RKMBs Forums .::Important::. Politics and Current Events Democrat Leaders Want Automaker Bailout

I heard a caller on Headline News today that hit the nail on the head. With any form of welfare the government wants to know if you really need the money, and wants documentation of how you spend it, but for some reason when the welfare is hundreds of billions, no proof of need was needed and no guidelines on spending. Why is it that the government wants documentation for $200 of food stamps, but doesn't give a crap about where $350 billion goes?

A new Capitol Visitor Center recently opened, just in time for the transformation of the Capitol building into a tomb for the antiquated idea that the legislative branch matters. The center is supposed to enhance the experience of visitors to Congress, although why there are visitors is a mystery.

Congress's marginalization was brutally underscored when, after lawmakers did not authorize $14 billion for General Motors and Chrysler, the executive branch said, in effect: Congress's opinions are mildly interesting, so we will listen very nicely -- then go out and do precisely what we want.

On Friday the president gave the two automakers access to money Congress explicitly did not authorize. More money -- up to $17.4 billion -- than had been debated, thereby calling to mind Winston Churchill on naval appropriations: "The Admiralty had demanded six ships: the economists offered four: and we finally compromised on eight."

The president is dispensing money from the $700 billion Congress provided for the Troubled Asset Relief Program. The unfounded assertion of a right to do this is notably brazen, given the indisputable fact that if Congress had known that TARP -- supposedly a measure for scouring "toxic" assets from financial institutions -- was to become an instrument for unconstrained industrial policy, it would not have been passed.

If TARP funds can be put to any use the executive branch fancies because TARP actually is a blank check for that branch, then the only reason no rules are being broken is that there are no rules. This lawlessness tarted up as law explains the charade of Vice President Cheney warning Republican senators that if they did not authorize the $14 billion, the GOP would again be regarded as the party of Herbert Hoover. Surely Cheney, a disparager of Congress and advocate of extravagant executive prerogatives, knew that the president considered the Senate's consent irrelevant.

Evidence that casualness about legality is inherent in big government is found in H.W. Brands's new biography "Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt." FDR became president on Saturday, March 4, 1933. Banks were closed that day and the next, temporarily preventing panicked depositors from withdrawing their money. At 1 a.m. Monday, FDR ordered all banks closed for four days, hoping that the fever would break. His act may have been prudent. But was it legal? Brands writes:

"He cited a section of the 1917 Trading with the Enemy Act as justification. The act had never been formally repealed, but a body of legal theory held that the law, along with other wartime legislation, had expired upon the signing of the peace treaty with Germany in 1921."

FDR had asked the opinion of his as-yet-unconfirmed attorney general, Montana Sen. Thomas Walsh, who gave the answer FDR wanted. Walsh never had to defend this: He died March 2 en route to the inauguration.

The expansion of government entails an increasingly swollen executive branch and the steady enlargement of executive discretion. This inevitably means the eclipse of Congress and attenuation of the rule of law.

For decades, imperatives of wars hot and cold, and the sprawl of the regulatory state, have enlarged the executive branch at the expense of the legislative. For eight years, the Bush administration's "presidentialists" have aggressively wielded the concept of the "unitary executive" -- the theory that where the Constitution vests power in the executive, especially power over foreign affairs and war, the president is immune to legislative abridgements of his autonomy.

The administration has not, however, confined its aggrandizement of executive power to national security matters. According to former representative Mickey Edwards in his book "Reclaiming Conservatism," the president has issued "signing statements" designating 1,100 provisions of new laws -- more designations than have been made by all prior presidents combined -- that he did not consider binding on him or any other executive branch official.

Still, most of the administration's executive truculence has pertained to national security, where the case for broad prerogatives, although not as powerful as the administration supposes, is at least arguable. With the automakers, however, executive branch overreaching now extends to the essence of domestic policy -- spending -- and traduces a core constitutional principle, the separation of powers.

