We Are All Auto Experts

I know my prescription for the ailing American auto industry is correct. So thought Daimler, followed by Cerberus Capital Management and currently Fiat. Fortunately, I don't run, nor will I run an auto maker. Daimler and Cerberus used there own money - I am good with that.

Unfortunately Congress gets to play with other people's money - your money. It seems they think they know which dealers are economically viable better than management or the accountants. Not it looks like they are going to try a new endeavour - running an auto maker.

More than 3,100 General Motors and Chrysler dealers could be in line for a new lease on life as a House bill to overturn dealer closing passed a House committee vote last night. The bill, part of larger spending bill, will move to the House floor next Wednesday.

Read more here.

Anyone who believed that a government run auto maker was going to be free to pursue economic rather than political choices was starkly wrong. These are the unintended consequences of bailouts. I expect that before the end of the next recession GM or Chrysler(Fiat) will be back to losing money on a massive scale. Again the taxpayer will be expected to be riding to the rescue (again). Can we get off this merry-go-round?

Health Care Chaos

Nationalizing more of our health care is a very, very bad idea. The simpler solution to the (involuntarily) uninsured is to provide vouchers or cover them under Medicaid. We didn't need to nationalize grocery stores to provide food aid to the poor We did it in the form of food stamps. Creating a Byzantine, inefficient bureaucracy is overkill.

For those that think "public choice" health care is a good idea they should sign up. However, where profit is falsely believed to be "excess" this is their chance to enjoy the benefits of government. If nationalizing becomes a reality it should be funded just like private insurance - from the proceeds of the program and fees collected through payroll deduction (only from the covered). NO GENERAL FUND money should supplement the program. This is where it will be quickly discovered profit is neither guaranteed nor excess in a competitive market place. I concede that our current system is already very convoluted. A system where the employer decides who pays for coverage, the patient choose the provider, the insurance company decides how much to pay on the claim. The normal market incentive system is broken.

Regulation, wisely done, is a necessity for both a private or public option and should be unaffected by such legislation.

The Fearsome Barrel Monster

This is definitely the most creative use of construction barrels I have seen. Hopefully the charges against the North Carolina State University student get dropped.

Arm Twisting for Chrysler

The government wants to change the outcome of well established bankruptcy procedures. This is not about giving away Chrysler to another entity, foreign or otherwise. This is about property rights and may well impact everyone in the country.

Bondholders that are senior (vs. senior subordinated, unsecured, etc.) are entitled to being made whole before any junior creditor. This is screwing investors who accepted lower interest because they would be the first reimbursed even in bankruptcy. This was not necessarily a poor investment based on existing rules. By changing the rules the government is telling all bondholder that senior is the same as unsecured. Imagine the implications for future bond sales by other companies and the effect this will have on borrowing costs. Investors may tend to stay away from any corporate bonds or bond funds, particularly those holding industrial, unionized companies - at least until this is resolved.

The retort to the suit by the government is “this is better for the economy” must not stand otherwise any effective property right you may believe you have is moot. Tthe same argument about your how much you make, where you work, how much free time you have, where you live, etc.

This is not about protecting the common man, this is about protecting every man. It does not matter that the small investors are fighting back, that is their right. Be happy someone is fighting back. J.P. Morgan and other TARP (bailout) recipients hold a lot of automotive bonds, but don’t look for them to join the fight as a bond holder.

More Regulation?

My concern is we have not enforced our existing regulations and we allowed lobbyists for banks to convince Congress to pass favorable laws.  A Federal regulator have even allowed blatantly illegal activities regarding backdating capital on the balance sheet, from a bank regulator that did the same thing in the S&L crisis.  See the Wall Street Journal for details.

Congress and the President want even more regulation.  That means more regulators.  That means more duds like the video below ensuring(???) we don't get burned as taxpayers.  The Federal Reserve has committed over $9.7 TRILLION dollars that the taxpayers ultimately backstop.  That is over $30,000 liability on every single person in this country.  More regulators is very unlikely to help.  How about better regulators?  Lots of Wall Street people are without jobs and they know how business is done.

Watch the video and you decide if more regulators will help.  By the way - stuff like this is quite common for our regulators for those who don't regularly see "how the sausage is made."

 

Sources:

Mises.org, The Fox Watching the Henhouse,  http://blog.mises.org/archives/010086.asp

Wall Street Journal, Regulators Let IndyMac Backdate Infusion, http://online.wsj.com/article/SB122998621544328009.html

Nanny Knows Best

I found an interesting blog called "Nanny Knows Best" and it highlights Britain's path towards a pervasive nanny state. Below is an excerpt from a recent post expounding on recent "expenses" by Members of Parliment:

Listening to our "walking dead" Prime Minister the other day, prattling on about how "the system" (wrt MPs' expenses) was at fault for the claims for floating duck islands, fake mortgages, moats etc I was struck by how what the PM said exemplifies the very heart of the problem of the Nanny state.

The PM ignored the fundamental issue, it is not the system that is at fault but the people. It was not compulsory for our MPs to claim for duck islands and moats, they did so voluntarily and with gusto!

The PM and these greedy MPs are using the "procedures" argument as a defence, in exactly the same manner that a doctor, social worker, police officer, teacher, FSA CEO or council officer uses "rules and procedures" to justify what they do and to justify their mistakes.

How many times have we heard the phrase "we followed the procedures"?

This should be an interesting blog to follow on occasion, mostly since I don't in Britain. Unfortunately things happening across the pond also wind up here in the USA. Let us hope not.

Stress Canary

Stolen from JCG3

I have a new definition… I was surprised when wikipedia and even the urban dictionary didn’t have a definition for the term “stress canary”.

Stress Canary - noun

1. the person on a team or project that feels the effects of stress well before anyone else
2. a modern version of a canary in a coal mine, someone who reacts to stress as an early warning signal