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Archive for the ‘Bailouts’ Category

Europe Comes up with Bailout Plan for Greece

Posted by Steve Markowitz on October 27, 2011

European countries, specifically France and Germany, have announced the long-awaited bailout plan for Greece.  The world’s financial communities will rejoice that we have once again avoided the day of reckoning.  It remains to be seen Europe’s debt problem has actually been resolved or the can has merely been kicked down the road a bit.

The announced plan calls for European commercial banks to take a 50% loss on their Greek debt.  While this action will significantly decrease Greece’s debt, it is estimated that it will still remain at 120% of GDP by 2020.

The complex debt plan also requires European banks to raise significant additional capital.  In addition, the European bailout fund will be doubled to $1.4 trillion.  This second item is required due to the fear of other European countries’ (the PIIGS) with huge debt, including Portugal, Spain and Italy.

When announcing the Greek bailout plan, the politicians claimed victory with French President Nicolas Sarkozy saying “The results will be a source of huge relief to the world at large, which was waiting for a decision”.  German Chancellor Angela Merkel said: “I believe we were able to live up to expectations, that we did the right thing for the euro zone, and this brings us one step farther along the road to a good and sensible solution.”

Reality should temper the politicians’ victory lap.  First, it was just few months ago that European leaders estimated the cost to commercial banks for the Greek write-downs to be only 21%.  Now that figure is up to 50%.  In addition, Europe has not yet determined where it will obtain the approximately $700 billion required to increase its bailout fund.  Finally, and possibly most unknown, is the reaction of the remainder of the PIIGS to this deal.  Will these other countries stand by and take the austerity measures required to continue paying back their debt or will they use the threat of default to extract concessions?  The answer seems obvious.

The GDP of Greece is a trivial percentage of Europe’s total.  Still, Greek debt has taken center stage in the European crisis for well over a year.  While it remains to be seen if this Greek tragedy has actually been resolved, more significant challenges remain from the larger PIIG’s.  Equities’ markets will start weighing in on this question in the coming weeks after the euphoria of this Greek deal wears off.

Posted in Bailouts, Banks, Greece | Tagged: , , , , , , , | Leave a Comment »

Low-Interest Policies Endanger Life-Insurance Companies

Posted by Steve Markowitz on October 6, 2011

Since the dotcom meltdown over a decade ago, the Federal Reserve has pursued a low-interest policy as the elixir for all economic downturns.  This is medicine was also used after the 9/11 attacks and more recently on steroids after the financial meltdown of 2008.  Interest rates have remained near zero for a significant portion of this period.

While the low-interest rate policy initially forestalled economic slowdowns for extended periods, it has not done much to cure the ongoing financial downturn that started in 2008.  In fact, these low interest rate policies likely led to bubbles, including the housing bubble, which ultimately helped create the 2008 meltdown.

Besides questionable benefits and bubbles caused by the Fed’s low interest rate policies, there are other consequences.  One is the financial damage done to people on fixed incomes, particularly retirees, whose incomes have significantly decreased with the interest rates on their savings accounts.  These low interest rates have promoted more aggressive investment behavior for these people that may further damage them going forward.

Another looming problem from the Fed’s low-interest rates involves America’s life-insurance companies.  Certain life insurance policies include guaranteed return rates for policyholders.  When determining these rates, life insurance companies assume rational behavior by government and Fed relating to interest rate policies.  Such has not been the case with the near zero rate policy in place already for three years with the Fed indicating they will remain there for another two.

In attempting to determine what effect the low-interest rates will have on American insurance companies we can look to Japan.  Japan has been in a recession caused by the bursting of their real estate bubble for nearly 20 years.  Their central bank has used a similar low-interest rate policy that continues to this day.  According to the Wall Street Journal, halfway into their recession, about a decade ago, some of Japan’s major life-insurance companies failed.  Unfortunately, we can expect the similar results in United States if the Fed continues on the current path.

