Denials by President Obama to the contrary, I have some real questions about this Administration's micromanagement of the businesses to whom they are lending taxpayer dollars. Some things they are doing make sense and are consistent with the way business normally operates. But there are a number of things this Administration is doing which exceed the boundaries of normal operations and some are both scary and can create further economic calamity. Unfortunately, no one in the "main stream media" (e.g. not labeled conservatives) are challenging the President on this.
Let's start by giving credit, where credit is due - President Bush started us down this path with the bailout of AIG, the $700 million for banks under TARP, and the decision to lend money to the auto makers. President Obama is carrying on programs that President Bush started. Second, if the government is going to provide money to companies then the Government, like any lender, has the right to try to protect the money being invested. Some things the Obama Administration is doing are appropriate - asking for stock in companies to which it is lending as security or asking the automakers to show us a business plan that works if you want more money. Those are things any lender might do to protect its investment.
But there are things this Administration is doing that go far beyond what any lender can do. For example, ordering the CEO of General Motors to resign -- shareholders of companies don't have the power to order CEO's to resign overnight. Nor do lenders. That was an exercise in power far beyond what is done in the market place. Dictating salaries and bonuses, as the Government is trying to do with banks, financial companies, and AIG, that is also an exercise of power beyond what any shareholder or lender can do.
Then there are things the Government is doing which are just downright scary. Some are scary because they suggest the Obama Administration is taking actions that can cause future economic calamity - the proverbial robbing Peter to pay Paul. Other actions are scary because they demonstrate that Government bureaucrats are threatening retribution against those who exercise legitimate rights. Both sides of this Administration are legitimate causes for concern.
On the economic front, a New York Times article recounting the steps leading up to the Chrysler bankruptcy reports that financial investors holding a smaller share of debt refused to agree to the debt settlement terms being dictated by the Government. Those investors said that given how they had secured their investments, Bankruptcy Law entitled them to a better result than what the Government was offering - and it was independently confirmed that these investors are right. The larger investors who agreed to the Government's terms were companies like J.P. Morgan Chase and other large investors who are "beholden to Washington." For these investors "defying the Administration was never an option..." even though by agreeing to the terms of the Obama Administration, these companies will take bigger losses than they should have.
The very banks that we have bailed out are now going to lose more money than they should otherwise lose because the Obama Administration is forcing them to do so. Any fiduciary or other legal obligations to the shareholders, depositors, or others investing in those banks is sacrificed because the Obama Administration feels it is necessary to rob Peter (these financial companies) to support Paul (Chrysler). Expect the Administration to do the same thing with investors in General Motors as well.
How is it good for these investors for the Obama Administration to force them to take greater losses than they would be required to accept under law? How is it good for the economy for the Obama Administration to force institutions to ignore their legal and fiduciary obligations by making them accept greater losses than they would be required to accept under law? Who are the evil investors the holdout financial companies protecting? Well the underlying investors -- according to the New York Times - include teachers union pension funds, Retirement Accounts (perhaps you have heard of 401ks?), and the endowments of charitable organizations. Do we really want to stiff people like that?
How is this good for the economy -- for these institutions to have less money available to lend or invest or for these institutions to report greater losses on their quarterly statements that influence their stock prices? Will that mean more taxpayer dollars will have to be invested in the future to shore these companies up further?
The really scary part is that the Obama Administration has continued a practice started during the Bush Administration of empowering bureaucrats to threaten businesses with regulatory repercussions if they do not go along. It was well reported that President Bush's Treasury Secretary, Henry Paulson, forced a number of banks to accept federal bailout funds even if they did not want the money. In sworn testimony, the CEO of Bank of America (BoA), said Secretary Paulson ordered BoA officials to keep quiet about Merrill Lynch bonuses that were to be paid out. For J.P. Morgan Chase, "defying the Administration was never an option" according to the New York Times.
The Obama Administration has continued these practices and given the authority to terrorize business to lower level bureaucrats. Earlier this year there were reports by bankers saying that they accepted TARP funds that they did not need or want because Obama Administration officials said that depositors of those institutions would not be protected if the banks did not take the money. In the current Chrysler situation, industry executives, according to the New York Times, worry the Obama Administration will use the refusal to cave by financial insitutions as leverage to pass legislation for greater regulation and eliminating certain tax benefits for private investment funds.
