Monday, December 22, 2008

Obama's Secretary of Transportation

President elect Barack Obama selected former Illinois Republican Representative Ray Lahood to head the Department of Transportation. At first this seemed like a pretty uneventful pick, other than him being one of a handful of Republicans in Obama's cabinet, luckily we have the great John Kass at the Chicago Tribune to fill us in on Lahood's background. According to Kass, Lahood is tight with Bill Cellini, the most powerful Republican in Illinois state politics. Cellini is also the head of the Illinois Asphalt Pavement Association, which I'm sure is an entirely reputable organization, and close to both Chicago Mayor Richard Daley and Gov. Blagojevich. Since Lahood will likely have enormous influence over where the $800 billion plus stimulus package is directed, I'm sure there are some pretty happy people in the Italian restaurants and social clubs of Chicago. Don't expect the mainstream media to delve into Lahood's background, they will be content to mention that he is a Republican, thus proving once again Obama's great commitment to bipartisanship. If the national media had a few more journalists like Kass, we might actually be able to hold a politician accountable once in a while.

Friday, December 19, 2008

Bush Gives $17 Billion to Zombie Automakers

Unsurprisingly, George Bush today gave GM and Chrysler a massive loan to allow them to continue to pay their UAW employees not to work. Even though sales have plummeted, Chrysler is shutting down all plants for 1 month, and GM has a negative $60 billion balance sheet, we are expected to believe that this "lifeline" will allow the companies to restructure and become profitable again.

The fact is these companies are dead, they just refuse to admit it. It may be years before auto sales begin to pick up again, especially now that banks are no longer giving no money down car loans to anyone with a pulse. GM has abandoned plans to build a factory to make the engines for their new electric car/pipe dream the Chevy Volt, which was supposed to somehow reinvigorate the company.

The best thing for the automakers would have been bankruptcy, despite the fearmongering claims that "no one will buy a car from a bankrupt company" and "the country will lose 3 million jobs if they go bankrupt". I don't think being on government life support will exactly inspire confidence in consumers, and massive job cuts are a necessity if these companies want to continue to exist in any form.

I am no business expert, but it seems like eliminating several brands, (Pontiac, Buick) and spinning off more successful ones (Hummer, Jeep) would be the most effective way to restructure. Instead we will hear the usual drivel about making more energy efficient vehicles, despite the fact that oil prices have dropped 60% and there is no market for them.
Meanwhile the automakers are still based in Detroit, a disgusting, corrupt cesspool that no engineer or executive in his right mind would want to live in or around. Other than these issues, they should be back on the right track in no time.

Hopefully this is the last disgrace Bush can thrust on the American people before he hands the reins to Obama, who will most likely be the FDR to Bush's Hoover. And, no I do not mean that as a compliment.

Wednesday, December 17, 2008

Newspeak Alert

Shoe dodger-in chief Bush today:
"I've abandoned free-market principles to save the free-market system,"

The biggest joke about this is that the vast majority of people, particularly on the left, regard Bush as some kind of free market zealot. In reality he has been no more of a friend of free markets than Nixon, Carter, or Clinton. He also gave a typically articulate justification for his socialist economic policies:
"I feel a sense of obligation to my successor to make sure there is not a, you know, a huge economic crisis. Look, we're in a crisis now. I mean, this is -- we're in a huge recession, but I don't want to make it even worse."

Don't worry Georgie, you already have.

Tuesday, December 16, 2008

Corn We Can Believe In

Barack Obama will announce former Iowa Governor Tom Vilsack as his Secretary of Agriculture on Wednesday, said a senior Democratic official. Vilsack briefly ran for the Democratic nomination last year, before dropping out and endorsing Hillary Clinton. Vilsack is so dull and unremarkable he makes Tommy Thompson, another ex-governor from the midwest who ran a hopeless primary campaign, seem positively mesmerizing by comparison.
Vilsack is a supporter of ethanol and other farm subsidies, and has been heavily funded by Big Agriculture, including seed and pesticide giant Monsanto.

Some of the more idealistic Obama supporters had held out hope that he would select writer Michael Pollan, a critic of ethanol and industrial agriculture. Instead he has selected another establishment Democrat and Clintonite, who is widely believed to be a shill for Monsanto, a company considered to be pure evil by many on the left . This would seem to be a pretty big slap in the face to environmentalists and progressives, not to mention conservatives and libertarians disgusted by ethanol and other farm subsidies. It will be interesting to see if there is serious opposition to this pick from the left, or if they will fall in line as most antiwar Obama supporters did after he selected Hillary for Secretary of State. I will be hoping for the former, but I wouldn't count on it.

Monday, December 15, 2008

Yahoo! Finance Funnies

The message boards on are always a source of great amusement. Here are some samples from the GM board today.

Andrew Jackson would put a bullet right between harry reid's eyes

In fact he'd lots of ammo because I think he'd shoot the entire congress. Can't you see him dueling nancy pelosi she runnig and crying and he's reloading. At least Hillary would stand up and take it like a man. Oh I wish we had old andy now.

Still got my 1928 Ford, 6 million miles

on it, never in the garage except for oil, lube and tire changes...more than anyone can say for the foreign brands because in 1928 they were still walking.

Blago to become Pontiac car salesman

That's what I heard.

A Little BB Can Really Wreck a Chevy!

Sunday, December 14, 2008

A Weak End To Bernie Madoff

Sorry for the horrible pun, but how often do you get a chance to equate massive financial fraud with a classic 80's movie? Also at least I didn't say that Bernie Madoff "made off" with $50 billion. I do have standards for my bad puns.

