US Economy

[tomahawk6]

Obama fires GM CEO. Obama's government is like the mafia. He buys into a business then takes it over.

http://www.politico.com/news/stories/0309/20625.html

The Obama administration asked Rick Wagoner, the chairman and CEO of General Motors, to step down and he agreed, a White House official said.

On Monday, President Barack Obama is to unveil his plans for the auto industry, including a response to a request for additional funds by GM and Chrysler. The plan is based on recommendations from the Presidential Task Force on the Auto Industry, headed by the Treasury Department.

The White House confirmed Wagoner was leaving at the government's behest after The Associated Press reported his immediate departure, without giving a reason.

General Motors issued a vague statement Sunday night that did not officially confirm Wagoner's departure.

"We are anticipating an announcement soon from the Administration regarding the restructuring of the U.S. auto industry. We continue to work closely with members of the Task Force and it would not be appropriate for us to speculate on the content of any announcement," the company said.

The surprise announcement about the classically iconic American corporation is perhaps the most vivid sign yet of the tectonic change in the relationship between business and government in this era of subsidies and bailouts.

Wagoner has been CEO for 8 years and at GM for more than 30. It is not yet clear who would replace him, or what role the administration would play in that process.

Industry sources had said the White House planned very tough medicine in Monday's announcement, which turned out to be an understatement. And it went to the very top. The measures to be imposed by the government will have a dramatic effect on workers, unions, suppliers, bondholders, shareholders, retirees and the communities where plants are located, the sources said.

GM and Chrysler first requested billions in federal aid in November, warning that they could run out of cash in a matter of months if they didn't receive it. In December, President Bush agreed to loan $9.4 billion to GM and $4 billion to Chrysler.

Last month, GM asked for $16.6 billion more and Chrysler requested an additional $5 billion.

Earlier this month, Obama agreed to loan $5 billion to American auto parts manufacturers to help them weather the steep drop in new vehicle orders and the financial uncertainty at the Big Three.

Obama and his aides may have honed in on Wagoner for two reasons. First, his company is asking for the most in total federal aid: $26 billion, a figure administration officials fear could grow even larger. Second, the GM chief was tied more directly to the ill-fated decisions that that brought much of the American auto industry to the brink of collapse. Wagoner joined GM in 1977, has had a senior role in GM management since 1992, and became CEO of the company in 2000. He is considered responsible for increasing GM's focus on trucks and SUVs—at the expense of the hybrids and fuel efficient cars that have become more popular in the last couple of years.

By contrast, Chrysler CEO Robert Nardelli, whose resignation does not seem to have been demanded as a price of further federal aid, was a newcomer to the auto industry when he was lured to that company to help turn it around. Nardelli had previously headed Home Depot.

Government officials have little reason to tilt at Ford CEO Alan Mulally since his firm has not actually taken bailout funds from the government. Ford asked for a $9 billion line of credit from the feds, but the firm has said it has no plans to tap the credit facility.

Obama's move against Wagoner hearkens back to September 2008 when President Bush's Treasury Secretary, Hank Paulson, insisted that AIG CEO Robert Willumstad step down as part of an $85 billion bailout of the insurance giant. Paulson installed in his place Edward Liddy, a former Allstate executive. The AIG bailout has since grown to about $170 billion and Liddy has faced calls for his resignation in the wake of reports about hundreds of millions of dollars-worth of bonuses the firm agreed to pay to employees.

Obama said Friday in an interview with CBS’s “Face the Nation,” broadcast Sunday, that the carmakers were going to have to do more.

“There's been some serious efforts to deal with a combination of long-standing problems in the auto industry,” the president told host Bob Schieffer. “What we're trying to let them know is that we want to have a successful auto industry, U.S. auto industry. We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is.

“And that's gonna mean a set of sacrifices from all parties involved — management, labor, shareholders, creditors, suppliers, dealers. Everybody's gonna have to come to the table and say it's important for us to take serious restructuring steps now in order to preserve a brighter future down the road."

Schieffer followed up: “But they're not there yet.”

Obama added: “They're not there yet.”

The Obama administration calls its task force “a cabinet-level group that includes the secretaries of Transportation, Commerce, Labor and Energy. It will also include the chairman of the President’s Council of Economic Advisers, the director of the Office of Management and Budget, the EPA administrator, and the director of the White House Office of Energy and Climate Change. The Task Force will be led by Treasury Secretary [Tim] Geithner and [National Economic Council] Director Larry Summers.”

The panel’s chief adviser is Steven Rattner, a well-known investment banker and former New York Times reporter.

 

[Kirkhill]

So THAT's the problem.

Obama got into the wrong line-up.

He thought he was applying for the job of President of GM.

 

[tomahawk6]

Obama is taking the government into the auto warranty biz as GM goes into bankruptcy.