Most members of the House and Senate want the automakers to get the money, so they probably are pleased that the administration has disregarded Congress's institutional dignity. History, however, teaches that it is difficult for Congress to be only intermittently invertebrate.

During a focus group meeting in late November, Joel Ewanick, Hyundai Motor America's vice president of marketing, realized no matter how much cash Hyundai piled on the fenders, it probably wasn't going to get buyers into showrooms.


Not when they were worried about losing their jobs.

"The question for consumers right now is what is going to happen to their income in 2009," Ewanick told Automotive News. "That's what is keeping them on their couches. No matter how big the rebate you put out, the real issue is fear."

So Hyundai, working with Walkaway USA LLC, an Irving, Texas, company that offers buyers insurance on their loans, came up with the latest twist in automaker incentive wars.

If a Hyundai buyer loses his or her job within 12 months after taking delivery, the buyer can return the vehicle to the dealership without damaging the buyer's credit rating. Buyers must prove they've been laid off and must be current in their payments. If the car is in good shape, the buyer can leave the keys with the dealer and Walkaway pays off the loans. Cost to the consumer: nothing.

Hyundai rolled out the program nationwide on Friday, Jan. 2, and will stick with it for all of 2009, Ewanick told Automotive News. He would not say how much the deal is costing Hyundai except to say that it accounts for a major chunk of Hyundai's 2009 marketing budget. Ewanick said Hyundai is paying for the first year of the insurance policy for consumers.

Although the program is less than a week old, Ewanick said reports from Hyundai dealers and from monitoring Web site traffic show consumers are interested in the program.

"We have definitely touched a chord with consumers. We knew from doing a lot of research last fall that consumers weren't reacting to traditional tactics of automotive sales and marketing programs."

Hyundai has exclusive rights to the program nationally thorough Walkaway, but individual dealers can offer similar protection. Ewanick says he expects Hyundai to have competition with the return program.

Says Ewanick: "We expect this will probably get a few months, maybe less, of clear sailing."

Ford Motor Co. said Thursday it lost $5.9 billion in the fourth quarter and burned through $5.5 billion in cash as sales slumped, but the company still says it does not plan to seek federal loans.

After losing $14.6 billion in 2008, the second-largest U.S. automaker said it was cutting more jobs and will borrow $10.1 billion from an existing line of credit to help get it through what is expected to be a tough 2009.

Chief Executive Alan Mulally said on a conference call with reporters and industry analysts that the company plans further restructuring actions that will be announced later.

Ford said it lost $2.46 per share in the three months ended Dec. 31, compared with a loss of $2.8 billion, or $1.13 per share, for the year-ago period.

Revenue fell to $29.2 billion, down 36 percent from $45.5 billion in the fourth quarter of 2007.

The results missed Wall Street's expectations. Excluding special items, the company reported a $1.37 per share loss for the quarter. On that basis, analysts polled by Thomson Reuters expected a fourth-quarter loss of $1.30 per share on revenue of $27.1 billion.

Ford shares were unchanged at $2.03 in premarket trading.

Dearborn-based Ford also announced that its credit arm would cut 20 percent of its work force, or 1,200 jobs, and it has reached agreement with the United Auto Workers union to end the "jobs bank" in which laid-off workers get most of their pay, although the effective date is still being negotiated.

Chrysler LLC ended its jobs bank Monday, and General Motors Corp. has said its will end next week.

The company said special items accounted for $1.4 billion of its net loss, largely due to personnel reductions and investment losses on money set aside for a union-administered trust that will take over retiree health care costs in 2010. Ford has about $2 billion in investments in that account, which can be used to fund operations, if needed.

The Treasury Department made loans to Ford's U.S-based competitors last month, allocating $13.4 billion to GM and $4 billion for Chrysler.

Company spokesman Mark Truby said Ford's position on seeking federal loans is unchanged. It asked for a $9 billion line of credit from the government but has said it has enough cash to make it through 2009 and doesn't intend to use government loans unless economic conditions worsen.

