GM a Few Months From Extinction

November 13, 2008

Many people call GM’s vehicles dinosaurs, which could be weirdly prescient in that analysts say that GM will become extinct in early 2009 unless it receives billions from the government.  Just last year of course the authomobile industry required $25 billion of loan guaranties from the government.  Now GM needs about that amount in cash.

Like Thomas Friedman, I am sick and tired of the automobile industry thinking that it can susrvive by paying money to lobbyists, blocking environmental laws, and disregarding the needs and concerns of consumers.  American auto manufacturers used to plan the obsolescence of the cars they manufactured in the interest of causing people to need new ones.  Their utter disregard of consumers is tantamount to planning their own obsolescence.

There is no way taxpayer should support the disreputable and irrational behavior of the American auto industry, at least not without some serious concessions.  The government ought to get whatever equity there is held by the stockholders and the officers and directors should be held accountable.  That means fire them without a parachute of any sort.  The salaries of their successors, considering what these companies have done to their industry and to the country, should be dramatically reduced.


About the Bailout

October 22, 2008

Bernie Sanders, an independent Senator, recently wrote a piece well worth reading if you are following the bailout. I have read a lot about the “Swedish model” which involves getting stock for the bailout money. This is said to give the tax payers an upside. Senator Sanders takes a slightly different view, which is detailed in the linked article. It is interesting to see that on this point populists can agree with conservatives (although their logical paths are quite divergent getting to the same general position), who buck at the prospect of “nationalizing” banks by having the government have a ownership interest.


October 16, 2008

The debates and campaigns for the presidency certainly give us an opportunity to learn about the candidates and their parties. Many. many people become political junkies during this period. Each election brings new insight and hopefully understanding. What is just as interesting to me is what we learn about ourselves.

I was frankly astonished at the results of the last presidential election. A significant number of the people who now hold Bush in low regard voted for him four years ago. Yet to my knowledge nothing happened in the second term that was not at least very clearly telegraphed in the first term. Concern about the economy was clearly expressed four years ago. Nobel Prize winning Paul Krugman (among others) has been prominently and clearly talking about the failures of Bush’s economic policies for years.

Actually as early as the late stages of the Clinton administration people were beginning to express concern about credit default swaps and the health of the financial industry. Four years ago we knew pretty much as much about our foreign policy and its flaws as we know now.

So I have to confess, not only was I surprised at the 2004 election results, but I have been surprised by the strength of the present aversion to Bush and his policies. It seems like Bush is being scapegoated a bit. No one can say that Bush did anything unexpected in his second term. His second term, like his first term, is defined by ideological inflexibility. We voted ourselves into this situation. I just don’t buy blaming Bush for our problems when we chose him with our eyes open.

In the current election, Gallup just came out with interesting polls that show demographic results. The economy seems to be driving voters to Obama. As I see it the well publicized miscalculations of the McCain campaign are not the reason for his decline in popularity. Rather they have merely impeded his ability to overcome the devastating effect of the economy on his campaign.

One thing the Republicans have been absolutely lock-step about is the deregulation of the financial industry and the deregulation of corporate activity in general. It is hard to imagine any proud advocate of this policy (such as McCain) being embraced by the population at the time of the catastrophic exposure of the consequences of this policy.

The Gallup survey shows that Obama for the first time now has a lead among male voters and for the first time among elderly voters. In September he gained a lead among college graduates and has always had a substantial lead among people who extended their education beyond college. This is all consistent with the broader polls.

One of the features of this campaign that is interesting of course is the fact that an African American is running for the first time. In that light it is interesting that McCain still has an edge among white voters. It is a steadily declining edge and no longer a clearly significant preference, but white voters as a group are showing more reluctance to vote for Obama than other demographic groups. This, I guess, is not surprising but it is a little startling to see.

I would not attribute this to racism, as that term is commonly used, but perhaps to unexplored precognitive associations. A good exercise I think for undecided whites or whites not strongly disinclined to vote for Obama is to imagine that things were reversed.

Imagine that McCain, instead of being at the bottom of his class had been at the top and had been Editor of the Harvard Law Review.

Now imagine that Obama barely graduated from college. Imagine that 15 years ago was deeply involved in a savings and loan scandal that cost tax payers hundreds of billions of dollars. Imagine that he was an ardent champion of deregulating the financial industry, and that all of the unpleasant aspects of Senator McCain’s personal life were a part of Obama’s life instead. Imagine that he had an unwed pregnant teenage daughter and had been found to have committed serious ethics violations while in the legislature.

If you can do this kind of switch and say that it really would not matter to you, or that your attitude about these things would the same for both candidates then I think you can say that you are not laboring with the precognitive associations of the sort I’m talking about.

I by no means am suggesting that a white’s disagreement with Obama is racially influenced. It is just that the polls suggest that in about one out of ten cases that could be an unexamined influence.

Another interesting poll result is that Obama lags among the group of people that attend church at least once a week. This is the group in which McCain is strongest. His is up 16 points there. I do not have the polls that predate the Republican convention but by all accounts Palin has firmed up McCain’s standing in this group. My guess here is that people who attend church the most tend to be more zealous and that among the zealous, McCain’s opposition to Roe v. Wade wins him the support of most people in the group. I’m presuming that this group is mostly a single issue group. If I’m wrong then the poll results would become even more interesting.

