KCRW's Left, Right & Center 11.14.08 show
Toxic Assets; Auto Bailout? Clinton
@ State? Prop 8
Sorry, Arianna had a medical appointment -- it's man-on-man only today. And it got mighty heated today in the
battle over the economy. No one really has the answer. But a couple of questions
include: Where has the money given out so far gone? Where does it come from? Who
should really be getting it? All three end up agreeing we cannot afford to let
the auto industry sink; but their reasoning in getting there differs. And the
men weigh in on the rumor about Hillary Clinton as possible Secretary of
State…plus a brief note about the hullabaloo over Prop. 8 anti-gay marriage
constitutional amendment that just passed in the State of
California.
Links mentioned in today's show:
Depression Economics Returns
The economic news, in case you haven’t noticed, keeps getting worse. Bad as it is, however, I don’t expect another Great Depression. In fact, we probably won’t see the unemployment rate match its post-Depression peak of 10.7 percent, reached in 1982 (although I wish I was sure about that).
We are already, however, well into the realm of what I call depression economics. By that I mean a state of affairs like that of the 1930s in which the usual tools of economic policy — above all, the Federal Reserve’s ability to pump up the economy by cutting interest rates — have lost all traction. When depression economics prevails, the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly. (read rest at link above)Panic in Detroit by Jonathan Cohn
This is not your father's Oldsmobile we're rescuing.
Post Date Friday, November 14, 2008
General Motors has come to Washington, begging for a $25 billion bailout to keep it and its ailing Detroit counterparts going next year. But nobody seems too thrilled about the prospect. Liberals dwell on the companies' gas-guzzling sport-utility vehicles. Conservatives obsess over all the well-paid union members with gold-plated benefits. And people of all ideological backgrounds remember how they used to buy domestic cars, years ago, but stopped because the cars were so damn lousy. "The downfall of the American auto industry is indeed a tragedy," the Washington Post editorial board sermonized recently, "but the automakers and the United Auto Workers have only themselves to blame for much of it." And, if they have only themselves to blame, the argument goes, why do they deserve taxpayer help? Let them fail and file for bankruptcy. In the long run, the economy will be stronger and the workers better off. It'd be worth?the short-term pain, which might not even be so severe.
In normal times, with another company, that might be correct. But these are not normal times...(read rest at link above)The Defining Moment: FDR's Hundred Days and the Triumph of Hope by Jonathan Alter (Paperback - May 8, 2007)
And here's a link to Amity Shlaes, a conservative with expertise on The Great Depression -- she sat in twice on the right. http://www.amityshlaes.com/ Her Book, The Forgotten Man is about FDR.
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Comments
A lively conversation needs it, and its response!
I love these people, (ALL of them!) for livening up and informing my dull and boring commute on Fridays. They do what All Things Considered can't, and smarter than Jon Stewart! (guess I'll go watch that next...)
I guess the program is too short to get everything in, even the things Matt promised. We do get more screaming talking heads, or at least talking heads talking at once, in part because Matt does it when he is moderating but wants to talk. We never did hear Blankley's "hold that point" point. Maybe the other guy should moderate and Matt should just be a panelist for the center, and maybe they could get more in.
Some substantive points.
Interesting that Blankley wants bankruptcy courts to get rid of automakers costs (mostly pay and health care for workers and retirees) that he thinks are too high in our top heavy to the wealthy economy, but Republicans blocked the use of bankruptcy to get rid of the "toxic" aspects of mortgages (overappraisals, explosive rate adjustments and unaffordable payments) so people can keep their homes. There is a special loophole for first mortgages that is otherwise available to individuals. Unfortunately the lenders seem dedicated to keeping the infrastructure to return to business as usual once they are rescued from the crunch.
Places like GM have been behind the Japanese and now even the Koreans in building quality, reliable and affordable cars for decades. Conservatives like to blame unions for things but this is obviously a problem of management and the legendary dysfunctional corporate structure of GM. Should the government force them to put 90% of the CEO pay into trust accounts for 5 years and if GM has a decent percentage of their cars highly rated by consumer reports they get paid. Or we could treat them like conservatives want to treat "failing" urban schools, dismantle the big 3 and let some people from Toyota come in and hire totally new staff. By the way do we know how much GM stock is owned by Americans?
Blankley and even Miller make too much of the fact that all car companies will be in trouble if banks aren't lending people money to buy cars. Scheer is right that the lenders are choosing not to lend the money the government is giving them, and the lenders are admitting as much. They are paying dividends and buying other lenders. Seems like these lenders are the problem.
