The Current #136

The Current #136
Monday May 18, 2009
Hosts: Jacob Bodnar and Logan Sparrow

Tell Me Lies, Tell Me Sweet Little Lies
Nancy Pelosi and the CIA are not on good terms. After being nailed to the wall about briefings on waterboarding dating back to 2002, Pelosi stooped to a new low claiming the CIA lied to her and “misled” Congress about enhanced interrogation methods. And then she stooped even lower, backtracking from her claim, pining all the blame on Bush. Is there a ladder long enough to get Pelosi out of this hole?
[audio:http://www.thecurrentpodcast.com/episodes/segments/pelosi_cia136.mp3]

Politics as Usual
Telling the people what they want to hear is typical politics. Doing what the people want is the opposite of politics. Barack Obama seems to be doing more of the former than the latter. A poll was released this week showing the vast majority of Americans (71%) want less government in their lives, and 54% say Obama is spending too much. So, at a townhall speech, Obama said we cannot sustain deficit spending. Well Obama, if we can’t sustain it, why are you doing it?
[audio:http://www.thecurrentpodcast.com/episodes/segments/obama_spending136.mp3]

Crazy Environmentalists
In Ann Arbor, Michigan they are trying to build an underground parking structure because like any city it’s difficult to find parking spots. But wait, the environmentalists have a problem with that, they claim the structure will attract more cars downtown and thus pollute the earth even more. Uhh right, because those cars wouldn’t be turned on otherwise.
[audio:http://www.thecurrentpodcast.com/episodes/segments/a2_parking136.mp3]

FULL EPISODE
[audio:http://www.thecurrentpodcast.com/episodes/thecurrentep136_96.mp3]

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The Obama Debt Plan UPDATE: Stimulus Passes Cloture

UPDATE: The stimulus package has passed cloture, meaning it received more than 60 votes, so the debate ends. This is a procedural vote so it doesn’t mean the bill has passed, it simply means that debating on the bill has come to a close.

The vote was 61-36, the three GOP senators that were part of the compromise talks voted to end debate. They were Olympia Snowe, Susan Collins, and Arlen Specter. The final vote on the bill will come tomorrow, I think everyone expects it to pass along party lines, with the exception of Snowe, Collins, and Specter.

Bloomberg published a startling number today.

$9.7 trillion. That’s how much the U.S. taxpayers are in for if this stimulus plan passes the Senate.

For all the visual learners out there that’s $9,700,000,000,000. That’s a lot of zeros. That’s also enough to pay off 90% of the nation’s home mortgages and enough to pay off about 90% of our total national debt.

The worst part is only about $1.7 trillion of that large sum has been approved by elected officials.

Only the stimulus package to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates approved in 2008 have been voted on by lawmakers. The remaining $8 trillion in commitments are lending programs and guarantees, almost all under the authority of the Fed and the FDIC. The recipients’ names have not been disclosed.

So the Fed and FDIC, who aren’t elected officials, have guaranteed $8 trillion of our money to failed institutions. And from the looks of Wall Street and banks right now, it doesn’t appear to be working. So what’s the solution? Well, in the government’s twisted world they use the mantra, if at first you don’t succeed, try, try again.

The New York Times is reporting that TARP II is on the way, and it’s a whole helluva lot fatter than TARP version one or the stimulus.

This week, President Obama and his Treasury secretary, Timothy F. Geithner, will prepare the country for the next, and far more difficult, step: another attempt to fill the huge hole blown in the center of the nation’s financial system.

No one has yet put a price tag on that effort. But the administration’s diagnosis of what went wrong with the first attempt to right the financial system — that it was too small, and that the problem has ballooned in recent months — suggests that the next effort will almost certainly entail a far bigger commitment of taxpayer dollars than the $350 billion left from last year’s $700 billion effort to right the system, and probably far more than the stimulus package.

How stupid can one system be. Let me remind everyone of the government’s track record on the economy in the past year.