"We don't plan to or foresee using it," Truby said Thursday.

Ford's cash burn rate slowed from $7.7 billion in the third quarter. The company said it had $13.4 billion cash on hand as of Dec. 31 and plans to receive the $10.1 billion from its secured credit line Tuesday.

"We took this action because of our concerns about the growing instability of the capital markets," Mulally said of the borrowing.

Chief Financial Officer Lewis Booth said the company is tapping the credit line only to make sure it's available and not to fund its operations. Ford hasn't needed a government bailout because it borrowed funds and set up credit lines totaling $23.5 billion in 2006 and 2007 to prepare for a downturn.

"We are confident that our burn rate will be substantially slower in 2009," Booth told reporters Thursday morning.

He said Ford cut costs in its automotive sector by $1.4 billion in the fourth quarter compared with the same time in 2007, and $4.4 billion for the full year.

Ford's 2008 net loss of $14.6 billion compares with a loss of $2.7 billion in 2007.

Booth said Ford still is on track to break even in 2011, but the company anticipates worldwide sales to fall more than 10 percent in 2009. Ford sees improvement later this year, however, as government stimulus packages take effect.

"Things are so volatile," Booth said. "This is unprecedented."

Ford said it plans to invest $14 billion over seven years to produce fuel-efficient vehicles, allowing it to qualify for up to $5 billion in loans from the U.S. Energy Department by 2011.

Congress allocated $25 billion to the Energy Department for loans to automakers so they can develop new fuel-efficient technologies.

Vehicle sales in the U.S. are at their lowest levels in 26 years as consumers face tight credit markets and economic uncertainty. Ford's U.S. sales plunged 20.5 percent in 2008, and its market share fell slightly to 15 percent from 15.4 percent in 2007.

That uncertainty has spread to Europe as well, where sales have dropped. Markets such as South America, typically a bright spot for Ford, are also slowing.

Losses in North America weighed down the company's results, with Ford reporting a pretax loss of $1.9 billion. In Europe, Ford posted a fourth-quarter loss of $330 million, compared with a profit of $223 million in 2007. In South America, Ford's pretax profit fell 75 percent to $105 million.

The company's Asia-Pacific and Africa unit lost $208 million in the quarter, due mainly lower sales and unfavorable exchange rates.

Ford is still considering a sale of its Volvo unit, which lost $736 million in the quarter.

The company posted a quarterly pretax profit of $79 million from its investment in Mazda Motor Co. In November, Ford sold a large portion of its 33.4 percent stake in the Japanese automaker.

Ford's financing arm, Ford Motor Credit Co., reported a pretax loss of $372 million, compared with a profit of $263 million in the year-ago quarter.

On second thought, never mind about that bailout

Print By MATT APUZZO, Associated Press Writer Matt Apuzzo, Associated Press

WASHINGTON – A small but growing number of community banks are backing out of the government's bailout, which they see as fraught with hidden strings and government interference.

About 20 banks so far that applied for or had been approved to receive about $1 billion combined in taxpayer money have reversed course in the past month and refused to take the money. That's just a fraction of the hundreds of billions of dollars the government already has spent, but it shows that taxpayers aren't the only ones anxious about the financial bailout.

"The government's going to own a good portion of these banks," said David Heintzman, president of Stock Yards Bank & Trust in Louisville, Ky. The bank recently turned down $43 million in approved bailout money.

After Congress approved the $700 billion bailout in October, the government gave banks only a few weeks to decide whether they wanted to take part in the government investment program. Many applied to get a foot in the door, in case predictions of an economic collapse came true.

"We drank the Kool-Aid," said Michael Ross, president of Fidelity Bank in Dearborn, Mich., which applied for about $29 million in November.

