News round-up: 19 Nov 2008
Yesterday’s big news came at the hearings in Washington D.C. where U.S. Treasury Secretary Paulson did his best Donald Rumsfeld imitation, stonewalling Congress despite increasing anger at how the Troubled Asset Relief Program (TARP) is being administered. See my post “Barney Frank rips Hank Paulson’s bait and switch” on this. Caroline Baum from Bloomberg also has a good article on Paulson and his ever-shifting efforts to stop the bleeding.
At the hearings, Paulson signaled Bush Administration opposition to the TARP being used for the Big Three U.S. Automakers. (Note: I had previously indicatedPaulson said that the automakers do deserve some financial assistance. However, I was wrong. The Bush Administration seems ever more opposed to helping the automakers). Therefore, we will have a showdown very soon on this issue. GM will likely fail unless it receives help before year’s end. I do not think the U.S. Government should bail out the Big Three. These companies have wasted billions on products no one wants and have a cost structure and debt load that is incompatible with their earnings capacity. Read what happened in the UK when they bailed out an automaker decades back.
The best result would be a pre-package Chapter 11 filing whereby the U.S. Government takes on some of the health care and pension burdens of the company and debt holders do a debt for equity swap. Management should be fired. Andrew Ross Sorkin had a good piece on this yesterday in the New York Times. However, Sorkin’s plan assumes many cost cuts that are unrealistic in today’s political environment. These cuts involve people whose lives could be destroyed by job loss. One should always remember that behind the numbers are real live people with hopes, dreams and aspirations. Ross Sorkin’s plan is a good attempt, but it will not pass a Democratic Congress. Mitt Romney gave his two cents in a New York Times Op-Ed as well.
One event not on people’s radar is the financial meltdown in Ireland. I penned a post about Ireland being too small a country to support such a large financial sector. I openly wondered if they were going the way of Iceland. Today, Irish papers are reporting that things are indeed starting to unravel and the Irish Government is taking steps ensure that it can maintain confidence in the country’s banking sector.
In other news, a Texas grand jury indicted Dick Cheney and former Attorney General Alberto Gonzalez for “organized criminal activity.” WHere this is going, I do not know. But, it is an interesting story. I guarantee you we will see pardons for these two before Bush leaves the White House covering any actions they took while in office. Stay tuned.
Much more news is available on the news feed which you can find here.
Below are a few other top stories which you should read. Enjoy.