-Summer rebate checks. Result: Failed miserably, people saved the money instead of spending it
-TARP I Part A ($350 billion). Result: Banks misspent the money, Washington slammed them, banks continued to collapse
-TARP I Part B ($350 billion). Result: Banks continued to misspend the money, Washington slammed them, banks continue to collapse
-Auto Bailout. Result: Automakers GM and Chrysler have continued to layoff workers, will say they need more money in their report due February 17.

So things haven’t been going too good for Washington. But instead of realizing that their spending doesn’t have much of an effect on the economy, they decided the reason nothing worked was because it was all too small.

That’s frightening.

If $9.7 trillion is too small, what’s just right? $12 trillion? $20 trillion? At what point does Washington realize they don’t have the money to spend. We went into this economic mess already in debt, we never had money to spend in the first place.

Meanwhile Obama is attempting to drum up support for the stimulus and TARP II by doing the only thing he knows how to do, give a stump speech.

Obama is traveling to Elkhart, Indiana where he will hold a town hall meeting about the stimulus package. Don’t get me wrong, I like the idea of taking this issue to the people (after all it’s their money) but Obama, and every other politician in Washington, have shown no respect for taxpayer money; why should we listen to anything he has to say?

The reason I dislike the idea of Obama traveling to Elkhart is because I can already predict what the scene will look like. And if I’m wrong I’ll call myself out on it.

First, he’ll be standing either in front of a sign that says “recovery and reinvestment for America” or he’ll have a podium that says something along those lines. He’ll give a speech, probably won’t take any questions, and it’ll be filled with the same rhetoric and fear he’s spewed over the last several days. And of course he’ll have a teleprompter. I predict that Obama will talk at the crowd, not with the crowd.

Maybe I’ll be wrong, I kinda hope I am, but Obama is in his element giving speeches and he’s never been good with direct questions from an audience. And this is not the time to be fumbling with answers.

Whatever Obama says today in Elkhart, and however it is presented, doesn’t really matter in the grand scheme of things. After Obama’s speech the stimulus will still be too large and TARP II will Congressional fist fight waiting to happen.

–jb

Surprise: AIG Execs still getting bonuses

You might want to sit down for this one.

The big wigs at AIG, ya know the company the government gave $152 billion to, are still getting huge bonuses. I’m truly shocked and disgusted and appalled and something needs to be done about this.

Actually, I’m none of those things. To be honest, I’m not surprised, I’m not appalled, I’m not disgusted. I have, however, been proven correct.

When the bailout talk started I, and many other conservatives, stood up and said it was ridiculous. These people did wrong and the government was more-or-less rewarding them. Giving them money so they could stay afloat and continue to operate because they were just too darn large to fail.

I, and many other conservatives, said the government wasn’t letting anyone learn their lesson, that these executives would continue to do wrong down the road because their actions had no consequences. And here we are, several months in to a several trillion dollar bailout and the executives at AIG haven’t learned their lesson. Shock and awe!

Instead of giving their executives bonuses and calling them bonuses, AIG is giving their execs “retention payments,” which is just a fancy name for a random end of year check that is a very large sum of money.

AIG is playing it off as a way to keep employees on board. In order to get the retention payments, given to 168 employees, the employee must agree to stay with the company for one year.

Anyway you slice it, AIG is spending money they don’t have and the government is furious about it.

“These so-called retention payments are nothing less than bonuses,” Rep. Elijah E. Cummings, D-Md., told CBS News. He sent letters to AIG, demanding details of the retention program.

Ironic, a congressman complaining about a company spending money it doesn’t have. Ordinarily I’d say that the government has no business to know anything about this “retention” program, but because the government gave them money and bailed them out suddenly they have a right to know. Which was just one of the many problems with the bailout.

It should be none of the government’s business what goes on in a private company. If that company does something as stupid as this “payment retention” program than that company goes out of business, those big executives are suddenly out of a job, and they have to live with the guilt of making thousands of people jobless. It’s not easy, it’s life, it’s capitalism.