Obama will make two other announcements Monday.
One, the president will announce a new government-backed warranty program for all new GM and Chrysler vehicles purchased during this restructuring period. A fund will be set up equal to 125 percent of the total cost to pay for warranty service.  The auto makers will contribute 15 percent while the government will provide 110 percent, with the money coming from the economic stabilization funds, the gift that keeps on giving. A separate company will hold the funds and pay the claims even if one of the auto manufacturers goes into bankruptcy or out of business.

The president will also name a Director of Recovery for Auto Workers and Communities. Edward Montgomery, labor economist and former Deputy Secretary of Labor, will serve in the role, helping autoworkers, communities, and regions adversely impacted by the failure of the automakers find new jobs, businesses, and industries.

 

[retiredgrunt45]

I hear and read allot of conjecture, animosity and back yard economists barking about how this would do that and that would cause this and how the sky is ready to fall on our heads. Who here has lived through an economic crisis of this magnitude who is under 79? Haven't found no one yet.

If you lived through the last big financial meltdown, your either dead or to old to care about this one. The blips of the 70's, 80,s and 90's don't count and where no more than pimples on a horses rearend in comparison.

My point is no one knows how to fix this, but please if you do have a crystal ball or magic wand, please get it out of storage and send it to the white house so Obama can find the answer, wave the magic wand and we all wake up tomorrow like none of this would have happened.

Pandora's box has been opened and what came out is big, mean and ugly and no one has the slightest clue how to put "big, mean and ugly" back in the box again.

American economists have failed their country as badly as have the Republican and Democratic parties. The sad fact is that there is no leader in sight capable of reversing the rapid decline of the United States of America.

http://vdare.com/roberts/060507_economy.htm

 

[tomahawk6]

Both parties share the blame for this meltdown. But what should be quite clear is that the democrats are exploiting the crisis to accomplish long cherished goals- namely the destruction of the capitalist system and replacing it with a government run economy. I dont know about Canada but I am hard pressed to think of any successfully run government programs in the US. Now Obama's marxist team is using trillions of dollars to nationalize entire industries. This is not conjecture but reality.

 

[TimBit]

Both parties share the blame for this meltdown. But what should be quite clear is that the democrats are exploiting the crisis to accomplish long cherished goals- namely the destruction of the capitalist system and replacing it with a government run economy. I dont know about Canada but I am hard pressed to think of any successfully run government programs in the US. Now Obama's marxist team is using trillions of dollars to nationalize entire industries. This is not conjecture but reality.

OK! Scary words such as "marxist" being used without ANY knowledge of what they mean here, as usual...

So you would say that the military or national security are not being run successfully in the US? Plus how do you define success in government programs? Please enlighten us as you seem to know so much.

Finally, I do believe that under the AIG bailout a number of american firms found themselves under partial govt ownership, all under the republican's command. Now look at those scary texan commies... >

 

[tomahawk6]

Both the Chairman of the Fed and Treasury Sec under Bush are/were democrats. Naturally I know what a marxist is. Destruction of capitalism is the goal of marxism and thats what we are seeing in the US today under the guise of stimulus. There is legislation now in the democrat run Congress that will regulate the pay of all employee's of companies that have received TARP money. Another bill will allow the Treasury Sec to take over any business in the country, powers that are massive in scope. Yesterday the President told the CEO of a private company to resign.

As for US government programs/entities that are inefficient are the US Postal Service,Freddie and Fannie Mae,Veterans Affairs ,the Congress [their private dining room loses money]. Two trillion of the tax payers dollars were spent by Treasury and so far they cant say how it was spent.

 

[TimBit]

As for US government programs/entities that are inefficient are the US Postal Service,Freddie and Fannie Mae,Veterans Affairs ,the Congress [their private dining room loses money]. Two trillion of the tax payers dollars were spent by Treasury and so far they cant say how it was spent.

Adam Smith himself thought that postal services should be under government care as it was hard to make money with this endeavour.

Fannie Mae and Freddie Mac are indeed GSE's; but the involvement of govt is minimal, and they don't seem to perform worse or better than AIG or most banks in the US right now for that matter.

Can't say anything for Vet Affairs, but I really can't get your point about the efficiency of Congress. How on earth is a Parliament supposed to be "efficient"?

That brings me to my last point, what is a criteria of success in government? Having studied public policy for three years, I think that it is much harder to define success for a pûblic corporation than for a private corp. Let's see, you are tasked with eradicating poverty or increasing literacy (public), versus increasing your sales or widening our markets (private). Much easier to define your mission in number 2... no corporation would ever be interested in taking on a policy or social endeavour. It is too complicated, not profitable, too risky, too emotional for any private business.

Anyway...

 

[Rifleman62]

On Monday the POTUS fired the CEO of a private US company (probably justified based on past performance, but GM had supposedly turned a corner), told another private US company that it must be sold to a foreign company (Fiat), and tax payers money will be used for that sale.

