Troubled Asset Relief Program

Warren Buffett: Crony Capitalist

by Bill O'Connell on August 26, 2011

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Photo by Dave Makes

Two news items yesterday, when put together, start to tell an interesting story. Warren Buffett invested $5 billion in Bank of America in a private sweetheart deal that will guarantee him a 6% return (that’s $300 million per year) and he is hosting a fund raiser for Barack Obama in New York where the tickets start at $10,000. What’s going on?

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Democrats: Free Market Capitalists-No, Crony Capitalists-Yes

by Bill O'Connell on December 3, 2010

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The latest news on the economy is not encouraging: a mere 39,000 jobs added and the unemployment creeps ever closer to 10% at 9.8%.  In spite of this, or apparently ignorant of it, the lame duck House voted yesterday for another whopping tax increase on the most productive among us. Yes, yes, they will beat the class warfare drums about tax “cuts” for the rich, when what they are voting on is not a cut at all, but either leaving things the way they are or raising taxes.  With the recovery barely showing a pulse, it is not the time to take money out of the hands of free market capitalists and put it in the hands of the government.  Who do you think can pull the economy out of the doldrums, entrepreneurs or government bureaucrats?

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The Tangled Web of Entitlement Politics

by Bill O'Connell on November 15, 2010

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“The nine most terrifying words in the English language are, ‘I’m from the government, and I’m here to help.’” – Ronald Reagan


Our friends on the left scoff at such words as those above, but the longer they are in power and providing “help”, the more they get tied up in knots.  Let me walk you through an example using Congressman Tim Bishop as the key player.

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Tim Bishop Outsources Jobs with Your Tax Dollars

by Bill O'Connell on October 28, 2010

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There’s good news and bad news coming out of the Tim Bishop campaign.  The good news is that he has a new ad out so we don’t have to keep watching the same ad he has been running incessantly for the past five weeks.  The bad news it’s about the one subject that Tim Bishop wants to talk about, outsourcing.  It’s the same old stuff, wrapped in a new package.  Why can’t Tim Bishop talk about his record?  Is he embarrassed by it or afraid of it.

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Tim Bishop’s Big Fat Zero

by Bill O'Connell on October 14, 2010

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Tim Bishop has one reason that he consistently gives for sending him back to Congress and that is that his opponent, Randy Altschuler, started a company and Bishop claims it outsourced jobs overseas. 

In a New York Post article yesterday, Raymond J. Keating informs us  that the Small Business & Entrepreneurship Council, where he serves as chief economist, just released their Small Business Scorecard for the 111thCongress.  The scorecard rates members of Congress on a wide range of votes (27 in the Senate and 22 in the House) that cover such things as workplace regulation, ObamaCare, government spending, tax policies, energy legislation, and bailouts.  Overall, he tells us the New York delegation scored just 11 percent on the scorecard, the sixth worst of the fifty states.  The two members of the delegation that scored well are Peter King, and John Lee.  On the other hand Tim Bishop failed to vote even once with small business on big issues.  A big fat zero.

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The Anti-Business Obama

by Bill O'Connell on June 18, 2010

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President Obama has demonstrated, as much as he would like to deny it, a strong anti-business sentiment.  He has acted in ways that remind one of a Castro or Chavez in that he is doing it in the name of the people against the greedy profiteers.

General Motors and Chrysler were bled dry by union contracts.  Management is culpable for agreeing to those contracts so they don’t get a pass in my view.  But government also piled on with CAFÉ mileage requirements that forced the auto companies to build cars at a loss (because of the union contracts) to meet this standard.  In the midst of the financial crisis the auto companies were running out of cash.  The Obama administration, rather than let them go into bankruptcy, muscles in and turns over major ownership stakes in GM and Chrysler to the unions who are loyal supporters of the Democrat Party, rather than pay bondholders who were entitled to be paid first.

The housing bubble was driven by government policies going back years.  The stated goals of the Clinton administration was to increase home ownership to as many people as possible.  When the bubble burst, the Obama administration forced TARP money on healthy banks who neither needed it nor wanted it.  The reason was to avoid showing who the real basket case banks were.  But these banks were forced by their government to take the money and then the Obama administration created a pay czar to make sure any company that took TARP money, voluntarily or not, could not pay their executives more than Team Obama said they could.