However, the program that the government has setup now alleviates anyone from any wrongdoing. Regardless of the bad policies an executive might have made, their company will stay afloat because they’re just too darn important to fail. And because the government gave them money, they exercise their inherited right to poke and pry into the ongoings of that company and then grill them when they find something they don’t like.

It’s socialism, it’s ugly, and unfortunately I think it might be too late to stop it.

–jb

Big Nance and Bush Shake Hands

Figuratively of course.

A deal has been reached on the auto bailout, which was just fantastic news to wake up to, hint the sarcasm. As predicted the proposed plan makes somewhere in the neighborhood of zero sense.

A government “car czar” with the power to force U.S. automakers into bankruptcy would dole out $15 billion in emergency loans to the failing industry under an emerging deal between the White House and congressional Democrats.

So the “car czar” can force the auto makers into bankruptcy. But I thought bankruptcy was bad? I thought no one would buy a car from a bankrupt auto maker? Yet the car czar would be able to put them in bankruptcy? Why not just let them fall into bankruptcy now and restructure.

The second thing that makes no sense is the amount of money. As I pointed out the other day, $15 billion is $19 billion less than what the auto makers said they needed. If the claim from the left is a bailout is the only way to keep them alive, why give them $19 billion less than what they need to stay alive? Why only give them money through March? What if that does nothing? Well, then they’d go into bankruptcy. All this bill does is delay the inevitable.

Third thing that makes no sense are the provisions in the bill.

All three would have to negotiate with labor unions, creditors and others and submit blueprints by March 31 to an industry czar named by President George W. Bush showing how they would restructure to ensure their survival. If not, the emergency loans would be revoked, the companies cut off from further federal help, and the government overseer could order his own overhaul, including forcing them into bankruptcy.

They have to negotiate with labor unions, creditors, and others. Gee, that sounds a lot like bankruptcy. As a matter of fact this whole bill sounds like bankruptcy, only a bigger pain in the ass.

Personally I’m irritated that Bush would let something like this go through. After the outcry from the TARP bailout I thought he might see the light and realize throwing money at industries, businesses and people doesn’t do squat. However, with this bill he’s safely secured a seat outside of the conservative circle. He might be a “compassionate conservative,” but he certainly isn’t a fiscal conservative.

I expected this kind of garbage from the left. This is the kind of thing that sounds like a brilliant plan but when some critical thinking is applied you realize how terrible it is.

This bill proves that bankruptcy is the best option for the big three. Why? Because the flippin’ bill is almost a carbon copy of what would happen in bankruptcy. Chrysler, GM, and Ford all file for Chapter 11. They get debt relief, they have leverage when negotiating with creditors and the unions, they can get rid of failed programs and failed brands and failed dealers without the hassle that would occur outside of bankruptcy.

And that’s the main problem with this bill, it forces the Big Three to negotiate and restructure without bankruptcy protection.

I’ll end with a prediction. The big three, in March, will be forced into bankruptcy. We are simply delaying the inevitable.

–jb

Congress Sends Bailout to Bush UPDATE: Nationalization

Congressional democrats have sent President Bush a draft of the auto industry bailout plan.

The catch? The plan is only $15 billion.

Now correct me if I’m wrong but the auto industry said they needed $34 billion, and the number being thrown around before that was $25 billion.

As you all know I’ve been against this bailout from the get-go, but if the bailout is going to happen it might as well be enough to actually support the companies.

There were two arguments against bankruptcy. One, that no one would buy a car from a company that’s in bankruptcy. And two, that bankruptcy might not save them.

So the democrats solution to that? Give them $19 billion less than they asked for. I guarantee that won’t save them. And by the way, who is going to buy a car from a company that just got a loan from the government that’s $19 billion less they what they need to stay afloat? Probably just as many people as would buy a car from a bankrupt company.

UPDATE: The Wall Street Journal is reporting that the language in the bailout bill that was sent to President Bush is basically a step in the direction of nationalizing the Big Three auto makers.

Under the terms of the draft legislation, which continued to evolve Monday evening, the government would receive warrants for stock equivalent to at least 20% of the loans any company receives. The company also would have to agree to limits on executive compensation and dividend payments, much like those contained in the government’s $700 billion rescue of the financial industry.