 

[a_majoor]

For efficiency of government services, there are many metrics to choose from. For the most part, look for a comperable private industry and see how the two stack up. The Postal service is woefully expensive, slow and inefficient compared to courier services (and in Canada, you can get door to door services from a courier).

If your metric is the acheivement of policy goals, then how many goals are accomplished? The actual answer is "none", since the perverese incentive of government service is to keep your job and expand your bureaucracy; neither which is possible if you "solve" the problem the government agency is supposed to deal with. Poverty statistics are illuminating, they have remained more or less constant over decades despite the trillions of dollars spent to "fight" poverty, but when you pay people to be poor (via welfare and bogus "tax reduction") and have a vested interest in having many poor people to "help".....

As for schools, you can examine the outcomes in various ways, even non rigerous observation of children schooled in private schools like Montessouri vs children educated in Public schools at the same level and in the same cities reveals the private school cadre has far superior outcomes in literacy, numeracy,public and private decorum etc. Charter schools in Alberta have similar comparisons vs Public schools.

WRT private industry taking on public policy; this was indeed the case in America post Civil war to @ 1920; many private business ran night schools to teach their immigrant work forces English and American "civics", indeed Boeing persisted in having its own in-house program to train apprentices and engineers until the late 1950's at least (a sort of corporate University which had enough meat to graduate Boeing engineers with true accreditation equivalent to any American College or University). The growth of State education and credentialism (along with a perverse side effect of civil rights; a non Boeing engineer could claim to be discriminated against if rejected in favour of a trained in house engineer) eventually killed this DIY public policy. Jerry Pournelle experienced this system during his time in the aerospace industry and has written about it.

 

[TimBit]

For efficiency of government services, there are many metrics to choose from. For the most part, look for a comperable private industry and see how the two stack up. The Postal service is woefully expensive, slow and inefficient compared to courier services (and in Canada, you can get door to door services from a courier).

If your metric is the acheivement of policy goals, then how many goals are accomplished? The actual answer is "none", since the perverese incentive of government service is to keep your job and expand your bureaucracy; neither which is possible if you "solve" the problem the government agency is supposed to deal with. Poverty statistics are illuminating, they have remained more or less constant over decades despite the trillions of dollars spent to "fight" poverty, but when you pay people to be poor (via welfare and bogus "tax reduction") and have a vested interest in having many poor people to "help".....

As for schools, you can examine the outcomes in various ways, even non rigerous observation of children schooled in private schools like Montessouri vs children educated in Public schools at the same level and in the same cities reveals the private school cadre has far superior outcomes in literacy, numeracy,public and private decorum etc. Charter schools in Alberta have similar comparisons vs Public schools.

WRT private industry taking on public policy; this was indeed the case in America post Civil war to @ 1920; many private business ran night schools to teach their immigrant work forces English and American "civics", indeed Boeing persisted in having its own in-house program to train apprentices and engineers until the late 1950's at least (a sort of corporate University which had enough meat to graduate Boeing engineers with true accreditation equivalent to any American College or University). The growth of State education and credentialism (along with a perverse side effect of civil rights; a non Boeing engineer could claim to be discriminated against if rejected in favour of a trained in house engineer) eventually killed this DIY public policy. Jerry Pournelle experienced this system during his time in the aerospace industry and has written about it.

This assessment is quite simplistic.

Quite often, there are no considerable private industries, at least not in the domains of defense, health policy, environmental policy, industry promotion, foreign affairs, etc.

The Postal service here in Canada is pretty good, so can't compare... but yes I did hear that USPS sucks.

If the metric is achievement of policy goals, then sorry but many many goals are accomplished, depending on the policy: selective hiring has increased target groups representation, subsidies for computers have increased technological literacy, employement development and social housing have brought inter-racial tensions down from what they were in the 70's (remember Black Panthers), difference in crime statistics in Canada would suggest that different correctional policies in different provinces have different impact on reinsertion, and so on, the list is endless.

For schools, I would suggest that the bang you get for the bucks often cannot be justified in the private (i.e. private schooling in BC at 30K a year... what kind of crazy person can afford that?), i.e. the marginal improvement of your results per dollar spent is decreasing from a 2000$ position to a 20000$ position.

Finally, none of the examples you list are policy-making. RAND would be one, granted. What I'm talking about is, say, environmental protection policies, health policies, drug policies, air policy, aboriginals policy, all of which cannot and should not be considered under the bottom line of $$$.

If all that is not convincing, I would suggest taking a look at mixed socialist democracies like Denmark and seeing how they fare right now compared to the US. To each its woes.

Oh, and I'm not a socialist...just open.

