Planes, Trains, and Automobiles

To further buttress the point that Hank Paulson and George Bush have one set of rules for their Wall Street buddies and another set of rules for the union workers of Detroit Automakers-

MSNBC has an AP report titled "Wall Street still not downgrading to first class. Companies — some taking bailout money — still fly corporate jets." It states, in part, that "Six financial firms that received billions in bailout dollars still own and operate fleets of jets to carry executives to company events and sometimes personal trips, according to an Associated Press review.... Wall Street's reliance of the rarified mode of travel has largely escaped the scorn poured on the Big Three automakers.Insurance giant American International Group Inc., which has received about $150 billion in bailout money, has one of the largest fleets among bailout recipients, with seven planes, according to a review of Federal Aviation Administration records. "...Five other financial companies that got a combined $120 billion in government cash injections — Citigroup Inc., Wells Fargo & Co., Bank of America Corp., JPMorgan Chase & Co. and Morgan Stanley — all own aircraft for executive travel, according to regulatory filings earlier this year and interviews."

There is one thing in common between the executives of the financial and auto firms- they LOVE to take private jets, rather than take the trains and the automobiles.

MSNBC has another interesting AP report titled "$1.6 billion went to bailed-out bank execs Records show bonuses, chauffeurs, health club benefits, financial planning." Some extracts..."Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages. Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found. The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.... The 116 banks have so far received $188 billion in taxpayer help. Among the findings:The average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits. Lloyd Blankfein, president and chief executive officer of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million..... Even where banks cut back on pay, some executives were left with seven- or eight-figure compensation that most people can only dream about. Richard D. Fairbank, the chairman of Capital One Financial Corp., took a $1 million hit in compensation after his company had a disappointing year, but still got $17 million in stock options. The McLean, Va.-based company received $3.56 billion in bailout money on Nov. 14. John A. Thain, chief executive officer of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. Thain, a former chief operating officer for Goldman Sachs, took the reins of the company in December 2007, avoiding the blame for a year in which Merrill lost $7.8 billion. Since he began work late in the year, he earned $57,692 in salary, a $15 million signing bonus and an additional $68 million in stock options. Like Goldman, Merrill got $10 billion from taxpayers on Oct. 28.The AP review comes amid sharp questions about the banks' commitment to the goals of the Troubled Assets Relief Program (TARP), a law designed to buy bad mortgages and other troubled assets..... Wells Fargo of San Francisco, which took $25 billion in taxpayer bailout money, gave its top executives up to $20,000 each to pay personal financial planners.At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend for financial planning services came to $66,748, on top of his $975,000 salary and $7.5 million bonus. His car and driver cost $178,879. Kelly also received $846,000 in relocation expenses, including help selling his home in Pittsburgh and purchasing one in Manhattan, the company said. Goldman Sachs' tab for leased cars and drivers ran as high as $233,000 per executive. The firm told its shareholders this year that financial counseling and chauffeurs are important in giving executives more time to focus on their jobs. JPMorgan Chase chairman James Dimon ran up a $211,182 private jet travel tab last year when his family lived in Chicago and he was commuting to New York. The company got $25 billion in bailout funds..."

Talking about trains, there is an interesting article in the NYT titled "Subway Window Ads Alarm Some Riders" where the author Jennifer 8. Lee discusses the new experiment of the The Metropolitan Transportation Authority of NY- covering subway windows with ads. For starters, she reports that "As Gothamist pointed out last week, red Coca-Cola ads are now covering a number of subway windows, as part of a 30-day pilot program. They are being used on a single eight-car A train where four of the cars have ads covering their large windows (though not their door panes). None of the windows on the other four cars are covered..... Despite the M.T.A. budget shortfall, transit officials say that advertising revenue is not the main motivation for the program. Instead, the sprawling ads have a practical purpose. The first is to reduce what officials call “scratchiti,” or scratched graffiti on the windows."