But as details emerged, the deal didn't look so good. For Fidelity, taking the money would mean the government would have owned about 25 percent of the company's outstanding stock. Then Congress and the White House could start calling the shots, Ross said. He remembers the government's failure overseeing Freddie Mac and its sister company, Fannie Mae, the two housing companies so badly mismanaged they were taken over by the Bush administration.

"These are the guys who brought you Hurricane Katrina. These are the guys who were supposed to be watching Fannie and Freddie," Ross said. "I've not seen anything like this, where they really are talking about nationalizing banks."

Much of the criticism about the bailout has focused on the lack of oversight, which allowed banks to take money and refuse to say where it's going. Wall Street executives, who make millions of dollars and enjoy lavish perks like private jets, earned the ire of consumer watchdogs who said taxpayers were getting a raw deal.

But some community banks, which had little or nothing to do with the subprime mortgage crisis, say the deal didn't look great for them, either.

Congress wants banks to make loans, so businesses can expand and people can start buying houses again. But lawmakers also want them to make only trustworthy loans. But there are only so many good loans to make in a weak economy with high unemployment.

Explaining that to investors is easy. To politicians, it might looks like you're hoarding taxpayer money.

"Then what? Then they have a guy at our board meeting?" said William Campbell, president of Pamrapo Savings Bank, a Bayonne, N.J., bank that walked away from its $11 million bailout application.

The government also can force banks to cut dividends to shareholders, making a bank's stock less attractive to investors. President Barack Obama has said he wants to prohibit banks from buying other banks. And at any time, Congress can change the law and add new terms.

"Are you going to enter into a contract that will cost you millions of dollars if you can't live with the rules and you don't even know what the rules are?" said Steve Buster, CEO of Richmond, Calif.-based Mechanics Bank, which refused $60 million in bailout money. "I don't know of any other forum that parties can change the contract at will. This is not fair."

The banks that turned down the money said they were comfortable their own finances will allow them to weather the storm. For some, taking the money seemed riskier than turning it down.

"We finally said, 'Hey do we really want to go down this path?'" said Michael Blodnick, chief executive of Glacier Bancorp of Kalispell, Mont. "I understand a lot of banks do, and a lot of banks need to."

___

Associated Press writer Stevenson Jacobs in New York contributed to this report.

WASHINGTON -- Wells Fargo & Co., which received $25 billion in taxpayer bailout money, is planning a series of corporate junkets to Las Vegas casinos this month.

Wells Fargo, once among the nation's top writers of subprime mortgages, has booked 12 nights at the Wynn Las Vegas and its sister hotel, the Encore Las Vegas beginning Friday, said Wynn spokeswoman Michelle Loosbrock. The hotels will host the annual conference for company's top mortgage officers.

The conference is a Wells Fargo tradition. Previous years have included all-expense-paid helicopter rides, wine tasting, horseback riding in Puerto Rico and a private Jimmy Buffett concert in the Bahamas for more than 1,000 employees and guests.

"I was amazed with just how lavish it was," said Debra Rickard, a former Wells Fargo mortgage employee from Colorado who attended the events regularly until she left the company in 2004. "We stayed in top hotels, the entertainment was just unbelievable, and there were awards -- you got plaques or trophies."

While the nation's recession has led other banks, such as Bank of America, to cancel employee recognition outings, Wells Fargo has not.

"Recognition events are still part of our culture," spokeswoman Melissa Murray said. "It's really important that our team members are still valued and recognized."

Corporate retreats have attracted criticism since the bank bailout last fall. Congress scolded insurance giant American International Group Inc. for spending $440,000 on spa treatments for executives just days after the company took $85 billion from taxpayers.

AIG has since canceled all such outings.

Beginning Feb. 25, Wells Fargo's insurance division is hosting a 40-person team meeting at the Mandalay Bay Hotel in Las Vegas, according to the Las Vegas Convention and Visitors Authority.

