Free Markets, Free People

Bruce McQuain

The Other Shoe Drops: Union Calls For Obama To Oust Bank CEO

I‘m sure some will find this surprising. Others will say, “yeah, baby!” It certainly is the logical extension of what happened to GM’s CEO. I, for one, still find it to be very disturbing:

On the heels of the resignation of General Motors CEO Rick Wagoner, the Service Employees International Union is urging President Barack Obama to oust Bank of America CEO Ken Lewis.

“It defies logic, common-sense, and responsible governance to punish the auto industry while letting financial institutions off the hook,” SEIU President Andy Stern said, announcing his call for Lewis’s job Tuesday.

The same could be said for letting the union leadership off the hook.

Aren’t they responsible for declining membership? Aren’t they as much a part of the problem as the management of the auto industry? Why isn’t the SEIU calling for union heads as well?

Of course I ask that facetiously. Obviously we’re now going to hear every whiner and complainer in the world will demand the government fire their boss. Hey, the precedent has been set with one of the worst decisions I’ve seen in a while. Now we begin to see the results of such a blatantly dumb move.

Impressive, no?

~McQ

You’re Doing A Heck Of A Job, Timmy …

You remember TARP. The “Troubled Asset Rescue Plan”? The plan which the Obama administration and the Treasury Department said they were monitoring closely? In fact, they even put a “watchdog” in charge of its oversight.

Transparency. Oversight. Hope and Change.

And any other buzzword promise that was thrown out there to describe how this administration would be so different from the last.

But apparently all the oversight promised depends heavily on cooperation, not stonewalling, by the Department administering TARP. That would be Treasury:

Looks like the same old stuff to me

Looks like the same old stuff to me

“We do not seem to be a priority for the Treasury Department,” the Congressional Oversight Panel’s Elizabeth Warren told a Senate Finance Committee hearing today.

“We have sent letters. We have requested that there be someone named so that we can get technical information. And so far, we have not been a first priority,” Warren said. “We use what you give us, and we will exercise the leverage given to us by Congress. In part, that’s why I’m here today. I’m here to talk to you about what’s happened so far, what we have discovered so far, the inquiries that we have in mid-stream and for which we continue to await responses.”

Warren, visibly frustrated with a lack of cooperation from the administration, emphasized, “This problem starts with Treasury.”

Now part of the problem, obviously, is that several key positions in Treasury have yet to be filled, over 60 days into the new administration and in the midst of a financial crisis. Apparently that’s not a priority either.

Oh, and you’ll love this:

Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program, voiced similar concerns.

He noted that his office just conducted a survey of all 364 TARP recipients on their use of government funds, something they had requested Treasury do, only for the Department to decline to do so except in the cases of Citigroup and Bank of America.

“One thing is clear: complaints that it was impractical, impossible, or a waste of time to require banks to detail how they used TARP funds were unfounded,” Barofsky said.

I continue to be unimpressed with Tim Geithner and his management and leadership style. What you’re reading here is totally unacceptable. For once, Sen. Chuck Grassley (R-IA) said the right thing:

“Unfortunately, despite saying all the right things about open government, the new administration has not made any major changes aimed at making TARP more transparent,” he said. “Moreover, I have heard about potential problems with access to information from all three of the oversight bodies testifying.”

Hope and Change.

~McQ

Quote Of The Day

The person to whom the Navy recently bestowed the formerly prestigious Distingusihed Public Service Award had this to say:

“If I’m corrupt, it’s because I take care of my district,” Mr. Murtha said.

Because, you know, there’s obviously no other way to do that than be corrupt.

Shades of Georgia’s Eugene Talmadge:

 “Sure, I stole. But I stole for you,”

~McQ

“Green Jobs” Likely To Destroy More Jobs Than Are Created

A study just completed in Spain finds that the creation of so-called “green jobs” doesn’t at all seem to be the employment panacea promised by their advocates. As you recall, President Obama pointed to Spain as the reference point for the establishment of government aid to renewable energy. As the study points out, “No other country has given such broad support to the construction and production of electricity through renewable sources.” But the results are not at all what you might expect given the hype. In fact, they’ve been quite the opposite:

Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.

Be sure you read that last part of the sentence carefully as well – those jobs would have been created by “non-subsidizsed investments” with the “same resources” – or said another way, they’d have been created in the private sector without government picking winners and losers and spending billions in taxpayer money.