Ahhh, the government telling a business how to run a business. Funny, considering we’re in more debt than the three auto makers combined, multiplied by about eight.

Furthermore congressional democrats also want President Bush to appoint an “auto czar” that would oversee the process, only this “czar” would have more power than simply being a watchdog on the government’s behalf.

The program would be overseen by an official, tapped by President George W. Bush, whom congressional aides and lawmakers describe as an “auto czar.” This person would act as a kind of trustee with authority to bring together labor, management, creditors and parts suppliers to negotiate a restructuring plan. He or she also would be able to review any transaction or contract valued at more than $25 million.

This whole mess of having to agree upon legislation and adding all this nationalization BS could have easily been avoided if the government simply let these companies go into bankruptcy. That’s what it’s there for.

–jb

Paulson the Planner

If you haven’t noticed yet Henry Paulson is really good at making plans. It seems that every week he has a new plan to “resuscitate” the economy. Unfortunately for Paulson none of those plans seem to be working.

Well another day, another plan.

Treasury Secretary Henry Paulson is considering a new plan to reduce mortgage rates in another bid to revive the U.S. housing market, a government official said.

The Treasury, which already has a program to buy mortgage- backed securities issued by Fannie Mae and Freddie Mac, could step up those purchases to drive down interest rates on some loans to 4.5 percent, the official said on condition of anonymity. The plan is preliminary and could change.

So this plan goes along with TARP and buying bank stocks right? Or is this an extension of another plan? Or is this not related to those other plans at all?

Ahhh! Too many plans!

Too bad Paulson couldn’t conjure up some of this plan enthusiasm back in say, October, when the problem began to grow. Had he sat down and actually thought out the best solution to this massive problem instead of shoving a bill down Congress’ throat, he wouldn’t have to makeup so many darned plans now.

However, in Paulson’s defense, he was more-or-less forced to come up with a plan to slow down home foreclosures. The democrats have been whining and crying about that for months (yet seemingly have done nothing about it, even with a majority…hmm)

Treasury “keeps nipping at the edges to come up with a wholesale response, but always ends up with a partial response,” said John Taylor, president and chief executive officer of the National Community Reinvestment Coalition in Washington. “Regardless of whatever rhetoric Paulson keeps throwing around, foreclosures continue to go up.”

New rule! Anyone who works for the National Community Reinvestment Coalition isn’t to be taken seriously. In light of the mess the Community Reinvestment Act got us into I think anything with the words “community” and “reinvestment” together should be taken with a grain of salt.

In other bailout news, the big three auto maker presidents drove to DC today to attend a hearing that will help determine the fate of the loan they’ve asked for.

The original number was $25 billion but the new number is $34 billion. Meanwhile the UAW has said that they would make concessions to help the auto makers. Gee, how great of you, too bad you’re two years too late.

I was watching some of the hearing on Fox News today and I heard democratic senator Robert Menendez from New Jersey telling UAW President Ron Gettelfinger that he was proud that the UAW was offering up concessions to help the auto makers, and that he knew how difficult it was for him to do that.

Please, the UAW has been screwing the auto companies since the 80′s, the fact that they’re making concessions because their members’ butts are on the line doesn’t mean squat. If the UAW really cared about the financial situation of the big three they would have made concessions years ago. This industry down turn is nothing new.

And where was Menendez’s praise for Rick Wagoner the CEO of General Motors. He took a pay cut back in March to help out his company. Where was the UAW’s concessions then.

This whole bailout bonanza can be summed up in one popular phrase, “where’s the beef?” It doesn’t appear that any of these plans are working and we’ve gotten no time line from Washington as to when they will.

Maybe, just maybe, they won’t actually work.

Huh, there’s a thought.

–jb

What we can Learn from the Bailout

We are maybe half way through this bailout mess. Maybe.

The government has made a lot of mistakes along the way, I think it’s time that we begin to learn from these mistakes so maybe the second half of this mess can be a little more productive (I doubt it).

