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GM and Chrysler: Hasta la vista, baby

In earlier posts, I've urged federal help for the automakers. It would be a calamity to lose this manufacturing backbone, which especially props up what's left of the middle class in places like Michigan and Ohio. There was a large "if," however — if the automakers fundamentally changed their business models to focus on green technology and building transportation for the 21st century beyond automobiles, particularly transit and rail.

Not surprisingly, none of that is coming true despite GM already receiving $13.4 billion in federal loans and Chrysler getting $4 billion. About the best GM can do is phase out the evil Hummer. Otherwise, it's business as usual and worse: cut 47,000 jobs worldwide, shut five more U.S. factories and phase out Saturn, the brand launched in the late 1980s as the reinvention of General Motors.

There comes a time to let go. It will be painful, but it's time. We need to let GM and Chrysler fail.

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The biggest issue no one wants to discuss

Financial Times pronounced the recent Davos conference the gloomiest in its history. The "global agenda" of world leaders has crumbled. With the Doha round of trade liberalization in shambles, "protectionism" is seen on the rise. This is one thing that happens during historic economic collapses: old arrangements, particularly unsustainable ones, crash down. This is what happens when an old order enters an pivot point of discontinuity, where the future will be profoundly different from the recent past.

Dangerous destabilization is headed our way. This is why Dennis Blair, the national intelligence director, said this week that the global economic collapse is the biggest threat to the United States, bigger than al Qaeda. The more we try to deny the current reality, or return to the bubbles of the past decade, the worse the reckoning. This is also true of trade. The "free trade" regime that has coalesced since 2000 has hugely benefited the swells and oligarchs that attend Davos, especially by increasing their personal wealth thanks to cheap labor in developing countries.

But the millions of Americans who have lost well-paid manufacturing jobs as a result, with nothing to replace them but a collapsed housing bubble, don't do Davos. They are not all blameless, to be sure. Like all Americans, they are blissfully unaware of the consequences of their consumer decisions. So they happily shopped at Wal-Mart as their jobs went away. No matter. Beware the meme that facing this, as in an abortive House attempt to put a "buy American" provision in the stim package, is "protectionism." Going forward, a new world trade arrangement is essential. It is the biggest issue facing the country that no one in power wants to discuss.

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Stimulus lesson

Here's the salient paragraphs from a New York Times story today on where the big Japanese stimulus of the 1990s went wrong:“In hindsight, Japan should have built public works that…
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Howard Dean for HHS

With Tom Daschle finally buried under the avalanche of his conflicts of interest, how about a candidate from the Democratic wing of the Democratic party? Dean is a physician. With…
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The real risks of the stimulus

Renegade — the president's secret service code name — is pushing hard for "his" stimulus bill as it reaches the House floor today. What's in is? That's difficult to tell as the horse-trading continues, and as Obama tries to rope in at least some Republican support. FDR and the Democratic Congress in 1933 simply steamrolled the Republicans who demanded balanced budgets and reactionary policies — but never mind. In the end, this will be a package crafted not only by 535 lawmakers, but countless lobbyists and staff. My biggest fear is that it will not be a renegade stimulus — transformative and focused on the future.

Let me count the ways:

1. Tax cuts in the current environment won't provide help. U.S. tax rates and dodges are already generally at lows not seen since the Coolidge years. Obama promised a working-class tax cut. Fine. He's bowed to Grassley to provide more alternative-minimum tax relief. OK. But these should be different bills. They're not stimulative. Individuals will squirrel away their checks or use them to pay down credit-card debt. Corporations are already paying nothing in many cases. As for "investors and risk-takers" — the Bush years demonstrated that tax cuts on investments merely fuel speculation while encouraging job-killing mergers and offshoring. Not for nothing did wages stagnate during those halcyon years. Perhaps worst of all, it continues the destructive "tax cut" entitlement mindset that Americans can get something for nothing.

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That experience thing…

It's worth noting, from a story in today's Wall Street Journal, that the three flight attendants on the USAirways flight forced to ditch into the Hudson, with all aboard surviving,…
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This is going to hurt

The $750 billion financial bailout is turning into a scam rivaled only by the practices of the financial sector that precipitated this signal disaster. The geniuses overseeing this "rescue" thought it would be dandy to save Bear, Sterns — but then let Lehman Brothers collapse. They pumped $45 billion into Citigroup — which went out and bought a $50 million corporate jet. Merrill's "savior" CEO was redecorating his office to the tune of more than $1 million while headed into a shotgun marriage with Bank of America — which is now begging for more bailout billions because of Merrill's disastrous bets. AIG and the rest of the gang handed out billions in bonuses while their hands were out for the taxpayers money. And the system is still sick, reeling afresh with any day's new shock.

Maybe $300 billion of the TARP money has been committed — maybe more. Then there are perhaps trillions in dollars printed out and essentially given to the big banks through Federal Reserve "lending facilities" — which the Fed is keeping secret. Behind the scenes, the big banks continue to lobby and squeeze members of Congress. In exchange for the taxpayer money, it's unclear what the taxpayers get in return, whether any of the bailout money will ever be paid back. These guys make Bernie Madoff look like the Better Business Bureau.

Now the cognoscenti are talking about nationalization as the answer — whatever "nationalization" means. As the New York Times reports,

That has already happened; taxpayers are now the biggest shareholders
in Bank of America, with about 6 percent of the stock, and in
Citigroup, with 7.8 percent. But the government’s influence is far
larger than those numbers suggest, because it has guaranteed to absorb
the losses of some of the two banks’ most toxic assets, a figure that
could run into the hundreds of billions of dollars.