The axiom that there is no such thing as a free lunch is always true when it comes to economics.  There will be consequences to the Federal Reserve’s protracted use of low interest rates.  Should these impact life insurance companies to the point of threatening their solvency, we will then be faced with yet another huge bailout demand.  This viscous cycle will need to be broken.  It’s only a matter of time when a future bailout will be too large for the government to handle.

Posted in Bailouts, Interest Rates | Tagged: , , , , , , | Leave a Comment »

Moody’s Cuts French Banks’ Ratings

Posted by Steve Markowitz on September 14, 2011

Moody’s today cut the long-term debt ratings of two large French banks, Société Générale and Crédit Argricole by one notch due to the ongoing European sovereign-debt crisis.  This crisis has led to key sources pulling funds from the banks as concerns about the sovereign-debt they hold increase.  Specifically, investors that typically place money in the banks’ money market funds have been withdrawing money at high levels recently causing potential liquidity issues for the banks.

The French banks’ problems show the high level of dependencies private companies have with sovereign-debt.  It also helps explains why the large banks are pushing European governments for a bailout of Greece.  Here we go again; more banks that are too big to fail.

Posted in Bailouts, Banks, European Union | Tagged: , , , , , , , | Leave a Comment »

Federal Reserve’s Secret Loans

Posted by Steve Markowitz on August 25, 2011

In October 2008 the United States and much of the world was in the midst of a financial crisis caused by the downturn in the US housing market and the related subprime mortgage mess.  This led to the Lehman Brothers bankruptcy that set off worldwide panic and the possibility of a meltdown of other financial institutions.

In an effort to contain the crisis, the Bush Administration came up with TARP (Troubled Asset Relief Program that would allow the US government to purchase up to $700 billion worth of troubled assets.  There was a great deal of debate concerning this proposal that amounted to a huge bailout of private financial institutions with taxpayer funds.

TARP was approved by Congress and implemented, but the jury is still out as to its long-term effects.  While the program helped stabilize financial institutions in the short-run, it has caused other imbalances in the economy and negatively impacted the moral hazard.  The bailed out banks got into trouble because they made imprudent loans.  Te government’s main excuse for the bailouts was that they were too big to fail.  However, soon after the bailouts banks were back to similar poor business practices that included huge bonuses for their executives.

While the argument can be made that TARP stopped a financial panic, there can be no justification as to why these banks’ shareholders and bondholders were not heavily penalized for investing in poorly managed companies.

As troubling as the TARP bailouts were, at least that program was vetted by Congress and in a somewhat transparent manner.  It has been disclosed that an even larger bailout occurred through the Federal Reserve in secret and without oversight or Congressional approval.  The scope of this program recently became public, the result of a Freedom of Information Act lawsuit filed by Bloomberg that went all the way to the US Supreme Court.  After reviewing over 29,000 Fed supplied documents, Bloomberg concluded the following:

  • The Fed bailouts that occurred between August 2007 and April 2010 involved $1.2 trillion in loans to 400 financial institutions and companies.
  • About one half of the banks that received these Fed loans were not U.S. based.
  • In the fall of 2008, US investment bank Morgan Stanley was near insolvency and barrowed $107 billion from the Fed, nearly three times its total profits during the previous ten years.
  • In 2007, Goldman Sachs was the most profitable firm in Wall Street history.  Yet in 2008 it barrowed $69 billion from the Fed.
  • Other companies that were not primarily financial based also barrowed money from the Fed.  This included Ford taking about $7 billion and Toyota getting $4.6 billion.  Even General Electric, who was highly profitable in 2010 but paid no U.S. income tax, received about $16 billion from the Fed.

The size of the Fed’s program is staggering.  The secret loans were 20 times larger than any previous Fed’s lending program, which occurred shortly after 9/11.  However, the most troubling part of the program is the fact that it was hidden from the American public.  In justifying its secrecy the Fed claimed that making the loans public would have caused investors to lose confidence in the receiving banks.  Since the release of this information and the lack of panic, this claim has been proven bogus.  But even more important, so what if there was panic?  The public has the right to know what the Fed does with its money.  The public also has the right to know the true financial conditions of companies that it might bank with or invest in.