Bush - using the classic FUD

FUD = Fear, Uncertainty, and Doubt.

George Bush has some clever people working for him while he himself does not display much intelligence.
Earlier this week, he and Hank Paulson kept repeating that they were considering an "orderly" bankruptcy for the auto industry. The idea being that Chapter 7 would essentially dismantle the companies, while an orderly process would keep these firms as going concerns. However, one effect of bankruptcy would be that the unions would lose their contracts and benefits, and possibly their shirts. After spreading this fear, Bush announced that he would give $13 billion right away to GM & Chrysler, with the promise of more if they come back with a "plan" and also reduce costs to that of the foreign automakers. Just a signal that the auto unions are going to be attacked, bankruptcy or not.

Bush, Obama, and others do not see the obvious issue- autos are capital assets, and the volume of automobiles that are going to be purchased in the future, per year, do not appear to support many auto manufacturers. Further, the U.S. makers do not have the product mix to support what customers want.
Everyone wants to play the Casino with someone else's money,

Detroit Automakers and Bush Legacy - A Bad Mix

According to the WSJ, "Throwing a lifeline to Detroit's ailing automakers, the White House reversed course Friday and said it would consider using the $700 billion financial-rescue plan to avert a bankruptcy of the Big Three that could deepen the U.S. recession. The announcement came hours after negotiations collapsed in Congress over a compromise bailout plan fiercely opposed by Senate Republicans. That package would have set up $14 billion in loans to the companies and a government-run restructuring process. The loans to be offered could be more limited than the $14 billion that Congress was contemplating -- perhaps closer to $8 billion, one person familiar with the situation said. General Motors Corp. would be a recipient, this person said. GM is hoping President George W. Bush will come through with about $10 billion to keep the company going. It warned Congress it needed at least $4 billion by the end of the month. It wasn't clear whether loans would be made available to Chrysler LLC, which is controlled by private equity firm Cerberus Capital Management. Cerberus came in for heavy criticism during the recent debate for not bailing out its own company. Ford Motor Co. has said all along it doesn't need a short-term lifeline, but could need help if one of its peers keeled over. The White House's intervention showed how heavily the question of the president's legacy is weighing over his last few weeks in office. White House officials worried that the collapse of one or more domestic auto company, perhaps the last crisis Mr. Bush will confront as president, could cause a surge in job losses, worsening the current recession."

The guy is now worried about his legacy?

Over a couple of decades, the U.S. automakers have funneled money to managers and shareholders and short-changed investment into new products. Lack of a desirable product mix is Detroit's main problem.

Currently, Toyota, Honda, VW, and other automakers are all reporting double digit declines (year over year) in auto sales. Once demand levels off, the fundamental questions are- what is the level, and the mix? Detroit has shown that it cannot produce innovative, low price, low cost, high quality autos. Customers are going to migrate towards these types of vehicles, and are also going to keep their vehicles longer. The bailout money really does not address these fundamental issues. Certainly executives of GM and other firms will make away with their loot, some employees will get paid, but these firms will most likely restructure and either go away or reappear in a very different form. Product mix is the problem- something short term money will not solve.

Bush Legacy? The worst President of all time, and he graduated from Yale and got an MBA from Harvard!

Taxpayers- becoming Roadkill for Government Bail-outs

There is an article in the LA Times about Detroit Automakers asking for $50 billion in low interest loans from the government. According to the story, "Early details suggest the plan would be a juicy deal: Interest rates would be about 4.5%, less than a third what the carmakers can expect on the open market. And Congress could defer all payments for as long as five years."
Both Obama and McCain are supporting this bailout, using taxpayer money.
This comes on top of the bail-out of the financial institutions and of the GSEs.

As the comedian Bill Maher alluded to tonight on the Larry King Show, the politicians don't just represent the public, they are representative of the public. He should add that the majority of the public just hasn't developed the mental capacity to "get it."