Between 2000 and 2008, Spain was very aggressive in pursuing alternative energy and green jobs. But its results were less than stellar:

Despite its hyper-aggressive (expensive and extensive) “green jobs” policies it appears that Spain likely has created a surprisingly low number of jobs, two-thirds of which came in construction, fabrication and installation, one quarter in administrative positions, marketing and projects engineering, and just one out of ten jobs has been created at the more permanent level of actual operation and maintenance of the renewable sources of electricity.

So 9 out of 10 were temporary jobs, while only 1 in 10 became permanent. And the cost?

The cost to create a “green job”:

The study calculates that since 2000 Spain spent €571,138 to create each “green job”, including subsidies of more than €1 million per wind industry job.

The cost in jobs lost:

Each “green” megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro.

And the eventual cost to consumers:

The price of a comprehensive energy rate (paid by the end consumer) in Spain would have to be increased 31% to being to repay the historic debt generated by this rate deficit mainly produced by the subsidies to renewables, according to Spain’s energy regulator.

Spanish citizens must therefore cope with either an increase of electricity rates or increased taxes (and public deficit), as will the U.S. if it follows Spain’s model

Previous studies have concluded that such increases would impact the poorest quintile the most:

• Reducing emissions, a major rationale for “green jobs” or renewables regimes, hits the poorest hardest. According to the recent report by the Congressional Budget Office, a cap-and-trade system aimed at reducing greenhouse gas emissions by just 15% will cost the poorest quintile 3% of their annual household income, while benefiting the richest quintile (“Trade-Offs in Allocating Allowances for CO2 Emissions”, U.S. Congressional Budget Office, Economic and Budget Issue Brief, April 25, 2007).

• Raising energy costs loses jobs. According to a Penn State University study, replacing two-thirds of U.S. coal-based energy with higher-priced energy such as renewables, if possible, would cost almost 3 million jobs, and perhaps more than 4 million (Rose, A.Z., and Wei, D., “The Economic Impact of Coal Utilization and Displacement in the Continental United States, 2015,” Pennsylvania State University, July 2006)

So to recap, we have a scheme which would see a net reduction in jobs by its implementation, create jobs of which only 10% were permanent, Cost anywhere from a half a million to a million dollars per job, increase energy costs tremendously and hit the poor the hardest.

Sounds like a winner, doesn’t it?

Will anyone pay attention to the actual experiment conducted by Spain and its results? Or are the blinders firmly in place?

While this scheme would be important to contest at any time, it is critically important to do so now, given the economic situation. One thing that must be avoided is government killing jobs as fast as the private sector creates them. This is truly a time when government should do all it can to enable the private sector to create jobs (tax cuts, etc.) and step back and allow that process to work. What it shouldn’t be doing is picking winners and losers and enacting a scheme which, in Spain at least, has proven to do all the things necessary to kill or at least cripple any economic recovery.

~McQ

Bailouts Not Diverse Enough

If you’re going to hand out big bucks, you need to do it in a politically correct manner.

Members of the Congressional Black Caucus on Monday criticized the lack of minority participation in the government’s financial bailouts and suggested that President Barack Obama isn’t doing much better than his predecessor to ensure diversity.

These particular vultures are feeling a bit peevish. They’re just not seeing the flow of money to their favored constituencies that they expect – especially with a brother in the Oval Office. I mean, come on – we are talking trillions here, right?

Where’s theirs?

~McQ

I’d Like To Hear The Left’s Comments About The Expansion Of “Executive Power” Now …

I‘m still in rather stunned disbelief about the White House ousting GM’s CEO.  

It’s not about how good a CEO he was or whether I agreed with his plan, his leadership style or his results.  It’s about the White House going so far as to ask him to step aside.  And, according to Obama’s own statement today, his “team” will “working closely with GM to produce a better business plan”.

Why, that sounds like something we’ve seen pass this way before and firmly rejected:

Italian Fascism often involved corporatism, a political system in which economy is collectively managed by employers, workers and state officials by formal mechanisms at national level.

Now I’m sure there are those out there who will argue that this is hardly a “formal mechanism”. But of course that’s simply not true. It is formal enough that a CEO is gone. Someone believes it is a mechanism of some formality for that to happen. And, if you think about it, it is just one more mechanism among many that have been put forward lately. Timothy Geithner’s plan to have the government take over financial institutions and hedge funds if the government deems them a threat to the economy’s well-being, for instance.

After all the caterwauling by the left about “unprecedented executive branch power expansion” during the Bush years, they’re rather quiet about these. The market, however, has cast it’s vote. Down about 300 at 4pm.

