Letter to Senator Mark Warner

I just received a letter from Senator Mark Warner. This is a reply.

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Thank you for your email.

Thank you for letting me know that you strongly support additional bailouts for favored businesses.

I realize that the small business package includes some things that will be positive, like allowing those who choose to invest in capital to write off the balance more quickly. However, allowing the current tax rates to expire on most of these businesses (taxes on the "rich" who own these businesses and file personal returns that reflect the business income) will cost far more than this plan could ever save.

Moreover, the majority of the cost (which will have to be paid for, despite the claim that it doesn't cost anything) is for direct bailouts (loans) for favored businesses. The loan industry has no shortage of funds available. The $1.5b is minor compared to the $300b already available. This money will go to companies, like those you indicated, which are politically favored, and some of whom do not have a sound business model which would be required to otherwise get loans. And which will be required to actually succeed and to pay back the loans.

In addition, while the deductions on capital investment may reduce the short-term cost of business growth, the new healthcare regulations will greatly increase the cost of employees. In other words, recent regulations still create an environment that is strongly negative for jobs growth.

It is laws like these that have overseen the increase in unemployment from 7.2% under Bush to over 10% under Obama. These laws with more regulation and higher taxes have made things so bad that some experts do not expect unemployment to ever return to the low rates that President Obama inherited.

(Originally posted at http://warner.senate.gov/public/index.cfm?p=NewsletterReply)

GM Being Run by Inexperienced Dropout

GM is now being run by Brian Deese, a 31-year-old Yale drop-out.

He got his undergrad degree in Political Science from a small private school in Vermont, and has had no formal econonomics education. His only previous experience with the auto industry was sleeping in his car in a Pontiac plant parking lot.

He worked with several Democratic-financed think-tanks, and after the stint at Yale, went to Hilary Clinton's Presidential campaign as her economic advisor. When that folded, he went to the Obama campaign as deputy economic policy director, then with the transition team as an economic advisor. Then, despite having neither any economic or business education, nor any private-sector experience, he was the only full-time member of the auto task force between the election and mid-February.

He is now managing the government investment of $458,000 per day in GM. And that plant at which he slept in the parking lot? The entire brand is being closed under his management.

Reference for much of this, though I found it elsewhere citing this article.

GM Restructuring

GM's restructuring plan includes more jobs manufacturing cars. But those jobs will be in Mexico and China, because they are moving some of the manufacturing there.

But...I thought this bailout was to save the "American auto industry"? So we are now bailing out the Mexican and Chinese auto industry, while those who really make cars here, like Honda and Toyota, are on their own?

Government running our businesses

The government is insistent on taking over the banks. They started by loaning the TARP/bailout money to the banks. They they changed that to preferred stocks - some more risk than bonded loans, but still higher in the food chain. Now the government wants to change it to common stock. You know, the stuff that becomes worthless in bankruptcy? Why? Because common stock is VOTING stock! The government wants to tell the banks exactly what to do! (They also get four of nine directors of Chrysler. with the UAW getting one and Canada getting one, totalling six of the nine directors.)

Since when has the government been any good at running a business? Just look at the Postal Service. They keep raising rates all the time. They are slow, and they lose a lot of mail. They don't guarantee their service unless you get the highest (most expensive) options. The major competitors at least guarantee they won't lose your stuff - and they offer tracking included at no extra charge. But they AREN'T ALLOWED to handle non-priority letters! The government knows it's doing such a bad job that it won't let others compete!

Keep the government's hands off of businesses!

FYI on a label I used.

Fascism: One of the major components is the government telling businesses what to do even while those businesses maintain the fascade of being private. Communism includes when those businesses are directly government-owned. Look it up.

Banking "stress test"

We've just gotten results from a "stress test" done on banks by the FDIC. The FDIC does these regularly anyway! It's just more politics.

And the bad news took the Dow Jones down another 102.43 points. Thanks - my 401K (what's left of it) needed that.

Transparency?

You may wonder, where's all the "transparency" we were promised? We just found out with Chrysler that we lost $4.3 billion from TARP. Wasn't "every last dime" supposed to be accounted for?

It turns out that they aren't going to give us any information on this until next year.

Chrysler bankruptcy

The company Cerberus owned 81% of the company, was owed $500M, and owned the Chrysler Building. They lose everything in the bankruptcy. They get repaid zero. They even lose the building.

The company Daimler that used to own Chrysler is owed another $1.5B. They get repaid zero.

Banks are owed $6.9B. They get $2B, 29 cents on the dollar.

The US government has put in $4.3B from the TARP bailout. They are also owed $300M in fees. This was supposed to be a great investment Chrysler would repay with interest. What do we get on our investment? Zero. No, worse than zero. We will give them another $3.2B in the restructuring and another $4.7B later.

The United Auto Workers has $10.6B in Chrysler debt. Remember from my last note that this is unsecured debt; they are only supposed to get what's left over after the secured debt is FULLY repaid. So, what do they get? A note for $4.6B (at 9% interest!), or 43 cents on the dollar, more than anybody else. Plus - and a big plus - they get 55% of the equity of the company. They went from not actually owning anything, and being last in line for repayment, to owning 55% of the company. Oh, and they also get $600M in "legacy costs", for stuff like pension and healthcare benefits, from Daimler.