For those not familiar with the story, Bernie Madoff is the former NASDAQ chairman who was recently charged with fraud for swindling up to $50 billion from wealthy investors in his Bernard L. Madoff Investment Securities LLC. This was a separate business from his huge brokerage, which was one of the largest market makers on NASDAQ. There had been red flags raised in the past as Madoff consistently brought in 1-1.2% every month, even in the current economic recession. Many investors believed that Madoff was using inside information from his market making business to achieve these incredibly steady profits, but were willing to ignore the ethical issues in exchange for a 10-15% yearly return on investment. According to analyst Henry Blodget:
"Many Wall Streeters suspected the wrong rigged game, though: they thought it was insider trading, not a Ponzi scheme," Blodget wrote. "And here's the best part: That's why they invested with him."

It is hard too feel too much sympathy for these people, how many billions in returns did they collect over the years as the fraud spiraled out of control? But many more of his investors could not have known much, if anything, about his "investment strategy". We already have reports of charities being forced to close, family foundations losing half their assets, and small towns pension funds being hit. The greater losses are with hedge funds, banks, and other asset managers, some of whom appear to have lost billions.

I predict that once the shock of the enormity of this theft wears off, we will begin to see the blame placed on the SEC and lack of government regulations. This will inevitably be followed by lawsuits against the government for lack of oversight, and eventually taxpayers will again be forced to foot the bill for greed and stupidity on Wall St. This is why it is always a bad idea to rely on government guarantees of safety and quality, be it the FDA, DHS, or the SEC. Peter Schiff, cutting to heart of the matter as always, had this to say:
"Of course, the fact that the SEC routinely audited Madoff's investment company and found nothing wrong is further proof that government regulation of the securities industry is ineffective and has done more harm than good," he said. "Rather than protecting investors, it merely lulls them into a falls sense of confidence. If government stayed out, private-sector due diligence would do a much better job of ferreting out such massive and poorly conceived scams."

Good luck trying to sell that one in the next few days, Peter. I have a feeling we can expect a lot of talk about "oversight", "better regulation", and "transparency". Perhaps Obama will create a new Cabinet level "Fraud Czar", or merely double the size and budget of the SEC. Either way SOMETHING will have to be done, all the serious people will say.

I can already imagine David Brooks, or Tom Friedman, or Paul Krugman calling for a regulatory Manhattan Project, to finally eliminate fraud and risk from the world of finance. The old Nuclear Option, the last rhetorical resort of intellectuals trying to control the uncontrollable , or otherwise meddle in markets.

The fact is, no amount of oversight or government control could prevent someone with Bernie Madoff's wealth and influence from fleecing his own friends. He used the respect and contacts he gained over half a century as one of the titans of Wall St. to lure in his marks, and steady returns to keep them from questioning his increasingly unbelievable performance. The failures here were ultimately human ones. Bernie Madoff committed an unquestionably evil act, destroying wealth created by generations of thrift, innovation, and sacrifice. Many of his investors were innocent, or guilty only of gullibility, but many were also guilty of greedily ignoring red flags in exchange for easy money.

Evil, ignorance, and greed are not new traits in humanity, they have existed since the dawn of time, and will be around as long as man exists. No religion, philosopher, or king has succeeded in destroying evil, and no government, regulator, or bureaucracy will either. Unfortunately, that will not stop our government from trying just one more time.

Saturday, December 13, 2008

Senate Republicans Still Don't Get It

The Senate Republicans who voted against the auto bailout once again failed to offer a real alternative to the Democrats, they were in favor of the bailout in theory, but ultimately killed the bill over wage concessions by the UAW. This strategy was both intellectually muddled and politically hamfisted.

The Republicans did not object to the fact that the bailout would have created an unconstitutional "Car Czar" to control the most important business decisions of private corporations, nor did they object to Democrats like Chris Dodd (D-Countrywide) calling for the firing of GM's CEO. Instead they chose to focus on getting the UAW to take pay and benefit cuts, thereby allowing the the media to present the story as one of stereotypical Republican union-busting.

A principled stand against the bailout as unconstitutional and socialistic would have been intellectually and morally sound, instead the Republicans were all too quick to accept the premise of the bailout, and then kill it essentially on a technicality. This left them in the worst possible position, verbally sparring with the UAW over who was to blame, excoriated by the media as anti-American and anti-worker, and standing on the sidelines as the White House and Treasury give in and use the TARP funds for the bailout anyway.

The Republicans started painting themselves into this corner when large percentages of them ended up voting for the TARP bill. When only 15 Republicans voted against the Senate bill, they lost any chance to claim the mantle of opposition, allowing all future government intervention in the economy to be measured against the monstrous TARP expenditure. How can Bob Corker (R-"Harold, call me") make a serious argument against giving $15 billion to Ford, GM, and Chrysler, when he voted for giving $700 billion to Goldman Sachs, Citigroup, and AIG? Richard Shelby (R-AL) voted against the financial bailout, but also represents a state with a massive presence by Toyota, effectively neutering his opposition by equating it with support for foreign manufacturers over American companies.

It is tough to see how the Republicans will benefit from this entire fiasco, they have allowed themselves, fairly or not, to be labeled as obstructionists and union-busters. The auto companies will get their loans, probably from the TARP fund, perhaps with additional assistance coming from the new Congress and Obama administration in January. The government will continue to take a greater role in planning and managing the economy and GM, Ford, and Chrysler will continue their inexorable slide into bankruptcy, only this time all Americans will be left holding the bag.