As one of many who were punked by Paulson in the original panicked rush to pass the bailout, I say let's take a deep breath, stop, look and consider:

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Screwed on mass transit

Talking Points Memo did more digging to find out why mass transit and Amtrak were getting so little of the proposed stimulus. It's bad enough that $30 billion will go…
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A simple primer on the banking crisis

The more I learn about the $750 billion bailout of derivatives, tranches and collateralized debt obligations, the more I think about drunks. The true drunk will do anything to keep drinking. Cheat. Steal. Betray. No one is above his treachery. He will destroy his family to get the next drink. On a binge, he will spend the wealth it took his family generations to accumulate, right down to the treasured mementos. He can be clever, fun, charismatic. Behind this mask he is a monster. At his most destructive, he wraps his addiction in layers of complexity and opacity, which non-drunks would simply call lies.

Substitute "banker" for "drunk" and I think we have a better understanding of the mess we're in. Consider State Street Bank. Its shares plunged 59 percent Tuesday as it revealed previously "unrealized losses." That's the drunk telling his wife he's wiped out the family savings. Citigroup and Bank of America shares are cheaper than value meals at McDonald's — territory we saw with the late Washington Mutual on the way to failure. That's the drunk in the gutter. The difference is they don't know they've hit bottom and must fundamentally change. They just want another drink.

They call it capital, and the last bar open is the federal Treasury.

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Selling out on mass transit?

The "all hands on deck" moment for the Obama administration is emerging now. Ironically, as the president-elect and VP-elect "Amtrak Joe" begin their rail journey from Philadelphia to Washington, it's…
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The Citi gang gets away

The financial implosion that wrecked America was largely cooked up by Citigroup, not only in its kitchens of "innovation" but especially in its wide influence over the industry. Now what was once touted as the largest "financial services" company in the world is being dismantled. Among other things, it will sell its Smith Barney unit, credit-card business and consumer finance units. The Wall Street Journal observes that the final result will look much like the old Citicorp before Sandy Weill got his hands on it in 1998. Only without the integrity, market value and perhaps safety and soundness.

Unfortunately, the American taxpayers own a 7.8 percent stake in this dog (the Treasury alone gave a $45 billion infusion — 45 times the annual Amtrak budget). Maybe — who the hell knows what we're on the hook for, considering the secrecy with which the bailout has been handled. Who knows how many hundreds of billions of dollars have been thrown down the Citi-rathole by TARP and the Federal Reserve. And all for what? Did we also pay for the cheap undercoating and worthless extended warranty?

This institution that was deemed too big to fail has failed to unfreeze credit markets. Citigroup has succeeded in lavishly compensating its top executives and big-time traders, who jet away from the calamity with no consequences. In 2007, as the crisis became undeniable, then CEO Charles Prince, who had performed abysmally for shareholders, nevertheless made some $25 million. Robert Rubin, the Democrat brain trust on economics, was paid $17 million. This year, aided by "rescue" money from the taxpayers, Citi reportedly set aside $3 billion in bonuses.

Obviously the Citi never slept.

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Fire and rain and blame

I keep getting emails from friends asking if I'm okay. The national news has been saturated with reports of the flooding in western Washington. I'm fine, largely because I live within the long-established urban footprint of Seattle (downtown, happily). Most of the damage has come in the exurbs, and much of it is human-caused. This is our second straight year of unusual flooding. It won't be the last.

This reminds me of my return to Arizona in 2000. Every year forest fires would erupt threatening cabins on the Mogollon Rim (pronounced Mug-e-on) in the High Country. One particularly devastating fire began in 2002 when a woman had a fight with her boss (boyfriend?) while they were on a trip to service his vending machines (I am not speaking in euphemism here). She stalked off into the forest, wearing only shorts, tank top and flip-flops, carrying a towel, cigarettes and lighter — a survival kit I never learned about as a Boy Scout. When she became lost, she lit a "signal fire" that turned into one of the worst conflagrations in state history. (And you wonder why Arizona is rated America's dumbest state). Comedy aside, I was puzzled because these areas of the High Country had been mostly uninhabited National Forest land when I was a boy. Then I drove up and saw the "cabins" were mostly subdivisions plopped down amid stands of combustible pine trees.

These disasters, repeated around the West and indeed the nation, bring large public burdens, from relief efforts and firefighting, to higher insurance costs. Yet nothing is being done to address the cycle of disaster. And with climate change and other environmental degradation, we ain't seen nothing yet.

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The kids are not alright

I keep waiting for the great Baby Boomer revolt.

It's not just that my generation is taking the brunt of the massive layoffs, replaced, if at all, by "lower cost" employees in their twenties. Or just that, even without a recession, we would face a hostile, age-biased job market at a time when many of us should be in our peak earning years. It's not just that we're the ones who lost the pension protection enjoyed by our parents, to be replaced by now decimated 401(k)s just as retirement nears. Or that we've spent a lifetime paying for the Social Security and Medicare of others to find that the nation sees our turn for this social compact a "looming danger" to be curtailed or stopped altogether. It's not just that the experience and skills many of us spent decades amassing are arbitrarily deemed worthless in "the marketplace."

It's all this, but more.

Throughout time people have awakened in a foreign country, whether they traveled anywhere: it's called old age. For many Boomers, this discontinuity has arrived much sooner compared with previous generations. And all the electronic distractions can't compensate for a simple fact: What happened to our country?

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