And this is all based in a false premise – something I’ve noticed that Obama uses quite effectively:

“We cannot, we must not, and we will not let our auto industry simply vanish,” President Obama said at the White House.

Anyone – who would expect the domestic auto industry to ‘simply vanish’ if the companies were left to go the traditional route of bankruptcy?

Since when does bankruptcy equal “vanish”? Delta airlines seems to have survived it quite well, thank you very much. Their bankruptcy or the bankruptcy of other domestic airlines hasn’t seen the domestic airline industry “vanish”. Why would anyone believe it would happen if GM or Chrysler went bankrupt?

And that said, what did he suggest in his speech today?

The administration says a “surgical” structured bankruptcy may be the only way forward for GM and Chrysler, and President Obama held out that prospect Monday.

“I know that when people even hear the word ‘bankruptcy,’ it can be a bit unsettling, so let me explain what I mean,” he said. “What I am talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so they can get back on their feet and onto a path to success; a tool that we can use, even as workers are staying on the job building cars that are being sold.”

Seems like that is precisely what all of us were telling them to do before they started throwing bucketfuls of imaginary dollars at the two companies, wasn’t it? And you can call it “surgical”, “structured” or whatever you want in an attempt to spin this as something other than fairly ordinary bankruptcy procedures, but that’s what they’re talking about.

One of the primary reasons they’ve attempted to keep these companies out of bankruptcy court can be described in three letters: UAW.

Their problem isn’t just “old debts” which need to be cleared away. Instead it is what is euphemistically called “legacy costs” which would go as well. And those “legacy costs” include the gold plated benefits the UAW now enjoys and doesn’t want to give up.

Administration officials on Sunday made it clear that an expedited and heavily supervised bankruptcy reorganization was still very much a possibility for both companies. One official, speaking of GM, compared such a proceeding with a “quick rinse” that could rid the company of much of its debt and contractual obligations.

The thing to watch out for is whether or not this “quick rinse” in a “heavily supervised bankruptcy reorganization” included “contractual obligations” to unions. If not, it will be a “quick rinse” of taxpayer’s wallets.

Among challenges the administration faced leading up to this weekend’s decision, foremost were the efforts to draw steep concessions from the United Auto Workers union and from the bondholders.

Attempts to solidify deals with the UAW and bondholders were slowed by disagreements by both parties over how exactly the other party needed to budge. The UAW, for instance, insists it already made health-care concessions in 2005 and 2007, and argues that the bondholders have never been asked to concede anything.

“I don’t see how the UAW will do anything until they see what the bondholders will give up,” one person involved in the negotiations on behalf of the UAW said Sunday.

Progress? Apparently both GM and Chrysler have been negotiating with both the bondholders and the UAW. But there’s not much to report there:

Both GM and Chrysler are negotiating with the UAW to accept a range of cost-cutting measures, including greatly reduced work forces, lower wages and a revamped health-care fund for retirees.

[…]

GM and representatives for its bondholders remained in talks over the weekend about a deal that would force these investors to turn in at least two-thirds of the value of the debt they hold in exchange for equity and new debt.

This arrangement would force GM to issue significantly more stock than what is currently being traded in the market. In addition, the government is being asked to guarantee the new debt with federal default insurance in order to entice bondholders who otherwise wouldn’t be interested in participating in the swap.

If GM can’t eventually forge a deal with the ad hoc committee representing the bondholders, the company may be forced to issue a debt-for-equity swap without the blessing of some of its biggest and most influential unsecured investors. This would heighten the possibility of the company eventually needing to file for Chapter 11 bankruptcy protection.

Or said another way, they’ll end up doing what we said they should have done in December, less umpteen billions of taxpayer money poured down a rathole. Of course, had they reorganized under Chapter 11 as we all said they should, the Obama administration wouldn’t have been able to make this unprecedented power grab, would it?

~McQ

Two New Examiners

Jason Pye and I have –  unbeknownst to the other, which we each found hilarious – applied for and become “Examiners” for the Atlanta Examiner.  What that essentially means is we write for an online publication (Examiner.com) and actually get paid to do so.

However, and this is the part I actually love – it really brings the libertarian out in me – we get paid for the number of page views we generate.  So our pay is based on how many eyes we bring to the articles we write.

As you might imagine, they’re more locally focused and pertain to topics we may or may not cover here at QandO.  However, being the “Atlanta Libertarian Examiner” and Jason being the “Georgia Libertarian Examiner” we pretty much have the freedom to write about what we want to.  What I’m trying to do, as is Jason, is keep it pertinent to the location but still spread the libertarian message.

