$145.6 mil... a DAY!

We tax all the others and pass the revenue on to you

I already mentioned not buying a new car, right? Back on March 21? Not that new cars aren't cool. They are. It's just that a financed $40k cool car isn't in your best interest, especially right now. That car is Detroit's way of shifting the crisis from them to you by getting you to go into great and untimely personal debt on their behalf. They need you to bail them out. That is, after TimmyG and the prez finish up their meddling.

This just in: TimmyG and the prez don't know how to fix the auto industry. Neither of them has run so much as a lemonade stand. They want you to buy cars without them actually having to fix anything. That's the fix. Now the US taxpayer is standing behind your next warranty. Why isn't that a comforting thought?

Next up: Bailout loans get paid out as purchase incentives for suckers who buy cool new cars they can't afford. You heard it here first.

Remember the "car czar" idea that flopped a month ago? Now TimmyG is going to head up an "auto industry panel". That should sound familiar. It's a car czar by committee, every bit as appealing as the economic-bailout-by-committee that we discussed last column. Ain't gonna work, nosiree.

The answer isn't doing what they've always done, which the auto industry panel (an A+ for arrogance on the name) doesn't understand anyway. That's how you got GM into this mess, Mr. Wagoner. Now, of course, GM is too big to fail and too screwed up to succeed. How did we get to the point of telling private industry how to operate and who should preside? Let 'em flop. They're going to anyway so get it over with and don't ask for more taxpayer money.

When I was in Armenia in 2007 there was an employer that was too big to fail so it was perennially propped up by the government. Didn't pay its taxes, didn't compete with anyone, didn't really operate under the same rules as for-profit companies, didn't have any plans to get back on its feet. Why bother when the government is perpetually bailing you out?

This employer produced parts for refrigerators. Russian refrigerators that hadn't themselves been produced since the days of humming round heat exchangers on top. Remember, Armenia has been an economic colony of Russia since forever. They had a guaranteed Russian market for their parts once upon a time but today, no market at all. The few parts that did get made were instant scrap metal which is all they were good for because they didn't fit anything anyway.

Still, the workers show up occasionally, hang around, get paid and are counted as fully employed in the census because, after all, they have jobs. The government is afraid to shut down the plant so things drift along. It embodies the old Soviet phrase "We pretend to work, they pretend to pay us." Think about that for a minute. They government is afraid of what might happen if an unsuccessful company is allowed to fail. Is that where we are? Looks like it from here. That's what happens when socialism replaces capitalism.

Our prez didn't get along with GM CEO Rick Wagoner. The prez fired him and replaced him with Fritz Henderson, whose almost-first act was to announce that he wasn't having any of that buck-a-year nonsense like Wagoner. He wouldn't ask for a raise, not yet, but he darn sure wasn't going to take a pay cut either. So part of our bailout money is going to finance his base pay of $1.3 mil/year.

His almost-second act was to announce to GM employees that bankruptcy is a real possibility. He's OK with that because he'll have a priority claim for his unpaid salary, just like the floor workers and salarymen below him.

Bankruptcy? Wasn't our bailout supposed to at least delay that for a while to give GM a chance to recover? Apparently not, so exactly what did we get for the $13.4 bil we gave GM since last Dec. 31? That's $145.6 mil PER DAY!!! And where is it now? Well, Fritz has one eye on his $1.3 mil/year plus perks. After that it's anybody's guess.

Lest we overlook Chrysler, they're being forced into a shotgun marriage with Italy's Fiat. Fiat is getting 35% of Chrysler for free! Wait, does that include the entire Chrysler bailout to date? And are we going to give them billions more in bailout money? Well?

You remember Fiat, don't you? They once made the nifty 124 Spider and some other cars that Americans didn't want. They were such utter failures in the American auto market -- couldn't keep enough spare parts in stock to handle all the repairs, for one thing -- that they were forced to leave us in 1984 and no one has ever missed them.

