On Sep 17th 2008, two days after allowing Lehman Brothers to spiral into a bankruptcy, USA nationalized insurance giant AIG. An AIG bankruptcy would have sent the worldwide financial industry into a precipitous tailspin and caused financial armageddon, coming just two days after the largest bankruptcy filing in US history. A year later in March 2009, with Obama just inaugurated, AIG announced bonuses of unto $218 Million involving specifically employees in its financial division, the main culprits behind its ignominious fall. AIG pleaded that those were 'retention bonuses' to retain talented people who were needed to set the house in order. Barack Obama, now President, exploded in anger "I've asked Treasury Secretary Timothy Geithner to use that leverage (US bailout) and pursue every legal avenue to block these bonuses and make the American taxpayers whole". Justifiable anger. Accurately expressed emotions of an outraged nation. Charles Krauthammer, being a columnist, went further and called for bringing out the "guillotine and Madame Defarge". It is a rare cosmic event for Obama and Krauthammer to speak in unison and especially when Obama appears restrained in comparison.
Obama administration caused a flutter when it shredded 200 years of bankruptcy law to give UAW ownership of GM and Chrysler. If Obama had followed that bankruptcy model for AIG, AIG employees would not need that bonus but instead would be laughing their way to the bank. According to bankruptcy law bondholders are the primary recipient of money in a bankruptcy. Obama gifted GM to UAW and stiffed the bondholders. Same thing at Chrysler. Bond holders, banks like JP Morgan, recipients of TARP, were coerced into signing off.
In February 2012 GM (General Motors) reported record profits and declared bonuses $4000-$7000 to its 68,000 US employees. The President was grinning and proudly claimed credit for having saved "American car Industry", liberals danced in the streets (ok, not literally) about how workers and working families were saved by US government. The wrinkle in that story is GM still owes US taxpayers $25 billion. What is worse US taxpayer owns a third of GM shares. The GM shares bought by US treasury is languishing at $30, the shares need to touch $50 for break even. Not feasible any time soon.
AIG and Wall Street were bailed out of a rapidly spiraling, little foreseen, calamitous event. The much maligned $700 billion TARP (Troubled Asset Relief Program), contrary to popular idea, includes bailout of Detroit. Everyone decried how Goldman Sachs and JP Morgan were given $25 billion from TARP. Both companies were actually 'forced' and 'coerced' to take the money lest they make the non-borrowers look bad causing a different crises. Both have returned the money, with punitive interest, promptly. That GM and Chrysler were sliding towards bankruptcy was a writing on the wall for nearly 4 years. Unlike Wall Street that suffered (and inflicted) a domino effect Detroit was declining in front of the public in well foreseen course of events. Wall Street has repaid every penny and interest for TARP. FDIC and US treasury made record profits on Wall Street bailouts. Detroit bailout is yet to make money for the taxpayer.
New York Times (not Wall Street Journal) in its editorial scolding Romney for discrediting Detroit bailout, conceded that Detroit's troubles were caused by outrageous labor contracts. UAW negotiated its most recent contract stipulating that GM should not be opening plants in low-cost Mexico. The American GM worker enjoying his bonus owes it to China and India for those profits. I guess selling to China is good but opening a factory in Mexico is not good.
UAW, with some justification, always deflected criticism of their generous benefits by saying "labor cost is a red herring, Japanese cars which cost more are selling more. So cost is not the factor. It's just that American cars are not liked by people due to reliability problems". UAW is also indignant that management continued to misjudge consumer requirements and produced gas guzzlers as gas prices climbed up. True.
UAW contracts, before the bankruptcy, are fortified and in the name of protecting the worker make it impossible for factories to retool or close down. When a factory or an assembly line closes down UAW worker enjoys 100% pay and full benefits for more than a year, the benefits include $0 in pension contribution and a very generous healthcare plan. Under bankruptcy protection UAW negotiated and got 'sign on bonus' and contracted bonuses. I don't know if sign on bonuses exist in private sector anymore for any worker lesser than the top most spot.
UAW, because GM is under Chapter 11, conceded something unheard of in Labor movement in USA. UAW conceded that new workers would be paid a different, lower, salary. A two tiered structure. When Metropolitan Transit worker in NYC struck work in the busiest shopping season of the year in 2005, a week before Christmas, their leader Roger Toussaint declared haughtily, "we will not sell the unborn" and caused millions of dollars in losses to NYC businesses. UAW was forced to concede all this ONLY because under chapter 11 they cannot strike. UAW threatened Ford with a strike because Ford, which did not need a bailout, did not have Chapter 11 protection.