For starters I want to share a quote from FDIC Chairman Shelia Bair.

“We really need to think through the exit strategy because (government guarantees) could become a crutch,” she said. Weaker financial institutions “need to be allowed to fail,” Bair added.

Hmmm, where have I heard ‘exit strategy’ before. Oh yea, that’s right, the Dems were running in the streets whining and crying about a lack of an exit strategy for the War in the Iraq. And now, when they are overseeing a financial mess that could use one of those fancy exit strategies, they overlook it.

Of course Bair just adds to the list of government officials who just don’t seem to get it. She supports more money for personal mortgage relief.

So here’s the first lesson we can learn from the bailout; find the problem and then fix it.

During this process the government has run around like a chicken with its head cut off attempting to find a solution to this massive problem. So far it appears they’ve failed. The government has taken the “guess and check” approach. Find something that’s wrong, fix it, see if it works. Imagine if your computer wasn’t working. Would you just start buying random parts and replacing them, seeing if each one worked. No, you’d find the faulty part, replace it, and continue using your computer.

I understand that there are several problems that caused this mess, therefore several solutions that need to be taken. But have we ever been told what those problems are? We’ve got the democrats claiming it’s deregulation, the republicans say it was too much regulation, meanwhile nothing’s been done about any regulations; we’ve just spend trillions and trillions of dollars.

Second lesson, have a clear message and stick to it.

One of the big reasons that the stock market has been a roller coaster this past month is because no one knows exactly what Washington is going to do. Take the auto bailout for example. The auto companies said they needed some money. Democrat Carl Levin began drafting legislation, then a report came out saying a bipartisan agreement had been reached, then there was talk about an upcoming vote, and then the Dems hold a press conference saying the auto makers need to prove their “accountability and viability.”

Talk about mixed signals.

Congress should have held a bipartisan press conference, outlined the problems, the solutions, and setup a process in which someone can ask for a bailout. We’ve got governors and mayors looking for a piece of the pie, what are the chances they’ll have to present their “accountability and viability” to congress? They should have to go through the same process as the auto makers.

Three, do what you can to stabilize every sector of the economy.

The key words are “do what you can,” the government is well outside of its allotted powers with this bailout, but that doesn’t mean they have no control over the stability of the economy.

The one thing I’m worried about is oil. Right now oil is trading at levels we haven’t seen in three years. Reason being is that demand is down, people don’t have as much money so they’re not traveling as much, etc, etc. However, once we get out of this global economic downturn the price of oil is going to shoot back up again. Demand will be back up and production will either be the same or lower.

OPEC is expected to cut production when they meet on December 17, and the United States hasn’t made any gains to increase production. The moratorium on offshore drilling has been lifted but no one believes it’ll stay that way. The democrats will put it back in place come February.

So investors and those on Wall Street know that once this slowdown is over oil is going back up. Currently it’s an extremely unstable market. However, the government can do something about it. The democrats can hold a press conference right now saying they have no plans to reinstate that moratorium on offshore drilling, and they can also endorse oil share and coal to oil. Any method to increase oil production should start now.

Four, the taxpayers money is important to them, it should be important to Congress.

If there’s one thing that’s disgusted me throughout this entire process it’s been the way the government has effortlessly thrown around taxpayer money.

Taxpayers cherish every dime they make, they worked hard for that paycheck and more than deserved it. A long, long time ago in a galaxy far far away, there use to be a congress that respected that money, and respected the hard work the taxpayer did to collect it. However, our current Congress, in some cases, sees that money as theirs. They have no respect for the hard work that went into earning it, they just care that it gets spent.

So there ya go, some simple lessons we can learn from this bailout so far. Hopefully Congress will take note and make some changes in the coming months.

Yeah right.

–jb

Auto Bailout Bonanza

Unions make Big Three pay for workers who aren’t working

In the continuing saga of “How the Unions are Screwing the Auto Industry,” Fox News is reporting that, as part of a 1984 deal, the big three auto companies are forced to pay laid off workers as much as $31 an hour to do nothing.