You still see 1969 Fiat clones in the former Soviet Union where Ladas and Zhigulis (Fiat sold entire plants to the USSR) still doddle along, belching pollutants that the Soviets (and the Italians before them) didn't require be controlled, collapsing into auto-rubble at incredible rates. Not even Russians will drive Ladas if they can afford anything else. Now Fiat is Chrysler's salvation? Don't count on it. Fiat is a mess.

You heard it here first #2: GM and Chrysler aren't ever going to repay their bailout "loans" and Fiat will go away -- just like they did in 1984 -- as soon as they have milked the American taxpayer out of his last free dollar.

From Eric Bolling's column "What the Car Czars Are Driving Might Shock You" on Foxbusiness.com:

Tim Geithner -- Acura
Larry Summers -- Mazda
Peter Orszag -- Honda
White House Economist Jared Bernstein -- Honda
White House Economic Advisor Austin Goolsbee -- Toyota

They don't believe their own pitch.

Are you mad yet?

Here's my plan: Have Chrysler start making refrigerators in Armenia.

* * * * *

We are all here for a spell; get all the good laughs you can.
Will Rogers

$70 Bil Piece of Advice

We tax all the others and pass the revenue on to you

Here's a piece of advice that will retrieve $70,000,000,000, the amount of AIG bailout that went to its trading partners. No, really, $70 bil or whatever the amount was that went out AIG's back door to those guys.

Put AIG in an operating liquidating bankruptcy (as I mentioned before) then force their trading partners to return all preferential payments.

That's what you do when a bankrupt pays his brother-in-law the day before he declares bankruptcy and that's what we need to do. Everyone shares the pain, everyone including the trading partners gets their pro rata distribution. It's the same "fair share" concept that we believe in when we pay our taxes.

This plan is available, it works and it's fair. If we don't do it, then one group of creditors (the trading partners) is favored over all other groups of creditors. If you don't think there are mobs of other disadvantaged creditors then you just haven't been paying attention. We have plenty of leverage, even with foreign banks, and nothing to lose. We could even tie it in with the new asset purchase plan.

Still reading? Yes, this might also apply to the bonuses but it's less clear there.

You heard it here first.

Sing it, Danny O'Keefe:

Some got to win
Some got to lose
Good time Charlie's got the blues

(Does anyone remember Danny O'Keefe or this wonderful melancholy song? Raise your hands.)

* * * * *

The new plan is to buy toxic assets from banks. Wait a minute. Wasn't that the old plan? TARP, where we overpaid by 22% for $350 bil of toxic assets?

Yep, sure was. The difference is that this time we're organizing a committee first. Because of our faith in the committee process? Don't be silly. So there will more people to blame. The committee will include the Fed, TreasDept and private sector investors. The latter will be largely indemnified from loss, at your expense. You, however, will generally be indemnified from profit.

These are the same guys who got us into this mess. No one has told us how we're going to be protected from our protectors. The tease (again) is that we will all benefit from the upside. You know, the upside. Where government makes money on its investments. Like, say, Social Security and Medicare. Oh, that's right. They used that money for something else.

This is like buying something on eBay from someone who has all negative feedbacks but you buy anyway because it's cheap.

This just in: There is no upside when you loan someone money to buy a bunch of someone else's bad debt.

We're going to buy a lot of diminished-value (not supposed to say toxic any more, the T word, but that's what we're buying) assets but now... ta da!... the market will set the value of what we're buying. That's the same market that Congress and TimmyG ignored to the tune of the $78 bil overpayment. The market is our friend now. It was our friend back then too, but we threw it over for the hoodlum with the hot car that our moms told us not to hang out with.

Good time Charlie's got the blues

There is no distinctly native criminal class except Congress.
Mark Twain

What Do We Do?

We tax all the others and pass the revenue on to you

Ransom asks a simple and good question: "What do we do?" Meaning, I think, what personal course do we chart given the economic crisis and our current leadership void.