Lax regulation on the Deepwater Horizon platform in the Gulf of Mexico permitted BP to take short cuts that led to disaster.  President Obama is put in an embarrassing position, so he cranks up the Public Relations machine to throw maximum ire upon BP.  He then tries to be a hero by shaking down BP for $20 billion.  BP has never said they would not pay.  BP waived the limit on damages that was set by, you guessed it, the government and has steadfastly said they would make things right.  But President Obama wanted to look like he was actually doing something and by taking $20 billion and putting it under his control it might look like he was.  I agree with many that President Obama did not cause the leak in the Gulf any more than Bush created Hurricane Katrina, but if, as Obama likes to say, the buck stops here, then he is responsible for the lax enforcement by his administration that could have prevented it.

To create jobs this administration created a $787 billion bailout package that did next to nothing to create real jobs.  It was pork to be paid to union members such as teachers, contractors, and not to grow the economy and create sustainable jobs.

If a business that is solidly behind the Obama agenda, like General Electric who owns the NBC and MSNBC cheerleaders, and wants to be a key player in the cap and trade exchanges, this President will treat them kindly.  But if you are an independent business trying to grow, you will be taxed to your eye sockets.

We pride ourselves on being a nation of laws not a nation of men, but since this President has taken office he has a view that he is above the law and can do whatever he feels he needs to do.  It was somewhat surreal to have Congressman Joe Barton, apologize to BP for the shakedown.  No one owes BP an apology but I understand Congressman Barton’s distaste for the administrations boorish behavior.  No one has the right to demand another’s property without due process of law, and that’s what happened.  Perhaps Tony Heywood should be fired for going along with it.

Let’s keep this in mind.  We need BP to continue to be a viable profitable company, so that every last claim can be paid.  If this administration succeeds in driving BP into the ground, guess who will be next in line to pick up the tab?  That’s right, gentle readers, you and me;  the American taxpayers.

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Help Wanted: Chief Executive in the White House

by Bill O'Connell on February 19, 2010

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President Obama has just created a panel to figure out how to get our debt under control.  Even when he makes a decision, such as this one, it is to pass the buck to someone else to do the heavy lifting.  His attempt to overhaul health care turned into the Harry and Nancy Show.  Obama campaigned and gave speeches while Pelosi and Reid shut out the Republicans and created the bill that could not be passed.  Obama is now trying to put lipstick on that pig, by calling for a bipartisan meeting.  But instead of starting over and getting ideas from everyone, they are basically going to pick over the stinking corpse of the bill that the Democrats could not get passed.  It is obvious that the real objective is to either get some Republicans to sign on or to use the meeting as a club to beat the Republicans as the “party of No.”

Stop Me Before I Spend

This president can’t seem to control himself and he finds that he painted himself into a corner.  If he tries to raise taxes on those who make less than $250,000 per year he will be breaking a major campaign promise.  If he stops spending on his own, he will lose the left which is about the only support he has remaining.  So he calls in Alan Simpson and Erskine Bowles to co-chair a committee charged with making the president a tailor made fig leaf, to allow him to cut spending and raise taxes, while shrugging his shoulders and saying, “I can’t go against the excellent advice of this august commission.”

If he wants to cut spending, he can just cut spending.  He doesn’t need a commission to do so.  How about an across the board spending freeze, except for national defense, until the economy grows enough to balance the budget and not with gimmicks like increasing discretionary spending now 24% and then saying you will freeze that same spending for the next three years?  How about freezing government hiring?  How about returning $500 billion in unspent stimulus money and $400 billion in repaid TARP money, plus interest, to the Treasury?  Don’t hold your breath.  That would require someone with executive experience who knows how to make a decision, rather than deliberating, like a legislator.  Sarah Palin comes to mind, as does George Bush (I & II), Bill Clinton, Ronald Reagan.  These experienced executives knew how to put together a budget and make decisions.  Chris Christie in New Jersey was just sworn in last month as governor and he immediately identified the problem as too much spending and got to work cutting it back.  All that President Obama seems to know how to do is talk. 

If we start advertising now, we may get enough resumes to review to find a replacement by 2012.