Thousands of laid-off auto workers get paid $31 an hour to sit around and do nothing all year under a controversial program that could continue even if American taxpayers bail out the American auto industry.

The program, called “Jobs Banks,” has been around for 24 years. Some of the employees at jobs banks choose to do community service, but others do crossword puzzles and watch TV all day — or just stare at a wall. If you’re a laid-off auto worker, it’s what comes with your pink slip, thanks to a deal struck in 1984 between the United Auto Workers and the Big Three carmakers.

Gee, what a deal. The auto companies lay off a worker to cut costs and are forced to continue paying them. I want to know if this is in addition to state unemployment benefits. After all, the vast majority of these laid off workers are eligible for unemployment, why should GM or Ford have to pay them for not working.

Just for the record, that $31 an hour is about how much the average worker at Toyota gets paid…for actually working.

It should also be noted that bankruptcy law experts say this is exactly the reason we have bankruptcy, to get rid of useless programs.

A second bankruptcy law expert, George Mason University Professor Todd Zywicki, said, “This is exactly the sort of thing bankruptcy is useful for … to get rid of programs that don’t do the company any good.”

If we want to help the auto companies and ensure “accountability and viability,” Congress has to take on the auto unions. They have to say, “enough is enough, stop with all of the outrageous pay demands.” Unfortunately, I’d be very surprised if that actually happened. The democrats thrive off of union support, I can’t see any situation in which they would go against the union’s wishes.

That means someone at the executive level at GM, Ford, and Chrysler has to grow a pair and take on the unions. Give them an ultimatum, you take a pay cut and get rid of the ‘Jobs Banks’ program and everyone keeps their job. If you deny our request we fire everyone. Pretty simple.

On a semi-related note, okay not related at all, Obama selected his director of the Office of Management and Budget today and lets just say he has, er, interesting hair.

His name is Peter Orszag and either he’s wearing a wig or has the worst haircut in the history of man.

Let me offer a suggestion, he should redistribute some of the hair on top downward to give him fair coverage.

Just sayin’

–jb

Someone Get the Dems a Thesaurus

The Democrats just finished up their press conference regarding the auto industry bailout and there’s one thing I learned from it; if Nancy Pelosi is on your Christmas list get her a thesaurus.

The words of the day for the democrats were accountability and viability. Together they were said 27 times, Nancy Pelosi delivering them 20 times.

Overall, I liked the press conference; if it was delivered about two and a half weeks ago.

Basically the democrats said they wanted the auto industry to provide them with a report about how they would be, you guessed it, accountable with tax payer dollars and viable for the future. That makes sense to me, I’d like to know if the auto industry is going to be able to survive with a measly $25 billion; and, unlike the $700 billion bailout, I’d like to make sure they are accountable for the money they receive.

However, the democrats are a tad late. The auto makers asked for this money weeks ago. That’s when this press conference should have taken place. Instead they had Carl Levin draft legislation for the bailout, they had musings of taking it from the $700 billion, there was talk that they’d do it if they got an ownership stake in the companies, there was talk today that a bipartisan group had finished legislation, there was rumor that it would be voted on soon. The House and Senate leadership let rumors fly.

What’s the problem with that? Take a good hard look at the market. No one knows what the hell is going on in Washington, their teetering is creating massive unease on Wall Street. Had the democrats come out the day after the auto industry asked for the money, we would have had a clear message as to what the procedure was going to be. We would have known when the decision was going to be made, and we would have understood that Congress had understood the idea of “accountability and viability.”

By the way, as I’m writing this Carl Levin, my Senator from Michigan, is speaking to the press. I unmuted the TV to hear what he had to say, I then remuted it after hearing this line…

“Auto industries around the world including China and Europe are requesting loans from their governments because of the dramatic decline of the global economy and the drastic reduction in car purchases and the availability of credit.”

So Levin’s justification for a bailout of the auto industry is that everyone else is doing it. Since when did we follow communist China’s lead?

–jb