Opher BanarieWhat Is Obama Admin Message?
March 30th 2009 16:57
Anyone watching these early days of the Obama Administration has to wonder what the message is. Candidate Obama promised to exit Iraq immediately - President Obama is calling for a phased withdrawal with thousands of troops remaining in Iraq. Candidate Obama discussed attacking Pakistan - President Obama has added 21,000 US personnel to Afghanistan. Candidate Obama called for an end to earmarks - President Obama signs legislation with more earmarks than anything prior. Candidate Obama called for the closing of the detention facility at Gitmo - President Obama signed an executive order, but cannot find any facility to move the prisoners to.
Now President Obama says he doesn't want to run General Motors - but forces the CEO of GM to resign.
But what is the real message? Does a "surgical" structured bankruptcy mean that shareholders and bondholders get wiped out, but the UAW contracts are left intact? Would a forced partnership between Chrysler and Fiat create an organization that will not honor Chrysler vehicle warranties? What about shareholders of Cerberus Capital Management LP, the private investment fund that owns Chrysler?
But beyond these questions are a series of questions regarding priorities and expectations. For example, why does AIG get about $200 Billion, but GM only gets $35 Billion and the tap is shut? Why is it important for the auto industry not to "simply vanish", but it gets less money than the financial industry? Does that mean the auto industry is less important? What about other industries - from steel to planes to appliances to computer chips - any less important to keep from "simply vanishing"? What about industries that have moved out of the US for any variety of reasons - is it a priority for the Obama Administration to bring them back to the US? Is that more or less important than the auto industry? And what will be the costs (to taxpayers, shareholders, lenders and to company management) to qualify for the endless flow of funds from Washington?
The Democrats berated the Bush Administration for seven years for not having an exit strategy for Iraq. I think it is time to begin asking what the exit strategy is for government funding of failed businesses. There cannot be multiple trillion dollar rescue plans indefinitely, yet that appears to be the direction Obama is moving. After the "toxic assets" it was "financial stimulus", followed by a "down payment" on health care and now the auto industry. There is talk about bailing out newspapers, several of which have closed recently or moved to web-based product. There will be huge spending on education following the $100 Billion in the stimulus. There will be huge spending on energy projects of one type or another.
Obama refuses to call any of this "spending", instead referring to it as "investment". However, the US government has never been in the "investment" business. It is not an investment fund and it has no money of its own to invest. Rather, it is spending taxpayer dollars on projects that politicians choose to identify as important enough to fund. How are those decisions being made? Who is involved in making the decisions? What alternatives are (or are not) being considered for each of these spending choices? Finally, how long will the American people allow this destruction of private ownership to continue?
Now President Obama says he doesn't want to run General Motors - but forces the CEO of GM to resign.
"We cannot, we must not, and we will not let our auto industry simply vanish," President Obama said at the White House.
"What we are asking is difficult," he said. "It will require hard choices by companies. It will require unions and workers who have already made painful concessions to make even more. It will require creditors to recognize that they cannot hold out for the prospect of endless government bailouts."
The remarks come a day after the administration ousted GM Chief Executive Rick Wagoner and rejected the restructuring plans that GM and Chrysler had hoped would lead to another infusion of government cash. Instead, the White House is giving GM 60 days to come up with a strategy for viability. Chrysler has a month to wrap up a partnership with Italy's Fiat SpA.
GM is expected to hold a news conference Tuesday morning to respond to the White House's rejection of its restructuring plan, a person familiar with the plans said Monday.
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.
"What we are asking is difficult," he said. "It will require hard choices by companies. It will require unions and workers who have already made painful concessions to make even more. It will require creditors to recognize that they cannot hold out for the prospect of endless government bailouts."
The remarks come a day after the administration ousted GM Chief Executive Rick Wagoner and rejected the restructuring plans that GM and Chrysler had hoped would lead to another infusion of government cash. Instead, the White House is giving GM 60 days to come up with a strategy for viability. Chrysler has a month to wrap up a partnership with Italy's Fiat SpA.
GM is expected to hold a news conference Tuesday morning to respond to the White House's rejection of its restructuring plan, a person familiar with the plans said Monday.
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.
But what is the real message? Does a "surgical" structured bankruptcy mean that shareholders and bondholders get wiped out, but the UAW contracts are left intact? Would a forced partnership between Chrysler and Fiat create an organization that will not honor Chrysler vehicle warranties? What about shareholders of Cerberus Capital Management LP, the private investment fund that owns Chrysler?
But beyond these questions are a series of questions regarding priorities and expectations. For example, why does AIG get about $200 Billion, but GM only gets $35 Billion and the tap is shut? Why is it important for the auto industry not to "simply vanish", but it gets less money than the financial industry? Does that mean the auto industry is less important? What about other industries - from steel to planes to appliances to computer chips - any less important to keep from "simply vanishing"? What about industries that have moved out of the US for any variety of reasons - is it a priority for the Obama Administration to bring them back to the US? Is that more or less important than the auto industry? And what will be the costs (to taxpayers, shareholders, lenders and to company management) to qualify for the endless flow of funds from Washington?
The Democrats berated the Bush Administration for seven years for not having an exit strategy for Iraq. I think it is time to begin asking what the exit strategy is for government funding of failed businesses. There cannot be multiple trillion dollar rescue plans indefinitely, yet that appears to be the direction Obama is moving. After the "toxic assets" it was "financial stimulus", followed by a "down payment" on health care and now the auto industry. There is talk about bailing out newspapers, several of which have closed recently or moved to web-based product. There will be huge spending on education following the $100 Billion in the stimulus. There will be huge spending on energy projects of one type or another.
Obama refuses to call any of this "spending", instead referring to it as "investment". However, the US government has never been in the "investment" business. It is not an investment fund and it has no money of its own to invest. Rather, it is spending taxpayer dollars on projects that politicians choose to identify as important enough to fund. How are those decisions being made? Who is involved in making the decisions? What alternatives are (or are not) being considered for each of these spending choices? Finally, how long will the American people allow this destruction of private ownership to continue?
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