The stimulus plan amounts to putting up gobs of money for borrowers ... as opposed to the bailout plans, which put up gobs of money for people who borrowed recklessly. For postponed business investing, that sounds OK. Problem is, you need a reasonable chance of repayment before you decide to make a business loan. That's why business plans exist. "Make it make sense to us and we'll loan you the money." When that works we all win, the loan gets repaid, jobs get created and the lender and businessman are rewarded with profits. When it fails we get GM, a convenient example. I'm glad I'm not a GM creditor.

It's hard to make a case for new business lending right now. If it weren't, BofA would be lending instead of hoarding the money they have. It still sounds good, that's why congress keeps trotting it out, but no one's doing it because the crisis is going to get worse and borrowers can be unnecessary risks. Why lend if the government's giving away free money? But there is no free money, just like there's no free Mexican food, remember?

Can you name any successful business people who gave it all up and become congresspeople? A darn short list. The really successful ones, Perot and Forbes come to mind, wouldn't demean themselves, seeking only higher office. Congress: The best of the unemployable. Would you hire Chris or Barney or Nancy or Harry to do anything important? TimmyG? Really? Nah.

Admit it, we wouldn't hire a congressman if we wanted to produce something. So why are we listening to them tell us how the American business model should run. Stop doing that. They don't know.

Consumer lending is another matter entirely. As the stimulus is currently contemplated, that involves loaning YOU a lot of money to buy things you don't need. Sure, some people need a new car but most people buy new cars, or name the purchase of your dreams, just because they want one. They used to do it that way. Their parents did it that way. Now we're being asked to close our eyes and pretend that today is the same as yesterday. It's not. Now I want to give the next sentence it's own line:

Consumer borrowing shifts the crisis to you

Pile up your debt to save the economy? That idea doesn't work for me. It shifts the center of the crisis but it doesn't solve it. The lenders get money and you get... stuff. Do you really need more stuff... and debt?

The idea doesn't work for lenders either, even though they want you to think otherwise. That's why they lobbied so hard for the last couple of bankruptcy reforms. They prefer your indentured servitude over your opportunity for a "fresh start", the heart of bankruptcy laws.

What do we do?

STOP BORROWING! If you can't afford it without borrowing... you can't afford it. The stimulus isn't in your best interest. I make an exception for housing but even then only if you can make a substantial down payment. Need a car but can't afford a new one? Buy a used one you can afford and save your money for something better later on. Do what you taught your kids to do.

Save something every month and put it in the bank. If the deposit limits scare you, open another account and thank God for your good fortune. Pay cash whenever you can.

Make do with what you've got. Cut back. Do the things that you talked about doing when gas was approaching $5/gallon. That was only last year.

Increase your marketability by getting more education and learning more about how your employer works.

Make yourself indispensable to your clients by helping them succeed.

Get a second job, even if it's flipping burgers.

Grow a Victory garden and put some flowers in with your veggies. Free beauty is good for the soul and so are home-grown tomatoes.

Refinance high mortgages if you can. Lenders may be more sympathetic now.

Invest conservatively.

Wait it out.

Here's what not to do:

1. Don't believe in crackpot solutions that involve replacing our government with something else.

2. Don't believe anyone who tells you that they know what you should do but they won't tell you unless you pay them. I'll tell you for free and I'm at least as likely to be right as they are.

3. Don't believe that help is on the way. The crisis may be someone else's fault but the solution for your family is up to you. Just like in the 1930s, 50s, and 80s. Get on it.

* * * * *

The time to save is now. When a dog gets a bone he doesn't go out and make a down payment on a bigger bone. He buries the one he's got. -- Will Rogers

Losing the War

We tax all the others and pass the revenue on to you

This is what it feels like to lose a war. You can't keep up with your losses. You're surprised by every turn of events. The cornerstones of your belief system crumble. Allies turn on you. Your leaders flee or resign or seek the company of your enemies. You become so used to losing that you can't imagine anything else.

The people left at the top scream at you "We can still pull this one out!" but they don't even have any skin in the game. They have more money and stuff than when they started the war. They're getting promotions and bonuses and we're thanking them for their failures.

Maybe you're too young to remember Nguyen Van Thieu or Nguyen Cao Ky, South Vietnamese generals and politicians who abandoned their soldiers to the North Vietnamese while they fled and then gave speeches blaming us. I remember them.