Miller also suggests that foreign capital can come in (or go out) of the US as it chooses. Essentially the universe is bigger than what is expected in these "if the government borrows it then the private sector can't" arguments. So as long as China wants us to consume instead of them, they will let us consume. It's not like we have a divine right to be the world's consumers, like we are the world's military. But what if the here private sector isn't going to do what it needs to do? They can wait longer than people who need to pay mortgages and buy food can.
And what happens if as Blankley suggests, they just wait until all the value that is lost is lost? Again those with money can wait it out. Reagan is famous for creating a recession to end the inflationary 1970s. So recessions are good for some and bad for others. Speaking of that, Miller talked about how because short sellers got rich betting on a crash that the world should have known how toxic the mortgages were. But the economy has some features of a zero sum game. For each sale their is also a purchase. If someone speculates on hedges, and bets that things will get bad, someone else is betting against them. Some people bet that Tampa Bay (long the worst team in baseball) would get in the world series against great odds, but that doesn't mean it was obvious that Tampa Bay would get in the world series. Deregulation allowed the go for it and do anything tendencies of the greedy to take advantage of people in destructive ways.
A bigger problem with the mortgage markets is when some people got rich making bad loans, everyone else expected their executives to do it too, so they all did it, including FNMA, Freddie Mac and the state of Iceland. All these executives are judged on short term comparisons with the profitability of similar places, so its like the behavior of a herd of lemmings. It's not like the cliff's not there, it's that market forces get them to all go over it together.
Also FDIC chair Baird has a really good idea to use bailout money to fix individual mortgage, but Paulson is saying no. Will Obama do better?
Even as a 1st time listener, I can relate to most of what was said before me: the moderator was more of an opinionator and was far too progressive/left to be holding the center position. I look forward to hearing Ariana dish out the core progressive message, and the guy who sat in for her tonight was good on his values - human rights trump politics/religion out of government, etc. - but his logic was tired, I've heard it before. I agree that the conservative voice seems to have submitted to total defeat, and by playing from the perpetual defensive has relegated himself irrelevant - but it would be a tough crowd with all the others tilting varying degrees to the left. That's my schpiel on the show.
Now for the rest.
Listen, the bailout was crap. The whole storyline made me want to vomit. Banks were going bankrupt because they were irresponsible and exploited 'leveraging - which is really just lying when you think about it' to pretend like they had much more to offer the economy than they actually did. Bear Stearns should have went down in flames the first time. Maybe that would've taught them all a lesson. But the politicians were too caught up in the fearmongering to trust in the dignity of our nation. Nope. They went straight for the checkbook to buy their way out of the mess, like they have their entire lives. God forbid an economic institution fail. I know what they were thinking about - their campaign re-election funds dwindling. If you want to know what's happening, follow the money. The treasury is already empty. Seriously. An annually BUDGETED deficit and a multi-trillion dollar national debt is hardly something the brag about as a nation. I am no fiscal conservative - in the way the politics are practiced. I believe the role of government is to provide support, services and protection to all people in ways that are smart, effective, efficient and reliable. If that means budgeting a deficit for a period of time to implement a well-crafted strategy, so be it. But the Bush way - I will because I can - has ruled for nearly a decade (3, really if you go back to the kingpin Reagan/Bush Sr. as the mastermind ticket of trickle-down-tax-cuts-death-to-social-programs-if-you-don't-have-it-you-don't-deserve-it philosophy and can see-thru Clinton as the business as usual politics of personal advancement (for my friends too). But W really took it way past reconcilable limits. You can blame failed American leadership for 2 terms for this mess. And I believe that completely. You can't cut trillions in taxes while you're spending trillions on wars, manifest the largest expansion/reorganization of government while turning the budget violently from black to red, and pretend like you're serving the country. The world was counting on America, and we failed them. They followed our lead, and we led them astray. They trusted us, and we betrayed them. Whereas we were the beacon of hope, we are now the light-house warning of the rocky and dangerous shore. Let's hope, pray and work to prove that the '08 election (not Obama, but the movement that lifted him) has forever shifted the momentum back to sanity, humane values-based leadership and integrity in service.
I always remember hearing 'no reward without risks' and 'one must sometimes fail to later succeed' as core values of the American Enterprise. Did I miss something? Have we sold-out our values so completely that we're going to pretend like we don't remember these things now? And what about my grandparents generation - born into the 30's, lived through/fought in history's most tragic warfare, where are their voices of wisdom? But none of that
And where's the continued coverage on the ethics of the AIG 'executive retreat' the week after the bailout? Where's the enforcement of voter's values when it's shamelessly reported that the banking industry is 'earmarking' 60-80% of the equivalent value of the bailout from their reserves/revenue for 'bonuses'. Bullshit. Bush/Cheney/Paulson/Gates & Co. have had their last hurrah. They have robbed the US Treasury of money we as a nation do not have, and entrusted it to a single man to distribute, who is choosing to prop up the failures, the irresponsible villains of the economy, virtually anointing them as impenetrable to risk. I heard a great quote on KPFK a few weeks back that America is choosing to privatize the gains, and socialize the losses, and that is not right.