Bailouts by the government and Fed were used for the advantage of some companies and citizens over others.  This has no place in capitalism or a free society, nor is allowed under the US Constitution.  The government and Fed have spent significant taxpayer funds without transparency or the required Congressional approvals, willful circumvention of the law and Constitution.

Many, especially on the Left, ignore the dangerous slippery slope that the Country is traveling.  Their fears are mistakenly focused on those attempting to stop the wild and special-interest spending in Washington.  That has allowed the Federal Reserve to debase the U.S. currency, a surreptitious way of increasing the taxes on all Americans.

Posted in Bailouts, Federal Reserve | Tagged: , , , , , , , , , , , , , , , , , | 1 Comment »

George Soros Speaks About the European Financial Crisis

Posted by Steve Markowitz on August 16, 2011

The respected German magazine, Der Spiegel, published an interview posted below with billionaire investor George Soros relating to the financial problems in the European Union.  While Soros has many detestable “qualities”, his insights on the challenges Europe faces are a worthy read.

Soros concludes that since a total breakup of the EU would have catastrophic effects worldwide, that it cannot be allowed to happen.  He sees Germany and China playing pivotal roles managing this outcome. 

‘You Need This Dirty Word, Euro Bonds’

SPIEGEL: Mr. Soros, we currently see a global banking crisis, a currency crisis and a sovereign debt crisis.  Has the financial dilemma become too big to handle?  How can politicians on both sides of the Atlantic be expected to solve such a multitude of crises?

Soros: The politicians have not really tried to fix any crisis; they have so far tried only to buy time.  But sometimes time actually works against you if you refuse to face the relevant issues and explain to the public what is at stake.

SPIEGEL: Are you talking about the Germans?  Many experts think Chancellor Angela Merkel has been particularly hesitant to address the euro crisis.

Soros: Yes. The future of the euro depends on Germany.  This is the point I really want to drive home.  Germany is in the driver’s seat because it is the largest country in Europe with the best credit rating and a chronic surplus.  In a crisis, the creditor always calls the shots.  Sure, this is not a position Germany or Chancellor Merkel ever desired and they are understandably reluctant to embrace it.  But the fact is that Germans are now in the position of dictating to Europe what the solution to the euro crisis is.

SPIEGEL: Why should Berlin embrace that idea?

Soros: There is simply no alternative. If the euro were to break up, it would cause a banking crisis that would be totally outside the control of the financial authorities.  So it would push not only Germany, not only Europe, but also the whole world into conditions very reminiscent of the Great Depression in the 1930s, which was also caused by a banking crisis that was out of control.

SPIEGEL: What, then, needs to be done to fight this crisis?

Soros: I think there is only one choice. It is not a question of whether Europe needs a common currency.  The euro exists, and if it were to break apart, all hell would break loose.  Germany has to make it work. To make it work, you have got to allow the members of the euro zone to be able to refinance the bulk of their debt on reasonable terms.  So you need this dirty word: “euro bonds”.  But when you study what it involves to have euro bonds, you really have a problem because each European country remains in control of its own fiscal policy, and you have to rely on the country to meet its financial obligations.

SPIEGEL: Germans hate the euro bonds idea. They fear that under this scenario they will ultimately need to bail out everyone, even large nations like Italy.

Soros: That is why you need to establish fiscal rules that will ensure the solvency of every member.  This should make the euro bond acceptable to German voters.  Europe needs a fiscal authority that has not only financial but also political legitimacy.  The difficulty is agreeing on the rules. Unfortunately, Germans have some funny ideas.  They want the rest of Europe to follow their example.  But what works for Germany can’t work for the rest of Europe:  No country can run a chronic surplus without others running deficits. Germany must propose rules that other countries can also follow.  These rules must allow for a gradual reduction in indebtedness.  They must also allow countries with high unemployment, like Spain, to continue running cyclical budget deficits until they recover.