Where Your Tax Dollars are Going

October 7, 2008

ABC reports that after a difficult season wrangling money out of the government, AIG executives went on a retreat costing $440,000 at the St. Regis Resort in Monarch Beach, California, where rooms run up to $1000 a night. The group should be commended for only changing $23,000 in spa fees, but after eating $200,000 worth of food in a week, they may not have been able to get to the spa.

We are quite literally paying for this with tax money in order to stabilize financial institutions.

The bailout involves us just buying worthless securities.  The banking lobby convinced Congress that it should not follow the recommendation of economists in taking stock in the financial institutions that it is propping up.  By buying the garbage generated buy these institutions instead of taking a stake in them, we as taxpayers do not only lose the right to future profit of the business but the right to curb the sort of behavior reported on by ABC News.

Republicans and Deregulation

October 2, 2008

To some audiences McCain has claimed to have made an effort to strengthen the regualtion of the financial industry.  This is disingenuous, as he and his party are four square behind removing constraints on the financial community and the business world in general.  I have discussed his meager gestures toward regulating business.  His overwhelming record in favor of deregulation is much discussed elsewhere.  It is hard to imagine a record more clearly favoring abolishing regulatory constraints.  Here is a video compilation of a few recent deregulation statements by McCain and speakers at the Republican convention.

S. 190: It Has Attained Myth Status

September 30, 2008

McCain spent months during the nomination process trying to convince us he was against all government regulation.  “I’m always for less regulation,” Wall Street Journal quotes him saying six months ago. He added: “I’d like to see a lot of the unnecessary government regulations eliminated.”  He now is now suggesting that he has been championing legislation that would have created regulations sufficient to have avoided the present crisis.  I have not seen McCain explicitly make such a far-fetched claim, but certainly many of his supporters seem to believe this.

McCain has pointed to his sponsorship of S. 190 in 2006 to show that he is not as hard line as he presented himself earlier.  His supplicants seem to have picked up this ball and run right out of the stadium with it.

Some people have actually claimed that the present crisis would have been averted if “McCain’s bill” had passed.  We have to stop right there.  McCain did not even believe that the scope of the bill could have such an effect when he endorsed it.  The bill was written in response to an accounting scandal that rocked Freddie Mack and Fannie Mae. In the best of all circumstances the bill would have helped avert (this is hotly contested) the bailout of Fannie Mae and Freddie Mack, but that had happened before the current crisis.

In his speech in which he announced his sponsorship a year and a quarter after the bill was introduced, he said”

Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

He does in his concluding sentence allude to problems for the economy if effective regulations are not implemented but this was not the focus of the speech at all.

At this point in time some form of the bill was on the floor of the Senate and it was capable of being voted on but it was entirely ignored had would never be voted on.  An amended form of the bill came out of the committee but to my knowledge there is no record of the bill as was when it emerged from the committee.  There is only the notation that it was changed.  Significantly omitted from McCain’s four minute speech is any encouragement that it be voted on, whatever it was.

Many people say that the Democrats filibustered this bill to prevent the Republicans from passing it.  There is simply no record of that at all.  Others say that it was the threat of a Democratic filibuster that prevented the bill’s passage and I have been unable to turn up any hint of that either.

The truth is that a significant number of Republicans opposed the bill.  The American Enterprise Institute was against it.  It is hard to imagine that this opposition was not reflected in the attitude of the majority of Republican senators.  Furthermore one of the most prominent lobbying groups for deregulation was opposed to it.  In this light it is easy to see why no Republicans were championing the bill at all.  Nor to my knowledge were any Democrats in the Republican-controlled senate.

Because the bill was fated to wither on the legislative vine and die unvoted upon in a few months, McCain vote was entirely safe.  He could create the appearance of a record without doing anything or even voting against the Republican “base.” The proof of the political purpose of his sponsorship, as opposed to substantive support, is that the bill was reintroduced in 2007 without McCain sponsorship or support.

The sole remaining deviation from McCain’s record of voting to deregulate Wall Street and the financial community was with respect to the Sarbanes-Onley bill, which in the wake of corporate accounting scandals required enhanced reporting.  After passage this fell on harsh criticism from corporate executives and McCain said that he regretted voting for it.

Other than these two minor deviations, I believe that McCain until now has been an ardent proponent of deregulation.

CBS News Says Obama Won by a Wide Margin Among Uncommitted Voters

September 30, 2008

CBS says that Obama won, although the polls do not seem to show a bump after the debate.  This may be because there were so many things happening last week, including last week’s declaration by McCain of “Mission Accomplished” with respect to the bailout. It was only this week that this was shown to be as illusory as previously accomplished missions.

McCain’s seizing the headlines last week and his efforts to portray himself as leader of the congressional bailout coalition no doubt caused expectations for his performance in the debate to rise, particularly when foreign policy, his acknowledged strength, was the focus of the debate.  Higher expectations may have contributed to the perception that he lost the debate.

I got the impression that he was betting the house when he “suspended” his campaign to demonstrate his leadership ability with the bailout legislation.  He of course did not suspend anything except his own public appearances and arguably the television time he got for this gesture exceeded anything that he would have received had he continued to make scheduled public appearances.  Once again though he took a short term gain — the appearance of leadership in crisis — and risked a long term loss.  Once again, as with the vice presidential decision, it looks like the long term loss will outweigh the immediate gains.  For all the broohaha last week, this week McCain looks ineffective.  His white horse seems to have charged in the wrong direction.

The vice presidential debate could given the recent downward direction of the polls momentum.  I shudder to think what episode awaits us to curb that event if it occurs.