A justifiable question on AIG bonuses was "if these guys are so intelligent that we need to pay retention bonuses to keep them how come they caused this mayhem?" Sure.As much as AIG employees were deemed incompetent to receive bonuses I've not seen GM employees being asked that question. Do GM employees deserve their bonus any more AIG employees deserved theirs? Were is the President asking for his Secretary to block the bonuses and pursue every legal avenue to make the tax payer whole.
Time magazine ran a cover story on the turnaround of Chrysler. The hero of the story was the CEO, not UAW. The whole story, by left leaning Time, was effusive about Sergio Marchionne of Fiat. Fiat CEO refused to put a penny of his own and forced Obama to pay everything. Marchionne lent only his legendary name and skill. This a wonderful moment lost by UAW to make good on their boast that they are the pillars behind the companies. I'd have loved to watch UAW run Chrysler without these high priced and hated CEO's. After all does not UAW shout from rooftops about how CEO's are greedy and how its the worker who is the productive unit. Time covers story is a lesson in how individuals and CEO's matter. UAW is just muscle.
Yes GM made profits but at what cost. Aside from direct bailout the Obama administration's clumsy and useless "cash for clunkers" cost is not counted. Edmunds.com CEO (popular website for car prices) lambasted the administration for throwing money. Again, it was done with the 'noble' intention of helping workers. Never mind that that money is taxpayer money, also paid by many hardworking workers. A friend dumped an old Nissan van and bought a Lexus with that taxpayer money. No sensible consumer was going to sign on a loan for a car worth $25,000 just because he/she gets $2000 for a banged up car. Obama administration scolded Edmunds.com CEO for telling the truth.
Everyday the President decries the billions of dollars in subsidy to the gas industry. Little does he talk of how his stooge the EPA tweaks mileage rules to favor the Detroit three. The President continues to plough money into hybrid vehicles. Does a buyer of a $25,000 vehicle need tax payer money? GM's volt is yet to sell like the hot cakes it is made out to be. Also too much is made of GM's profits. GM earned its profits from sales mostly in Asia. Also the tsunami in Japan completely threw out Toyota and Honda's supply lines causing severe shortage. Any CEO worth his salt would put the cash that is raining now for a rainy day and not disburse them as 'bonuses'.
To top off the chutzpah GM recently paid millions to release an ad during Super Bowl half time starring Clint Eastwood lauding the bailout. The thinly veiled campaign ad for Obama drew a lot of scorn from republicans. Ford, trying to sell cars, recently aired a series of ads featuring real customers boasting that Ford did not take tax payer money and is turning out good cars. Obama administration shut that ad down.
Greed, it is liked to be believed, comes wearing a pin stripe suit sipping expensive wines. No, greed is as much blue collar as it is white collar. Greed can come in overalls too. Man is greedy. Greed fuels and destroys man. The art is knowing when the fueling power slides into becoming destructive. Wall Street greed has been decried and punished by lawsuits and regulations. Union greed is commended and celebrated.
Obama administration caused a flutter when it shredded 200 years of bankruptcy law to give UAW ownership of GM and Chrysler. If Obama had followed that bankruptcy model for AIG, AIG employees would not need that bonus but instead would be laughing their way to the bank. According to bankruptcy law bondholders are the primary recipient of money in a bankruptcy. Obama gifted GM to UAW and stiffed the bondholders. Same thing at Chrysler. Bond holders, banks like JP Morgan, recipients of TARP, were coerced into signing off.
In February 2012 GM (General Motors) reported record profits and declared bonuses $4000-$7000 to its 68,000 US employees. The President was grinning and proudly claimed credit for having saved "American car Industry", liberals danced in the streets (ok, not literally) about how workers and working families were saved by US government. The wrinkle in that story is GM still owes US taxpayers $25 billion. What is worse US taxpayer owns a third of GM shares. The GM shares bought by US treasury is languishing at $30, the shares need to touch $50 for break even. Not feasible any time soon.
AIG and Wall Street were bailed out of a rapidly spiraling, little foreseen, calamitous event. The much maligned $700 billion TARP (Troubled Asset Relief Program), contrary to popular idea, includes bailout of Detroit. Everyone decried how Goldman Sachs and JP Morgan were given $25 billion from TARP. Both companies were actually 'forced' and 'coerced' to take the money lest they make the non-borrowers look bad causing a different crises. Both have returned the money, with punitive interest, promptly. That GM and Chrysler were sliding towards bankruptcy was a writing on the wall for nearly 4 years. Unlike Wall Street that suffered (and inflicted) a domino effect Detroit was declining in front of the public in well foreseen course of events. Wall Street has repaid every penny and interest for TARP. FDIC and US treasury made record profits on Wall Street bailouts. Detroit bailout is yet to make money for the taxpayer.