SPIEGEL: More and more economists, especially in Germany, would like to see Greece leave the European Union. Do you consider that to be a viable option?

Soros: I think that the Greek problem has been sufficiently mishandled by the European authorities that this may well be the best solution. Europe, the euro and the financial system could survive Greece leaving. It could survive Portugal leaving. And the remainder would be stronger and more easily managed. But the financial authorities have to arrange for an orderly exit in order for the European banking system to survive it.  That will cost money because the European banking system including the European Central Bank has to be indemnified for its losses.  Depositors in Greek banks also need to be protected. Otherwise, depositors in Irish or Italian banks will not feel safe.

SPIEGEL: Is the current crisis even worse than the one in 2008?

Soros: This crisis is still the continuation of the same crisis.  In 2008, the financial system collapsed and it had to be put on artificial life support.  The authorities managed to save the system.  But the imbalances that caused the crisis have not been removed.

SPIEGEL: What do you mean?

Soros: The method the authorities rightly chose three years ago was to substitute the credit of the state for the credit in the financial system that collapsed.  After the failure of Lehman Brothers, the European financial ministers issued a declaration that no other systemically important financial institutions would be allowed to fail.  That was the artificial life support; it was exactly the right decision.  But then Chancellor Merkel stated that such support would only be granted by each EU member state individually, and not by the European Union.

SPIEGEL: That undermined the concept of a strong European response to the crisis. Has that been the biggest mistake so far?

Soros: That Merkel statement was the origin of the euro crisis. It shattered the vision that the EU will protect the euro in a joint effort.

SPIEGEL: Where will the current crisis stop?  Even France now seems to be threatened by a financial meltdown.

Soros: Of course it is spreading. Markets fear uncertainty. Germany has to realize that it has no alternative but to defend the euro.  The longer it takes, the higher the price Germany will have to pay.

SPIEGEL: You have been very critical of how the crisis has been handled by governments. Many European citizens, however, blame speculators like you for their attempts to bring down the euro.  Huge hedge funds like yours have waged massive bets against the European currency over the past year.  And in recent days, several European countries have even imposed temporary bans on short selling, bets on falling share prices.

Soros: You are confusing markets and speculators. At the moment, the biggest speculators are the central banks because they are the most important buyers and sellers of currencies.  Hedge funds have definitely been supplanted by central banks. Markets expect the authorities to produce a financial system that actually holds together.  If there is any hole in that system, speculators will rush through that hole.

SPIEGEL: That sounds very noble.  But in reality, speculation makes any crisis worse. Look at the credit default swaps (CDS) market where speculators can bet on a further decline of currencies and economies.  How can that be helpful?

Soros: Of course, speculation will always make a crisis worse.  If there is a weak point, it will expose it.  And you are right, the CDS market is a very dangerous instrument and I think it should not be allowed.  I am one of the very few people who argue that the CDS is a dangerous instrument because it is so lop-sided in favor of a negative outcome.

SPIEGEL: Do you think the European Central Bank is part of the solution or part of the problem when it comes to the dealing with the euro crisis?

Soros: It is part of the solution, but which part?  Any central bank should only be in charge of liquidity. Solvency is a matter for the treasury.  But because there is no European treasury, the ECB was pushed into that arena.  To keep the financial system alive they overstepped their limits, as the former German Bundesbank president Axel Weber pointed out, by discounting the government bonds of a country that was clearly bankrupt.

SPIEGEL: You are referring to the purchase of Greek bonds.  Now the European Central Bank even started buying Spanish and Italian bonds. It is not even clear, however, if it is legally allowed to do so.

Soros: Yes, but there is a well-established conviction that the central banks always do what is necessary to keep the system going and then afterwards you then take care of the legal aspects.  In a crisis, you simply do not have time to think about such concerns for too long.

SPIEGEL: The United States is drowning in even more debt than Europeans.  Its economic recovery has been painful.  Are we going to see a double-dip recession in the US?