Guess what? The "Car Czar", Steve Rattner, was Finance Chair for the Democratic National Committee. And guess what else? The UAW gives 99% of their political contributions to the DNC. Makes things clearer, doesn't it?

Auto industry bankruptcy

Well, Bush said that the "US auto industry" was too big to fail. (Never mind that Honda, Toyota, Volkswagen, BMW, and others make their stuff here, and frequently with more US-made parts than the "US" manufacturers...) We, meaning the taxpayers, have put billions into them.

Well, now Chrysler is failing anyway. YAY! We've been putting "good money after bad" for far too long, and I don't want the government running businesses anyway. And Fiat will get a good deal, because the tax payers and debtors (mostly small businesses) are covering the rest.

Now we just need to push GM over, so they go bankrupt too and get the government out of their management. And the unions too, while they're at it. Unions can be useful, but they've gotten to just be huge, political, and expensive bureaucracies of their own.

The Federal Governmemnt Is Clueless

OK, the Air Force One flight that served to terrify people in NYC cost closer to $350,000. And the trip to Missouri yesterday was about $20 million. Your tax dollars at work.

Our government over the past year - yes, with both parties and both administrations - are using crisis after crisis to get more power. The government and the unions now control GM and the major banks (and a large portion of Chrysler). They have pushed through cabinet secretaries without proper review, and any objections were overruled in the name of the crisis. We got a tax cheat AS THE HEAD OF THE IRS because we had a crisis. He has since proven worthless; CitiBank and Bank of America are now (based on the "stress test") seen as less stable and more likely to fail AFTER the bailout than before. Now we have someone with a strongly racist beliefs as head of Health and Human Services because of a crisis. It's just a bad flu, at least for now, and all they really need to do is close the border from Mexico to keep sick illegals out.

When I say HHS secretary Sebelius is racist, I mean as in wanting to eliminate all black people. She's scary - check it out, just not with the major news sources since they love everything Obama does. Oh, and as a reminder, Obama's only 1/16 black. With 7/16 Arab and 1/2 white. This is common knowledge, but generally ignored. I don't care what race/heritage someone is, but don't try to convince me of something that's not true. Planned Parenthood was started by Margaret Sanger explicitly to eliminate blacks by aborting all black babies. They try to play that down now, but it's still true.

Our politicians are getting irritating...

- They go on about how "water boarding" is horrible and abusive. But Nancy Pelosi, current Speaker of the House, KNEW since 2002 that it was permitted and legally not torture. Neither she nor anyone else objected about any of the procedures until now, and in fact, two actually asked if it was going far enough. There are minutes of the meeting as proof.

- Obama blames Bush for his inherited debt. Yes, Bush doubled the national debt during his two terms. I didn't like most of what Bush did. But that doesn't explain Obama quadrupling the debt (based on Federal budget forecasts) during his first term.

- Republicans blame Democrats for poor control of the Mexico border. Bush created a highway through the middle of the country that is considered international territory; any truck from an approved company gets through with little if any inspection, and McCain tried to reduce control of illegal crossing even further.

- Dems blame our banking problems on lack of regulation that allowed them to make unwise loans. Sorry, but Barney Frank's House Financial Services Committee required banks make high-risk loans, and if they refused, they'd lose access to Federal borrowing sources.

- Everybody was up at arms about AIG bonuses. The bonuses were not to those who were part of the problems, but to those who took over from them. Further, these people had agreed to a salary of only $1 a year; the bonus was to be their only pay for the work, and then only if they exceeded the goals that had been set by the regulators. Since they did exceed the goals, they were supposed to get the bonus. Now the bonus, the only pay they get, will be taxed at 90%. Which is illegal, by the way, according to the Constitution, that forbids punitive taxes or taxes that are targeted to specific groups.

- Speaking of bonuses, did you know that members of Chris Dodd's Senate Finance Committee got bonuses from Fannie Mae, which is also getting bailout money? And the Fannie Mae bonuses were not protected by the bailout wording; AIG's bonuses were specifically allowed in the bailout, because they were appropriate, as explained above. And both Chris Dodd and Barack Obama got hundreds of thousands from AIG.

- The government says they want to keep the "auto industry" from failing. So they are now requiring Chrysler and GM to file bankruptcy, when they say they don't need to? (Besides, don't Honda, Toyota, BMW, etc, who make their vehicles here count as auto industry? Honda uses more US-made parts in their cars than Ford does...)

- Obama went to the opening of a wind farm? Fine. I like cheaper energy. But he took Air Force One to get there and used 9000 gallons of jet fuel to do so? And probably (he usually does) took a second one as backup, and a cargo jet with the limos, at least tripling the gas to closer to 30,000 gallons of jet fuel. And the gas used by the processional limos, which are not hybrids.

- Boston requires all taxi companies buy new hybrids by 2015. They can't get used ones; they have to be new ones.

- And by the way, research shows that hybrid cars create a lot more environmental damage when they are made than they can ever offset by being more efficient. (And they aren't usually that much more efficient...)