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The Auto Bailout Clings to Life

by Bill O'Connell on November 20, 2008

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It’s not over yet folks, although your voice is being heard.  The big sticking point seems to be whether the bailout money should be taken out of our left pocket ($700 billion TARP bailout package) or our right pocket ($25 billion fund to provide re-tooling for green production).  The only people talking about going Chapter 11 are people on the right such as Mitt Romney, who actually knows something about it having watched his father, George Romney, try to save American Motors, as CEO.

Politics Trumps Problem Solving

Barney Frank has weighed in to make sure the class warfare card is played.  He compared the bailout of AIG with the bailout of the auto companies as White Collar (AIG) vs. Blue Collar (GM). A blog by dbeale points this out very well.  This begs the question:  where does it all end?  Where do you draw the line?  If you bail out AIG, you have to bail out GM because they have blue collar workers.  If you bail out GM you have to bail out (fill in the company name) because they have (fill in special interest group).

But if you read the post carefully you can see the true political objectives of the Democrats and their supporters:

  1. Give the auto companies a bailout
  2. Fire most of senior management for mismanagement
  3. Threaten bankruptcy but don’t do it
  4. If the auto companies don’t reinvent themselves (which they can’t do without bankruptcy), nationalize them.  Don’t call it nationalization, call it a “quasi government takeover”
  5. Make sure the focus is on building high mileage cars, and whatever else the green program demands.  Anyone who gets in the way of that goal should be fired. To quote dbeale, “every one involved in undermining gas efficiency standards must go.”
  6. Appoint a automobile czar (don’t call it nationalization) to oversee the companies to make sure that the management isn’t paid too much, that union contracts are reinforced, the “right” kind of cars are built.
  7. Bailout with more government money every 3 years, because the root cause the problem is never addressed.

A Workable Solution

The root of the problem is that the auto companies as they are today, are not competitive.  Here is my proposal

  1. Eliminate the CAFE standards.  The CAFE standards were introduced 1975 in response to the energy crisis.  At least that was the stated objective.  The real objective was to curtail the importation of foreign cars, particularly Japanese cars, which could already meet the standards.  If you wanted to buy a car that got good gas mileage, you could.  This was a attempt by government to force U.S. car companies to make cars of similar economy.  However, their cost structure would not allow them to compete with the imports at the low end of the market.  G.M., Ford, and Chrysler don’t seem to have a problem making a profit on the luxury end of the market, on SUVs, and light trucks.  But if, for example the standard is 27 MPG, and your Cadillac only got 20 MPG.  You would have to sell eight compact cars that get 28 MPG for each Cadillac to comply with the standard.  However, it is estimated that GM is at a cost disadvantage of $2000 per vehicle.  At the luxury end there is enough margin to cover that.  At the low end there isn’t.  So, GM as a direct result of government policy has to sell eight cars at a loss to allow them to sell one car at a profit.  Why not let them sell as many cars at a profit as they can, sell no cars at a loss and let the market decide?  If need a high mileage car to save on gas for your long commute, buy a foreign car.
  2. File bankruptcy.  Reorganize and get rid of those things that are killing you.  That’s what the bankruptcy laws are for.  Yes, shareholders may get wiped out, union contracts will have to be renegotiated, commitments to continue paying revenue bonds for plants that are no longer needed can be renegotiated or voided, pension commitments revisited, etc.
  3. Slim down, come out of bankruptcy, and get competitive again.  The Big three made about 17 million vehicles in 2007.  Does any rational person believe that if the Big Three go into bankruptcy that the people and companies that bought that many vehicles will no longer need cars?  If they still need cars, someone has to build them.  That can either be the foreign makes, the slimmed down Lean Three, or new companies that are formed to take advantage of this huge demand for 17 million vehicles that no one, or not enough are stepping up to the plate to meet it.  People will be re-hired, sub-contractors will have new subcontracts, and the auto industry can actually thrive and not just limp along from bailout to bailout.

The key to this working is to get government out of the mix.  We are facing a plethora of problems and most of them can be traced to government intervention in the market place.  The financial crisis is a direct result of government programs such as Fannie Mae, Freddie Mac, the Community Reinvestment Act, the strong arm tactics of the Clinton Justice Department and HUD to demand more sub-prime lending, and the resistance of Barney Frank and Chris Dodd for more oversight.

The tragedy is that we have problems created by the government and we think that more government is going to fix them.  Keep up the fight.  Let your representatives and senators know, NO BAILOUT

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