Our Thieu and Ky are named Frank, Dodd, Reid, Pelosi and Geithner. They haven't got a clue what to do, like Henry Kissinger, Geithner's mentor, in my generation. They're betting our future and hoping that something -- please God, anything -- works. The prez is their LBJ , letting his scapegoats-to-be dangle in the wind while he tries to distract us with another Great Society slight-of-hand. I've seen this movie before. I think the prez goes to China or Russia pretty soon.

* * * * *

Two of the bailout companies owe more than $100 mil in back taxes... each. No one checked, apparently. Like the bonuses. 11 others owe $20 mil. Someone who is acting comptroller general -- and thus knows absolutely nothing about tax collection -- assures us it's all right because "IRS has the tools available to collect that money." Now we're trusting the IRS to save us from ourselves? Can this get any crazier?

How did that happen? Treasury believed them (hello, TimmyG) when they said they didn't owe any taxes. They even put it in writing so it must be true. No one thought to ask IRS "Do any of these Bozos owe back taxes?"

The bonuses have been direct-deposited. The horses have left the barn. The House has just abused the tax code again, this time trying to pull their reputations out of the crapper. They passed a new tax that re-captures 90% of some of the bonuses. If you received an applicable bonus and you file your tax return and you can't offset the bonus with losses and deductions, then maybe we'll get some of that money back. Maybe ((and that's gonna fail several smell - and legal - tests), but bet the other way and keep our congressional and administration tax cheats in mind. TimmyG's $40k was a joke in comparison.

Gotta wonder why we're so fixated on AIG's latest round of bonuses. After all, it's only $170 mil. Merrill Lynch paid $6 bil in bonuses out of bailout money.

A bunch of AIG's closest "trading partners" were made whole, 100 cents on the dollar, even though their investments were worth much less. No one made an attempt to negotiate the balances or guarantee payments instead of paying them in cash at par. It's good to have powerful friends in DC. Seems pretty clear that all kinds of senators and reps and TimmyG knew about the bonuses long ago. The ruckus is just a DC sham to take our minds off of their failures.. and our lost money.

Keep this in mind: Barney knew, Nancy knew, Chris knew, Harry knew, TimmyG knew, AIG knew, Merrill Lynch knew, the trading partners knew. Knew what? That if they just kept quiet until after the election there would be billions, maybe trillions, to split up among themselves as rewards for years of incredible profits for gaming the system and wrecking our economy... and no one would be punished, no one would have to pay... except us.

You can lead a man to congress but you can't make him think. Milton Berle

Feeling Stimulated Yet?

We tax all the others and pass the revenue on to you

It must be spring. The swallows returned this morning. It gives me the feeling that at least some things are the way they should be. However...

* * * * *

Another tril? Yep. Ever notice how it's always "the Fed said", not an actual person you might ask questions of? Today "the Fed said" it's going to pump "an extra trillion" (NYTimes) into mortgage-backed securities and Treasury notes to provide more money for lending.

Did you know we had an extra tril lying around? Did TimmyG find it in the sofa?

Here's the deal. The stimulus hasn't stimulated because, inter alia, banks haven't been loaning the money they've gotten. They're moving it around among themselves, sure, but that wasn't the idea -- assuming there was an idea behind all this. Now the Fed and Treasury are joining in to offer a starter package of $200 bil for consumer, corporate investment and small business loans right away. They "hope" this grows to a tril.

There's a problem here. The Fed and Treasury aren't supposed to be consumer lenders, they're supposed to manage our money. They don't have the infrastructure or knowledge to be direct lenders. They and Congress are the ones who thought payday loans were a pretty good idea, remember? Sure you do.

More likely, this is a plan to provide another tril to traditional lenders. You know, banks. Yes, the guys we're already lending to who won't loan what we've already given them specifically for loans!

If at first you don't succeed... keep it up until you run out of money.

The Fed is also buying up another half-tril in mortgage-backed securities.

Anybody keeping count of all this swag?