Soros: The indebtedness of the US is not all that high, but if a double-dip recession was in doubt a few weeks ago, it is less in doubt now, because financial markets have a very safe way of predicting the future.  They cause it. And the markets have decided that America is going to see a recession, particularly after the recent downgrade of the US by the rating agency Standard & Poor’s.

SPIEGEL: President Barack Obama has been fiercely criticized for his handling of the economy.  You were one of his biggest supporters in 2008. Are you happy with his economic policy?

Soros: No, of course not. But the reality is that we have had 25 years of excesses building up in America – a combustible mix of too much credit and too much leverage.  You need a long time to reverse that.

SPIEGEL: Obama tried to stimulate growth with a gigantic stimulus program which increased the national debt further.  Was that a mistake?

Soros: Obama embraced the ideas of John Maynard Keynes. Basically, the analysis of Keynes is still very relevant – with one big difference between now and the 1930s.  In the 1930s, governments had practically no debt and could therefore run deficits. Nowadays, all governments are heavily indebted, and that is a big change.

SPIEGEL: If Keynes were still alive, would he adjust his theory?

Soros: Definitely.  He would say governments can still benefit from running fiscal deficits, but the new debt has to be invested in a way that will pay for itself. So the money spent would have to increase productivity.

SPIEGEL: The $800 billion stimulus program launched by Obama did not live up to that?

Soros: Obama’s stimulus program was not big enough and it was not directed at improving infrastructure nor human capital.  So it was not productive enough.

SPIEGEL: And any further stimulus is now basically a non-starter, because the conservative majority in Congress is hell-bent on preventing it.

Soros: That is what is pushing the world towards another recession, into a double dip.

SPIEGEL: The Republicans are doing that?

Soros: Yes, but Obama is also at fault.  He yielded the agenda to the Republicans.  He is talking their language.  The president would have to show leadership to counter the Republican wave, and so far he has not done so.

SPIEGEL: Do you think the US deserved the recent downgrade by Standard & Poor’s?

Soros: Probably not.  This decision was the attempt by the rating agencies to reinvent themselves as anticipating rather than responding to changes that have occurred.  So they are really basing that downgrade on the expectation that the political process will not provide the solution.  Judging such political developments is a very new role for the rating agencies, though.

SPIEGEL: As an investor, do you listen to the rating agencies?

Soros: Well, I do not, but many other investors do.

SPIEGEL: The credit rating agencies are accused of exacerbating the crisis.  Do you think the role of the rating agencies in the financial system needs to be scaled back?

Soros: I do not have an answer to that.

SPIEGEL: There are no alternatives.

Soros: Frankly. It is an unsolved problem in my mind

SPIEGEL: As an investor, would you still bet on the euro?

Soros: I certainly would not short the euro because China has an interest in having an alternative to the dollar.  You can count on China to back the efforts of the European authorities to maintain the euro.

SPIEGEL: Is that the reason why the euro is still so strong compared to the dollar?

Soros: Yes. There is a mysterious buyer that keeps propping up the euro.

SPIEGEL: And it is not you.

Soros: It is not me (laughs).

SPIEGEL: In the end, will China be the only winner in this crisis?

Soros: China, of course, has been the great winner of globalization, and if globalization collapses, the Chinese will also be among the losers.  So they have a strong interest in preserving the current global system.  However, in some ways, they have been just as reluctant to accept it as the Germans. Germans have been hesitant to accept responsibility for Europe, and the Chinese have been hesitant to accept responsibility for the world.  But they are both being pushed into it.

SPIEGEL: Mr. Soros, we thank you for this interview.

Posted in Bailouts, Debt, European Union, George Soros | Tagged: , , , , , , | Leave a Comment »

European Increases Sovereign Bailouts

Posted by Steve Markowitz on August 10, 2011

In an effort to avoid what they believe is a rising panic, the European Central Bank signaled over the weekend that it will begin buying Italian and Spanish government bonds.  This will move problematic debt from these specific European countries to the European Union as a whole, a significant increase in the EU’s bailout of troubled economies.

