Bring In The Antitrust Division (on Banking)
April 16, 2009
In early February I suggested there was a showdown underway between the US Treasury and the country's largest banks. Treasury (with the Fed and other regulators) is responsible for the safety and soundness of the financial system, the banks are mostly looking out for their own executives, and the tension between these goals is - by now - quite evident. As we've been arguing since the beginning of the year, saving the banking system - at reasonable cost to the taxpayer - implies standing up to the bankers. You can do this in various ways, through recapitalization if you are willing to commit
Are The Credit Markets Thawing?
April 07, 2009
The Times collects the evidence that they are: The market for securities made from bundles of car loans and student loans — a vital source of credit — has started to stabilize. Prices of these investments have risen in the last month, suggesting government-run programs to buy or guarantee this type of debt are gaining traction. ... Businesses with better credit ratings issued $200 billion of debt in the first quarter, according to Thomson Reuters, compared with $188 billion a year ago.
Wait, Is Gaming The Geithner Plan Necessarily A Bad Thing?
April 06, 2009
In a piece today on The Huffington Post, Jeff Sachs conjures up another seemingly gruesome gaming scenario: Suppose, however, that Citibank itself sets up a Citibank Public-Private Investment Fund (CPPIF) under the Geithner-Summers plan. The CPPIF will bid the full face value of $1 million for the worthless asset, because it can borrow $850K from the FDIC, and get $75K from the Treasury, to make the purchase! Citibank will only have to put in $75K of the total.
Detroit's Unions Seem Ready To Deal. And The Creditors?
April 06, 2009
With Chrysler and General Motors scrambling to meet government deadlines for restructuring, you're going to hear a lot of talk about which stakeholders are making the necessary concessions--and whether the unions, in particular, are giving up enough. As I've written before, the United Auto Workers deserves its share of the blame for the industry's troubled state. But, to its credit, it has already made significant concessions. And, by most accounts, it has indicated a willingness to concede even more.
A Bad Bank Approach For Gm?
April 01, 2009
The Times has an interesting piece about what the government has in store for GM: The administration appears to be drawing in part from a playbook used with troubled banks, with the goal of creating a new, healthier G.M. but leaving behind its liabilities and less valuable assets, perhaps for liquidation. More often referred as the “good bank-bad bank” model, the approach can infuriate those with claims against the bad bank. Under a plan being worked out by the administration, G.M. would file for bankruptcy, according to people briefed on the matter.
Obama In The Driver's Seat
March 30, 2009
President Obama just finished speaking about his plans for the ailing domestic auto industry. And, as reported already, he is offering some pretty tough medicine. Obama's auto task force has determined General Motors can become a viable company. But it will take more radical restructuring, starting with more concessions from creditors, unions, and dealers. GM gets 60 days to make that happen. The transformation in management began over the weekend, with the ousting of GM CEO Rick Wagoner. The verdict on Chrysler is less sanguine: The task force has decided it cannot stand on its own.
Gm Gets A Lifeline; Chrysler Gets 30 Days
March 30, 2009
Various outlets now have complete details on Obama's plan for Chrysler and GM, as provided in background briefings by administration officials. The gist is pretty simple: The administration believes that GM can survive--and, indeed, thrive--with the proper restructuring, so it will provide up to 60 days of working capital as the company revamps its management and negotiates with stakeholders. Chrysler, though, is another story. The administartion does not believe the company can ever be viable on its own.
Obama Previews His Deal For Detroit
March 27, 2009
Sometime very soon, probably on Monday, we'll find out whether President Obama is prepared to keep Chrysler and General Motors going with further government assistance. And it looks like the answer is "yes," albeit with under some very strict conditions, following about a month of study by the administration's twelve-person task force. Here's what the Wall Street Journal has learned: Interviews with task-force members indicate that the administration doesn't want to let General Motors Corp. and Chrysler LLC slip into bankruptcy protection, a course advocated by some critics of the industry.
Detroit's Hybrid Conundrum
March 17, 2009
This was predictable: Now that gas is back down below $2 per gallon, people aren't quite as keen on paying a bit extra for hybrids or other fuel-efficient cars as they were last summer. Also, there's a recession going on, so many people aren't buying cars, period—when money's tight, delaying a car purchase is often one of the easier cutbacks to make. Trouble is, the major U.S. automakers still feel the need to keep developing and churning out pricier green vehicles at a frantic pace, in part because they promised Congress they'd do so when they came begging for bailout money.
Can We Stiff The Bondholders?
March 10, 2009
I meant to link to this yesterday and just didn't get a chance, but Josh Marshall has a great post raising a lot of important questions about bondholders--in particular, whether they should take a hit (and how big) as we bail out (and potentially nationalize) major financial institutions: Now, on the one hand, this sounds like a no-brainer. If you lend money to a company that goes bankrupt, that's tough luck. Maybe you recover a percentage on the dollar of what you were owed. But too bad. Why taxpayers should cover those loses is really hard to answer. But let's try it.