Any time a government official threatens an American citizen for exercising his or her legal rights that is wrong. The fact that such terrorism is supported by or a practice of an Administration in power is downright scary.
Let's start by giving credit, where credit is due - President Bush started us down this path with the bailout of AIG, the $700 million for banks under TARP, and the decision to lend money to the auto makers. President Obama is carrying on programs that President Bush started. Second, if the government is going to provide money to companies then the Government, like any lender, has the right to try to protect the money being invested. Some things the Obama Administration is doing are appropriate - asking for stock in companies to which it is lending as security or asking the automakers to show us a business plan that works if you want more money. Those are things any lender might do to protect its investment.
But there are things this Administration is doing that go far beyond what any lender can do. For example, ordering the CEO of General Motors to resign -- shareholders of companies don't have the power to order CEO's to resign overnight. Nor do lenders. That was an exercise in power far beyond what is done in the market place. Dictating salaries and bonuses, as the Government is trying to do with banks, financial companies, and AIG, that is also an exercise of power beyond what any shareholder or lender can do.
Then there are things the Government is doing which are just downright scary. Some are scary because they suggest the Obama Administration is taking actions that can cause future economic calamity - the proverbial robbing Peter to pay Paul. Other actions are scary because they demonstrate that Government bureaucrats are threatening retribution against those who exercise legitimate rights. Both sides of this Administration are legitimate causes for concern.
On the economic front, a New York Times article recounting the steps leading up to the Chrysler bankruptcy reports that financial investors holding a smaller share of debt refused to agree to the debt settlement terms being dictated by the Government. Those investors said that given how they had secured their investments, Bankruptcy Law entitled them to a better result than what the Government was offering - and it was independently confirmed that these investors are right. The larger investors who agreed to the Government's terms were companies like J.P. Morgan Chase and other large investors who are "beholden to Washington." For these investors "defying the Administration was never an option..." even though by agreeing to the terms of the Obama Administration, these companies will take bigger losses than they should have.
The very banks that we have bailed out are now going to lose more money than they should otherwise lose because the Obama Administration is forcing them to do so. Any fiduciary or other legal obligations to the shareholders, depositors, or others investing in those banks is sacrificed because the Obama Administration feels it is necessary to rob Peter (these financial companies) to support Paul (Chrysler). Expect the Administration to do the same thing with investors in General Motors as well.
How is it good for these investors for the Obama Administration to force them to take greater losses than they would be required to accept under law? How is it good for the economy for the Obama Administration to force institutions to ignore their legal and fiduciary obligations by making them accept greater losses than they would be required to accept under law? Who are the evil investors the holdout financial companies protecting? Well the underlying investors -- according to the New York Times - include teachers union pension funds, Retirement Accounts (perhaps you have heard of 401ks?), and the endowments of charitable organizations. Do we really want to stiff people like that?
How is this good for the economy -- for these institutions to have less money available to lend or invest or for these institutions to report greater losses on their quarterly statements that influence their stock prices? Will that mean more taxpayer dollars will have to be invested in the future to shore these companies up further?
The really scary part is that the Obama Administration has continued a practice started during the Bush Administration of empowering bureaucrats to threaten businesses with regulatory repercussions if they do not go along. It was well reported that President Bush's Treasury Secretary, Henry Paulson, forced a number of banks to accept federal bailout funds even if they did not want the money. In sworn testimony, the CEO of Bank of America (BoA), said Secretary Paulson ordered BoA officials to keep quiet about Merrill Lynch bonuses that were to be paid out. For J.P. Morgan Chase, "defying the Administration was never an option" according to the New York Times.
The Obama Administration has continued these practices and given the authority to terrorize business to lower level bureaucrats. Earlier this year there were reports by bankers saying that they accepted TARP funds that they did not need or want because Obama Administration officials said that depositors of those institutions would not be protected if the banks did not take the money. In the current Chrysler situation, industry executives, according to the New York Times, worry the Obama Administration will use the refusal to cave by financial insitutions as leverage to pass legislation for greater regulation and eliminating certain tax benefits for private investment funds.
Any time a government official threatens an American citizen for exercising his or her legal rights that is wrong. The fact that such terrorism is supported by or a practice of an Administration in power is downright scary.
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