The European action is not too dissimilar from various bailouts taken in United States in which troubled assets from private corporations; i.e. banks and insurance companies, were moved to the government’s balance sheet.  America’s action is one reason for the just announced downgrade of American’s credit rating.

Previously the EU bailed out Greece, Portugal and Ireland.  However, these economies are small compared to those of Italy and Spain.  In making this new move, the European-based G-7 said: “In the face of renewed strains on financial markets, we … affirm our commitment to take all necessary measures to support financial stability and growth in a spirit of close cooperation and confidence.”  Given the expensive EU efforts to date to contain its financial crisis that have failed, these words were of little comfort to markets beyond the very short-term.  The rapid downward trend of world equity markets in recent days indicates the fallacy of this latest European intervention.

Just last month EU leaders created the European Financial Stability Fund (EFS) adding €109 billion for Greek aid.  This was on top of funds already dispersed to Ireland and Portugal.  The EFS has since been increased to €440 billion.  It is likely that this amount will significantly increase in the not-too-distant future.

Infighting is developing within the European Central Bank over the increasing cost of the bailouts.  The financially stable north European countries including Germany are resisting the increased bailouts.  However, like in the United States, those that promote the bailouts claim that without them financial Armageddon will occur in Europe.

Those charged with creating economic policies worldwide avoid discussing the real issue behind the lengthy economic crisis.  The problem is simple to define, but politically difficult to address.  Excessive debt, first in the private sector and now in the public sector, is the problem.  The only real solution, one that can have positive effect of long-term, is paying off or eliminating the excess debt.  This action, often referred to as deleveraging, is a painful process since by necessity it means less aggregate wealth.  As total wealth decreases, so does individual wealth which leads to less consumption and lower standards of living.

Politicians are rarely elected by sharing bad news with the electorate.  This reality will lead to more of the same failed programs that will merely kick the can down the road.  That will then lead to still larger economic dislocations and even larger bailouts.  When the bailouts ultimately become too large for the United States and/or Europe to handle, the economies will require restructuring of fiat currencies, an unforgiving way of paying off the debt.

Posted in Bailouts, Sovereign Debt | Tagged: , , , , , , , , , , , | Leave a Comment »

Ohio Restaurant Closes Doors After Obama Referenced it in Speech

Posted by Steve Markowitz on June 13, 2011

Last week President Barack Obama gave one of his signature teleprompter speeches; eloquent words with little substance.  As the video below shows, while trumpeting his auto industry bailouts, the President’s rhetoric included the statement; “ …. and this plant indirectly supports hundreds of other jobs right here in Toledo.  After all, without you who’d eat at Chet’s?”

Nice words Mr. President, but not true.  Unfortunately nobody is now eating at Chet’s.  After 70 years in business they closed their doors just a few days after your speech.

Troubled that you didn’t hear about yet another snafu from your president?  Then stop watching the network news.  They are but an arm of Obama’s election campaign that is too busy studying Sarah Palin’s 24,000 emails to keep tabs on our President.

Posted in Bailouts, Chrysler, President Obama | Tagged: , , , , , , | Leave a Comment »

Moody’s Again Threatening U.S. Credit Rating

Posted by Steve Markowitz on June 5, 2011

Moody’s Investors Service (Moody’s) last week indicated it may reconsider America’s debt rating next month, which currently stands at a pristine Aaa rating, for a possible downgrade.  Their stated concern is America’s huge $14 trillion dollar federal debt and the Country’s need to barrow more via raising the current debt ceiling.

Treasury Secretary Tim Geithner gave an optimistic view of negotiations between the White House and Congress on increasing the ceiling stating:  “I am confident two things are going to happen this summer.  We’re going to avoid a default crisis, and we’re going to reach agreement on a long-term fiscal plan.”  While Geithner’s view is likely pervasive in Washington, let us not forget that this same financial genius didn’t even know how to properly calculate his personal Federal tax bill.

