of cars to make that work. GM will be back asking for money in the next 5 years, count on it!

The Volt is a nice car, but it will take years for cars like that to be mainstream. Meanwhile, Toyota sold their 3 MILLIONTH Prius. The Japanese yet again teach us a lesson about innovation...........

 

[HFWR]

When traditional bankruptcy happens, taxpayer money is not involved.........

As I understand it, no one had deep enough pockets to fund a re-org, and the only alternative would have been Chapter 7 liquidation. Seems to me we picked the lesser of two evils, but, obviously opinions differ...

 

[FinanceDude]

As I understand it, no one had deep enough pockets to fund a re-org, and the only alternative would have been Chapter 7 liquidation. Seems to me we picked the lesser of two evils, but, obviously opinions differ...

I think it was more of a political move than a solvency issue. One can understand trying to avert disaster at Fannie and Freddie and maybe AIG but the car companies are a head scratcher............

 

[Independent]

I think it was more of a political move than a solvency issue. One can understand trying to avert disaster at Fannie and Freddie and maybe AIG but the car companies are a head scratcher............

I'm on the opposite side. I can't understand why F&F, AIG, Bear Stearns, etc. creditors got 100 cents on the dollar when GM and Chrysler's took such a hit. Most of the people who caused the housing bubble and then the credit meltdown get off with a little embarrassment. We were way too generous with them.

 

[Tadpole]

And the engine just died as Sam and Mary argued whether it needed more fuel or a cleaning.

 

[Texas Proud]

I think it was more of a political move than a solvency issue. One can understand trying to avert disaster at Fannie and Freddie and maybe AIG but the car companies are a head scratcher............

Not really.... who wants to have millions of people let go under their watch


Now, I am not of the belief that the companies would have gone through Chap 7... you can delay a lot of things in BK...


I still do not know why the union got a big hunk of the ownership (well, I do know... political payback)... the gvmt should have owned the whole company to minimize the losses... if we had made a profit..... then we could have paid off the other creditors with the left overs...

 

[FinanceDude]

Not really.... who wants to have millions of people let go under their watch

Millions of people? I don't think so, companies go bankrupt all the time but they don't cease operations and quit making products for sale..........

Now, I am not of the belief that the companies would have gone through Chap 7... you can delay a lot of things in BK...

As well as get out from underneath unfunded pension liabilities and the like........

 

[HFWR]

Humbled GM files for bankruptcy protection - Business - Autos - msnbc.com

“There is no other sale, or other potential purchasers, present or on the horizon,” Henderson said in an affidavit filed Monday in bankruptcy court. “The only other alternative is the liquidation of the debtors’ assets that would substantially diminish the value of GM’s business and assets, (and) throw hundreds of thousands of persons out of work and cause the termination of health benefits and jeopardize retirement benefits for current and former employees and their families.”

 

[Independent]

Millions of people? I don't think so, companies go bankrupt all the time but they don't cease operations and quit making products for sale..........
)

AFAIK, it depends on whether they can find financing for Ch 11 or go through Ch 7 and liquidation. Nobody but the feds was willing to put up financing. But I'm sure we've got people on this board who actually work bankruptcies. Maybe one of them will clarify.

But, whatever we did with the autos, it doesn't justify giving F&F etc. creditors a free pass.

 

[lets-retire]

Millions of people? I don't think so, companies go bankrupt all the time but they don't cease operations and quit making products for sale..........

I have to agree. Yes, there would have been people unemployed, but they were excess capacity in the system. That excess has not been wrung out, so it is still there and still being a drag on the industry. Until that excess is taken out of the system the industry will not be healthy and will continue to struggle to make a profit.

 

[Bdroc]

Point of no return is because of the debt, not because of the income disparity. I agree that lobbyists have too much say.

 

[eridanus]

The American Dream is not the only dream.

This was lost in the shuffle and needs repeating. Maybe the American Dream changes?

 

[ERD50]

I agree that lobbyists have too much say.

Was the Constitution changed? Lobbyists get to vote in Congress now?

How about putting the blame where it belongs - the Congress Critters that vote for special interests rather than for the 'general welfare'?

-ERD50

 

[MichaelB]

Was the Constitution changed? Lobbyists get to vote in Congress now?

How about putting the blame where it belongs - the Congress Critters that vote for special interests rather than for the 'general welfare'?

-ERD50

For every politician with hand outstretched there is a donor handing over money. Together they are co-conspirators, both willing partners and equally committed to using this money to further their interests or deny others.

 

[ERD50]

For every politician with hand outstretched there is a donor handing over money. Together they are co-conspirators, both willing partners and equally committed to using this money to further their interests or deny others.

Yes, but one of them took a sworn oath.

-ERD50

 

[MichaelB]

Yes, but one of them took a sworn oath.

-ERD50

What are they violating?

I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.

ERD, I'm not disagreeing with your dim view of politicians taking money, just pointing out that the people giving them the money are no better.

 

[ERD50]

What are they violating?



ERD, I'm not disagreeing with your dim view of politicians taking money, just pointing out that the people giving them the money are no better.

I'm not letting the bribe offerers (I'll use that term for simplicity) off the hook, I'm just saying the bribe takers are the ones I hold to a higher standard.

If an officer of a company is approached by an outsider to embezzle money, does it and gets caught, I would hold the officer of the company to a higher standard than the random person approaching them.

They swore to uphold the Constitution, which has the 'general welfare' clause, not a 'specific welfare for those who bribe me' clause. So I would say they are violating their oath to uphold the Constitution.

-ERD50

 

[MichaelB]

I'm not letting the bribe offerers (I'll use that term for simplicity) off the hook, I'm just saying the bribe takers are the ones I hold to a higher standard.

If an officer of a company is approached by an outsider to embezzle money, does it and gets caught, I would hold the officer of the company to a higher standard than the random person approaching them.

They swore to uphold the Constitution, which has the 'general welfare' clause, not a 'specific welfare for those who bribe me' clause. So I would say they are violating their oath to uphold the Constitution.

-ERD50

Not sure where bribe came from. The Supreme court doesn't seem to think there is anything wrong with contributing money to politicians - or even judges in some states. I do, but in most cases I wouldn't call that bribery.

 

[M Paquette]

I'm not letting the bribe offerers (I'll use that term for simplicity) off the hook, I'm just saying the bribe takers are the ones I hold to a higher standard.

"An honest politician is one who, when he is bought, will stay bought."
-- Simon Cameron

(Simon Cameron was a Secretary of War under Lincoln, and a Senator. His corruption was so notorious that Congressman Thaddeus Stevens, when discussing Cameron's honesty with Lincoln, told Lincoln that "I don't think that he would steal a red hot stove". When Cameron demanded Stevens retract this statement, Stevens told Lincoln "I believe I told you he would not steal a red-hot stove. I will now take that back.")