Murray did not immediately have details about the size or cost of the events or what was planned

In previous years, top loan officers were treated to performances by Cher, Jay Leno and Huey Lewis. One year, the company provided fortune tellers and offered camel rides, Rickard said.

Every night when employees returned to their rooms, there was a new gift on their pillows, she said.

Wells Fargo Chairman Richard Kovacevich has traditionally greeted every employee personally when they arrived.

Rooms at the Wynn and the Encore are consistently among the most expensive in Las Vegas.

The $2.3 billion Encore opened in December as sister hotel to the Wynn. Its decor includes a 27-foot Asian dragon made from 90,000 Swarovski crystals and artwork by Colombian artist Fernando Botero. One of the restaurants features Frank Sinatra's 1953 Oscar.

Both properties have high-end retail stores, including Manolo Blahnik at Wynn and Chanel at Encore.

Dear BASAMS,

Yesterday, the Senate began debate on an economic stimulus package that is intended to get our economy back on track and help Americans who are suffering through these difficult times. Unfortunately, the proposal on the table is big on the giveaways for the special interests and corporate high rollers, yet short on help for ordinary working Americans. I cannot and do not support the package on the table from the Democrats and the Obama Administration. Our country does not need just another spending bill, particularly not one that will load future generations with the burden of massive debt. We need a short term stimulus bill that will directly help people, create jobs, and provide a jolt to our economy.

I believe we need to evaluate every bit of spending in this stimulus proposal with one important criteria - does it really stimulate the economy and help create jobs - if the answer is no, it does not belong in a so-called stimulus package. Furthermore, the stimulus must include significant direct relief to American workers in the form of payroll tax cuts and programs to help homeowners keep their homes. Finally, we need an end game to this stimulus so that when our economy recovers, these spending programs do not remain permanent and saddle our children with a skyrocketing national debt.

I appreciate the discussions President Obama is having with my Republican colleagues, but the time for talking has come to an end and we must now begin some serious negotiation. But as of yet, Republicans have not been given the opportunity to be involved. The House of Representatives passed a stimulus bill without a single Republican supporting it. In the Senate, the Democrat leadership is trying to jam the existing proposal through regardless of reservations from a number of members. With so much at stake, the last thing we need is partisanship driving our attempts to turn the economy around.

I have long been a fighter against wasteful spending in Washington and long an advocate for a balanced budget -- that will never change. I realize we face extraordinary challenges with our economy today, but that is not an excuse for more irresponsibly from Washington. I hope you will join me in saying no to this stimulus package as it currently exists by signing this petition .

Sincerely,

John McCain
Chair, Country First PAC

Interesting. According to the LA Times, Hollywood was earmarked money in bailout bill. The bill that was passed in October would provide tax breaks worth more than $470 million over the next decade for movie and TV producers that shoot in the U.S.

Can we now stop pretending this is about helping the economy and wholly about throwing money at special interests?

DETROIT (Reuters) – U.S. auto parts suppliers are asking for up to $20.5 billion in federal aid to survive the worst industry downturn in decades, the Automotive News reported on Wednesday.

Suppliers are asking for $10 billion in direct loans from the U.S. Treasury Department, the magazine said, citing Neil De Koker, president of the Original Equipment Suppliers Association.

The suppliers made the request on February 1 through the Motor & Equipment Manufacturers Association, according to the report.

The Original Equipment Suppliers Association did not immediately return a call for comment, and a spokeswoman for the Motor & Equipment Manufacturers Association was not immediately available for comment.

Automotive News reported that the suppliers had asked for another $10.5 billion that would flow through the Detroit automakers so that suppliers could be paid in 10 days for delivered parts instead of the traditional 45 days.

Production cuts from all three U.S. automakers and steep declines in sales have are pressuring parts suppliers. Analysts have said they expect many small auto parts suppliers to fail.

The federal government already has pledged $17.4 billion to automakers General Motors Corp(GM.N) and Chrysler LLC (CBS.UL).