We must find our bearings, and when we do, we must not hold back from using them to help others find theirs, and together, we may again find a way. Until then, I'm just hoping that we are the one's we've been waiting for. God know's 'they' have done us no good.
We should not bail out anybody! Especially Wall Street. As far as the Banks the Americans should hold a stake in all of them until they repay all their debt! As far as the auto makers, they should file for Chapter 11 and restructure themselves under a strict and close government monitoring until we can see their new face and new products. I went to buy a car last year and all the GM, Ford
Scheer is forced to repeat his arguments week after week as Miller and Blankley ignore them in favor of rants that ignore the facts. It was true of the war and now it is happening again with the economy.
One of the major reasons the auto companies are in trouble is their management's greed. They built there entire business plan on the idea that oil would stay cheap and they could continue to build big trucks and S.U.V.'s that have large profit margins. The government does need to help the auto industry by providing money, throwing out their management, and doing what Thomas Friedman talks about in his new book: Hot, Flat, and Crowded which is forcing them to build a new green fleet of automobiles. If this doesn't happen communtities like mine are finished! Time for someone to really see what is happening in the real world!
Sorta of like asking a burglar to guard your house. What did anyone expect?
Come April 15, don't pay your taxes. We need a tax revolt.
I too miss Arianna and her clever retorts and wonder if LRC could have a stand in for her when she is away.
He misleads when he tries to make it seem that Toyota is just as bad off as GM and he mentions that Toyota's stock is down too and uses this tidbit to dismiss out of hand the idea that GM has a problem with it's cost structure. I think the order of magnitude is important, Toyota is down to about half it's 10 year high, GM is down below one TENTH of what it was worth. The big 3 are loosing money big time while Toyota is still making money.
On this show, "Tony" said he'd been a consistent Chicken Little over the financial and economic crisis. Yeah, maybe YOU said pessimistic things, Mr. Kidnapper in your Kidnapper Lair, but we all know that Tony has consistently downplayed the crisis over the last few months in the leadup to the election, at least compared to the other three LRC participants.
Somewhere, the real Tony Blankley is shouting through a gag that things aren't all that bad.
A quick comment on "getting the banks lending" and "what are they doing with all that TARP money".
The banks already own more risk than they want or that their existing capital bases can handle in the form of loans to consumers that now appear to have substantially higher risk of loss than when they were originally made.
None of these credit card loans were modeled to include a 25% decline in home prices and shutting off of home equity lines.
Back in the seventies, during the first oil crisis, the Big Three tried to cram large gas-eating cars down the public's neck and discovered that their market share was eroded by the likes of Datsun (Nissan), Toyota, and Volkswagen who responded with small economical cars. What happened when oil loosened again? The American automakers went back to cramming large gas-eating cars down the public's neck, even after the writing was on the wall. Now they want a bailout to retool? Why didn't they do it when it was obvious to everyone in the world that churning out gigantic SUVs went the way of the dinosaur?
When the Big Three raked-in profits by being the only game in town, the UAW could continually increase wages and benefits without impacting the viability of the company. The average Big Three autoworker makes between 29 to 39 dollars per hour and their benefit package nearly doubles that amount. That means they earn 60-70 dollars per hour. This weekend, the UAW made a statement that they would not budge on salaries or benefits. They wanted bailout money to secure 780 thousand retired employee's benefits. Bailout money is meant to keep a company running so it may in turn maintain employee's wages and benefits. The UAW should understand that company which no longer generates sufficient capital to subsidize extravagant salaries and benefits will go bankrupt and the autoworkers will be left without any wages or benefits.
By bailing out the automakers, we are supporting a failing institution. Unlike Tony, I don't believe American Automakers will disappear if they fail to receive a bailout, I believe they will file bankruptcy, reorganize their company, fire their corporate managers, and renegotiate their union commitments. It will hurt, but this may be the only way to truly save the Big Three instead of sustaining a failing institution.
With the UAW not budging, and the obligations of the Big 3 in having to pay out retirees and worker benefits while heading into bankruptcy brings up the classic business conundrum between profitability and worker rights when things go sour
Just think if the government provided basic healthcare for these employees, instead if a failing company being forced by contract to? When times were good, the employees could privately get better coverage and business could grow faster. When the industry is suffering like it is today, at least the business wouldn't have to worry about the cost of these benefits, and the workers aren't worried about whether or not they will have healthcare.