Moody’s has had challenges properly evaluating debt in the past.  Only a few days before the cataclysmic financial meltdown of 2008, this firm rated many bonds based on the housing market (i.e. mortgages) as Aaa quality.  While Moody’s is currently focusing on the potential for political gridlock in Washington, the real problem is the exploding U.S federal debt, not negotiations to raise the debt ceiling, as the chart shows.

Adding insult to injury, last week another division of Moody’s made negative comments relating American’s biggest banks ratings.  Their concern is that the new financial regulations included in the Dodd-Frank FinReg bill may make it more difficult for the government to rescue of the large banks, should there be a future systemic meltdown in the financials system.

The backs mentioned in Moody’s warning are Bank of America, Wells Fargo, Citigroup, Goldman Sachs, J.P. Morgan, Morgan Stanley, Bank of New York Mellon and State Street Corporation.

Investors and politicians would do well to look beyond Moody’s warnings that focus and rely on governmental bailouts for the banks to receive high ratings.  Governments change the rules with political winds.  In addition, banks that were deemed too big to fail in 2008 are even larger today.  That offers their managers comfort, real or not, that the government will not allow them to fail in the future.  That belief will lead to riskier behavior on the banks part and more danger in the future for investors.

Posted in Bailouts, Banks, Debt, Deficits | Tagged: , , , , , , , , , , , , , , , | Leave a Comment »

After Obama’s Bailout of Chrysler, SUVs Rule

Posted by Steve Markowitz on May 25, 2011

Somewhat of a sideshow to the U.S. government’s bailout of General Motors, the Obama Administration also bailed out Chrysler in 2009.  With much fanfare, Chrysler and the White House announced that the auto company will pay back $5.9 billion of the government loans this week and ahead of schedule.  The reality of this repayment story is not as rosy.

Chrysler is giving the U.S. government the $5.9 billion, not from profits, but from refinancing its debt with private offerings.  It seems they learned much from their association with Uncle Sam; if you don’t have real money, just print it!  In addition, the U.S. government will retain a 6.6 percent stake in Chrysler.

Perhaps the greatest irony of the Chrysler bailout is the government forced marriage of it to Fiat of Italy.  Obama’s dream was to have Chrysler sell the small green cars from the Italian manufacturer.  Dreams, however, do not cut it in the real world.  Consumers choose products based on their own desires, not those of the Progressives in Washington.

Fast forward two years.  The small Fiat cars are still not being sold by Chrysler, but it has become profitable.  That profit, according to Henry Payne of the Michigan View.com, comes from increased sales of Chrysler’s gas guzzling Jeep Grand Cherokee and Dodge Durango SUV that went up by 17%.

Chrysler has been so successful in selling SUV’s that Fiat plans to offer them in Italy.  Hmmmm ….

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Congresswomen Who Took Geithner to the Woodshed

Posted by Steve Markowitz on April 20, 2011

Timothy Geithner, the current Treasury Secretary, earned the nickname “tax cheat Tim” when it come out in his confirmation hearings that he didn’t pay all the taxes he owed to the US Treasury.  While a bit of a stink was raised at the time, the Obama Administration and its compatriots in Congress claimed that Geithner should get a pass for his indiscretions because of his importance to our economy.  How sad it is that those in power are not held to the same standards for the People they supposedly work for.

While the attached video forwarded by a reader is over a year old, it is instructive.  In it Democrat Congresswomen of Ohio, Marcy Kaptur, questions Geithner in a hearing about the incestuous relationship between bankers, the Fed and the Treasury department.  She points out that Goldman Sachs was the largest domestic counter-party benefactor of the AIG bailout at a time when ex-Goldman executives were in positions of power, including then Treasury Secretary Hank Paulson.

Geithner’s responses to Kaptur were testy, evasive and defensive.  On multiple occasions he used phrases like: “you know the answer to this question” and “it is a matter of public record”.  Such rhetorical answers are often used to deflect truth.  It is evident that Geithner understands that the bailouts not only benefited few, but that most of the benefits went to those that actually caused the economic meltdown in the first place.

Posted in Bailouts, Tim Geithner | Tagged: , , , , , , , , , , | 1 Comment »