* * * * *

Remember the $400 stimulus? The one you're going to get that used to be $500? OK, now do you remember why you're getting it? That's right, it's part of the overall stimulus plan. The one that isn't working.

Now compare that to the 2008 $600 stimulus that most of us received. What was the stimulus effect of the $600? Nothing? Right, didn't buy us 5 minutes of a good economy, so don't put much store in the $400 plan. It's all show and no go. Gonna have to get that stim somewhere else. If the $600 didn't work, the $400 is DOA. Don't spend it yet.

All those new jobs? You can forget them, too. Sham. No money + no incentive to invest = no new jobs. Even the government will be cutting back for the same reason: no money. Remember when the prez promised those new jobs at Caterpillar and held hands with the CatPrez? Turns out, they're actually laying off a LOT more employees, not hiring, and now the CatPrez says the administration "used" him. Say it ain't so.

Your $400 isn't going to stimulate the economy. We know that for sure because the 600 bucks last year didn't stimulate squat. So why give us the $400 at all? ... Think hush money.

A spoonful of sugar makes the medicine go down.
from Mary Poppins

An AIG Solution

We tax all the others and pass the revenue on to you

And those of us who manage the public's dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government.

Barack Obama's Inaugural Address

* * * * *

If your husband is killed in Iraq, here's what you get:
$100,000

Here's what Merrill Lynch boss Thain paid out of bailout money to redecorate his office:
$1,200,000

Here's the bonus Thain asked for in December:
$10,000,000

Here's how much Merrill Lynch's top investment banker was paid when M-L lost $27 bil last year:
$33,800,000

Here's the 2009 AIG bonus fund:
$170,000,000

Here's what Merrill-Lynch's 2008 $27 bil loss looked like:
<$27,000,000,000>

Here's how much TimmyG overpaid in the first tranche of TARP purchases:
$78,000,000,000

Here's the AIG bailout to date:
$170,000,000,000

Here's what a three tril bailout looks like:
$3,000,000,000,000

* * * * *

Here's the solution: Stop bailing out companies and individuals who looted our nation. It's America that's too big to fail, not AIG.

Put AIG into operating liquidating bankruptcy RIGHT NOW! It's coming anyway. Execs are keeping the AIG zombie moving solely to line their pockets.

Cowboys shot broke-leg horses, even their favorites, because they couldn't be saved. It's time to put down the dying AIG mule.

Make That $170 Mil In Bozo Bonuses

We tax all the others and pass the revenue on to you

They waited until the weekday news cycle was over to tell us they were skimming off $100 mil of bailout money in Bozo bonuses at AIG, only now its $170 mil. Feeling queasy yet?

Last Nov. 21 MSNBC gushed "Geithner has been a key player in the current economic crisis -- helping Treasury Secretary Hank Paulson and his team manage the wall street bailout."

TimmyG was president of the New York Fed, in charge of Wall St. oversight. He let BofA get away with billions in Merrill Lynch bonuses paid out of your bailout money. He let AIG get away with doling out $50 bil to third party trading partners they won't identify and who, tentatively identified by the Wall Street Journal, won't comment. The $440 large in AIG bailout party money? Way too small to get much attention after the initial insult.

It is simply not credible that TimmyG didn't know that Wall St. lives on bonuses. If we give a failing company $170 bil of our money, shouldn't we at least tell them "By the way, no bonuses this year." Timmy, this one is all your fault, yours and the prez.

White House spokesman Robert Gibbs told us in January, “The president-elect chose Tim Geithner to be his treasury secretary because he’s the right person to help lead our economic recovery during these challenging times.” Thank you, Politico.

The same Bobby Gibbs who told us of TommyD "Nobody's perfect". The prez has an uncanny knack for hiring "nobody's perfect" help, only his hires lean more to "nobody's competent."

In more honorable times, AIG's government-appointed CEO would have resigned in protest over this. Nope, not today, but he does tell us that he finds the bonuses distasteful. Me too.

Capitalism is the legitimate racket of the ruling class. Al Capone