New York Times (not Wall Street Journal) in its editorial scolding Romney for discrediting Detroit bailout, conceded that Detroit's troubles were caused by outrageous labor contracts. UAW negotiated its most recent contract stipulating that GM should not be opening plants in low-cost Mexico. The American GM worker enjoying his bonus owes it to China and India for those profits. I guess selling to China is good but opening a factory in Mexico is not good.
UAW, with some justification, always deflected criticism of their generous benefits by saying "labor cost is a red herring, Japanese cars which cost more are selling more. So cost is not the factor. It's just that American cars are not liked by people due to reliability problems". UAW is also indignant that management continued to misjudge consumer requirements and produced gas guzzlers as gas prices climbed up. True.
UAW contracts, before the bankruptcy, are fortified and in the name of protecting the worker make it impossible for factories to retool or close down. When a factory or an assembly line closes down UAW worker enjoys 100% pay and full benefits for more than a year, the benefits include $0 in pension contribution and a very generous healthcare plan. Under bankruptcy protection UAW negotiated and got 'sign on bonus' and contracted bonuses. I don't know if sign on bonuses exist in private sector anymore for any worker lesser than the top most spot.
UAW, because GM is under Chapter 11, conceded something unheard of in Labor movement in USA. UAW conceded that new workers would be paid a different, lower, salary. A two tiered structure. When Metropolitan Transit worker in NYC struck work in the busiest shopping season of the year in 2005, a week before Christmas, their leader Roger Toussaint declared haughtily, "we will not sell the unborn" and caused millions of dollars in losses to NYC businesses. UAW was forced to concede all this ONLY because under chapter 11 they cannot strike. UAW threatened Ford with a strike because Ford, which did not need a bailout, did not have Chapter 11 protection.
A justifiable question on AIG bonuses was "if these guys are so intelligent that we need to pay retention bonuses to keep them how come they caused this mayhem?" Sure.As much as AIG employees were deemed incompetent to receive bonuses I've not seen GM employees being asked that question. Do GM employees deserve their bonus any more AIG employees deserved theirs? Were is the President asking for his Secretary to block the bonuses and pursue every legal avenue to make the tax payer whole.
Time magazine ran a cover story on the turnaround of Chrysler. The hero of the story was the CEO, not UAW. The whole story, by left leaning Time, was effusive about Sergio Marchionne of Fiat. Fiat CEO refused to put a penny of his own and forced Obama to pay everything. Marchionne lent only his legendary name and skill. This a wonderful moment lost by UAW to make good on their boast that they are the pillars behind the companies. I'd have loved to watch UAW run Chrysler without these high priced and hated CEO's. After all does not UAW shout from rooftops about how CEO's are greedy and how its the worker who is the productive unit. Time covers story is a lesson in how individuals and CEO's matter. UAW is just muscle.
Yes GM made profits but at what cost. Aside from direct bailout the Obama administration's clumsy and useless "cash for clunkers" cost is not counted. Edmunds.com CEO (popular website for car prices) lambasted the administration for throwing money. Again, it was done with the 'noble' intention of helping workers. Never mind that that money is taxpayer money, also paid by many hardworking workers. A friend dumped an old Nissan van and bought a Lexus with that taxpayer money. No sensible consumer was going to sign on a loan for a car worth $25,000 just because he/she gets $2000 for a banged up car. Obama administration scolded Edmunds.com CEO for telling the truth.
Everyday the President decries the billions of dollars in subsidy to the gas industry. Little does he talk of how his stooge the EPA tweaks mileage rules to favor the Detroit three. The President continues to plough money into hybrid vehicles. Does a buyer of a $25,000 vehicle need tax payer money? GM's volt is yet to sell like the hot cakes it is made out to be. Also too much is made of GM's profits. GM earned its profits from sales mostly in Asia. Also the tsunami in Japan completely threw out Toyota and Honda's supply lines causing severe shortage. Any CEO worth his salt would put the cash that is raining now for a rainy day and not disburse them as 'bonuses'.
To top off the chutzpah GM recently paid millions to release an ad during Super Bowl half time starring Clint Eastwood lauding the bailout. The thinly veiled campaign ad for Obama drew a lot of scorn from republicans. Ford, trying to sell cars, recently aired a series of ads featuring real customers boasting that Ford did not take tax payer money and is turning out good cars. Obama administration shut that ad down.
Greed, it is liked to be believed, comes wearing a pin stripe suit sipping expensive wines. No, greed is as much blue collar as it is white collar. Greed can come in overalls too. Man is greedy. Greed fuels and destroys man. The art is knowing when the fueling power slides into becoming destructive. Wall Street greed has been decried and punished by lawsuits and regulations. Union greed is commended and celebrated.
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