Your support is requested.  If you will take a short moment and click in.  Check out the articles.  Jason and I will be embedding links in various posts as we put new articles up on Examiner.com.  Your feedback and comments are solicited and welcome.  But remember, clicking in helps pay the writer and I can promise you both writers would very much appreciate those clicks.

My links are here and here.

Jason, the prolific one, has links here, here, here, here and here.

Thanks for your indulgence and support.  Both are appreciated.  Thus ends the commercial.

~McQ

GM = Government Motors

I thought I’d quickly steal that title from one of our commenters (Brown). It pretty much encapsulates the latest and rather significant change as apparently the CEO of General Motors stepped down at the behest of the White House. Apparently Obama is now in the car business.

The two following paragraphs are significant:

“We are anticipating an announcement soon from the Administration regarding the restructuring of the U.S. auto industry. We continue to work closely with members of the Task Force and it would not be appropriate for us to speculate on the content of any announcement,” the company said.

The surprise announcement about the classically iconic American corporation is perhaps the most vivid sign yet of the tectonic change in the relationship between business and government in this era of subsidies and bailouts.

The folks who run the post office and Amtrack are now stepping in to run the auto industry. That’s not to say the auto industry has done so well itself, but there’s a market result for poor leadership, and it isn’t to prop up the industry and let government run it.

I’m sorry but this pain avoidance scheme which is costing us trillions of dollars we don’t have has now spun off into the absurd. If you think the auto industry is ailing now, just wait until the “Administration” engages in “restructuring the US auto industry”.

~McQ

Saying Goodbye To A Warrior (UPDATE)

I‘m headed to a rather somber ocassion, where the family of a young paratrooper who served with the 173rd Airborne Brigade Combat Team will be presented his posthumous award of the Silver Star.  It will be awarded in the high school auditorium from which he graduated.

I did aSomeone You Should Know segement about the fight in Wanat, Afghanistan where 9 soldiers lost their life.  But they gave much better than they got, killing well over 100 Taliban and al Qaeda.

The young man being honored today is Cpl. Joseph Ayers.  This from the script of the SYSK delivered on WRKO 680am, Boston on Pundit Review Radio:

At another spot on the observation post, Cpl. Jonathan Ayers laid down continuous fire from an M-240 machine gun, despite drawing huge volumes of small-arms and RPG fire from the enemy.

The enemy put everything they had into knocking out that machine gun. At least 5 or 6 RPGs exploded all around him and he never even flinched. Those that saw what he did said, “He just kept rocking on that 240.”

The survivors said it was the most heroic thing they’d ever seen. Like a movie. They feel he saved their lives. He kept the enemy from getting anywhere near COP. And Ayers kept firing until he was shot and killed.

I’ll have more on this later.

UPDATE: Well that was one heck of a great ceremony.  The auditorium was packed.  The Patriot Guard lined the room.  Old members of the 173rd Airborne Brigade (from my era) were on hand.  So were Cpl Ayer’s comrades.  His mother had decreed (in a motherly way) that this ceremony not be a memorial service but, instead, a celebration of his life.   And that’s precisely what it was.   Speaker after speaker talked about Jonathan, his life prior to the Army, the fact that he was the commander of the JROTC unit at Shiloh High School and that the military seemed always to be in his future.

His former company commander, who will receive the Silver Star in a ceremony at Ft. Benning tomorrow, talked about the fact that had it not been for Jon Ayers, he wouldn’t have the honor of  standing on that stage addressing Ayer’s family.  His mother, Susan, talked about the son she’d lost but was so proud of the man he’d become.  And his father brought the house down with a poignant yet humorous remembrance of his son. After the presentation of the Silver Star to the family, the family was the first to leave and then other relatives. When the soldiers who had served with Jon rose to walk out, the entire auditorium stood and applauded them. 16 Sky Soldiers from Chosen Company of the 1st of the 503 Airborne Infantry battalion lost their lives during their tour in Afghanistan. Over 60 of them were awarded Purple Hearts. 14 Silver Stars. One Distinguished Service Cross was awarded to a member of the company and one is pending. And one soldier from the company has been nominated for the Medal of Honor.

It was an inspiring afternoon – one remembering a young man who gave his all for a unit, in which his mother said, he was so proud to serve he found it difficult to express the full depth of his pride. Today they honored him.