 

[Kirkhill]

TimBit,

What makes you think that Denmark is "mixed socialist"?  It has never been more than "right wing" socialist and under Rasmussen has moved farther right - to the relief of my Danish buddies.  Likewise for Sweden and Holland.

As for Adam Smith on monopolies:

If there is a market (a demand) then there is profit then there is an interest in making that profit.  Hence the rise of couriers to compete with the government mail monopoly.

Likewise with railways.  If there is money to be made someone will make it.  Someone else will compete for it.

If there is an ESSENTIAL service that cannot support competition then yes, the government may need to REGULATE that single supplier.  The government does not need to BECOME the single supplier.  It is probably better if it doesn't as it ends up regulating itself - and self-discipline is not a strong suit of government.

As well, by keeping the service in the private sector it allows for other private individuals to continue looking for alternative methods of supplying the service in a manner that a) separates existing customers from the existing supplier (better, cheaper) while  b) making the supplier a useful profit.

Adam Smith was not averse to regulation.  He just thought it was best to minimize it.

Obama - a community organizer with a sense of style and desire for bling - has got no clue when it comes to life, the universe or anything.  He has never run anything and has always danced to the tune of whoever is paying him.  In a word, he is feckless.

 

[TimBit]

TimBit,

What makes you think that Denmark is "mixed socialist"?  It has never been more than "right wing" socialist and under Rasmussen has moved farther right - to the relief of my Danish buddies.  Likewise for Sweden and Holland.

Well... considering that

• Denmark had the highest taxes in the world in 2005 and 2006
• free healthcare and a strong welfare net
• free schooling up to university
• 38% of the workforce in public sector jobs

I would say it is pretty "mixed socialist"...

 

[Rifleman62]

President Obama: Yes, I Can

President Obama will become the next Great Communicator. In the US, he seems to be on TV (and radio) every single day. An announcement the day before he is to speak, i.e. at 1100 am tomorrow morning, is met with groans. He spends a heck of a lot of time behind a teleprompter. He must hold his Cabinet meetings at night. I do not get it. Holding a "press conference" during prime time, opening with a lengthy statement followed by thirteen questions (and the long-winded political "answers"). What purpose?

Can you imagine if PM Harper appeared evan once a week and demanded network time? Yes, he is not the leader of the free world etc. Remember how he was criticised for using a teleprompter, his PAO lining up who will ask questions? Don't see much criticism of President Obama in Cdn media do you.

I am with tomahawk6. It is unsettling what is going on, and as the USA goes, so does Canada.

My 2 cents.

P.S. I predict that GM will produce a “Peoples’ Car”. The shape will be rounded so that it will have a slippery wind coefficient. The Peoples’ Car will be produced in two colours:
* Obama Blue - mandatory colour for the populous of red states; and
* Sheep White for everyone else.

A special enforcement unit, enlisted from non-resident aliens, will ensure compliance.

 

[a_majoor]

The "program" might not get passed after all thanks to the wisdom of the "Founding Fathers" in decentralizing powers:

http://www.rasmussenreports.com/public_content/political_commentary/commentary_by_michael_barone/not_yet_ready_for_a_welfare_state

Not Yet Ready for a Welfare State
A Commentary By Michael Barone

Saturday, March 28, 2009

Roadblocks. That's what Barack Obama has been encountering on the audacious path toward a European-style welfare state he has set out in his budget and other proposals.

He continues to insist that America cannot enjoy real prosperity again without higher taxes on high earners, a government health insurance program, a cap-and-trade program that amounts to a tax on energy and the effective abolition of secret ballots in unionization elections. The fact that there are large Democratic majorities in both houses of Congress made it seem that the path was open. But roadblocks have started to appear.

One has been set up by the Senate Budget Committee. Chairman Kent Conrad of North Dakota, whose concern about budget deficits has persisted even though we no longer have a Republican president, has apparently decided that cap-and-trade is off the table for this year. But calculation as well as conviction probably lay behind his decision.

Cap-and-trade would impose higher costs on coal-fired electric power plants. In states where most electricity is produced from coal, this would mean higher utility bills for consumers and industrial users. By my count, there are 25 Democratic senators from states that get 60 percent or more of their electricity from coal (in North Dakota, the figure is 93 percent). Conrad needs to hold all but eight of those senators to be sure of the 50 votes he needs for the budget resolution. So you can see why he was ready to ditch cap-and-trade, which, in any case, addresses a problem -- climate change -- whose purported evil effects are decades away.

Ditching cap-and-trade, however, may set up another roadblock, since the money the government was going to take out of the private-sector economy was slated for Obama's middle-class tax cut.

Another roadblock was erected, in concrete, by Republican Sen. Arlen Specter when he announced this week that he would not vote, as he did in the last Congress, to advance the unions' card check bill. It was easy enough to support it and bask in approval from Pennsylvania union leaders when it was clear George W. Bush would veto the measure. But now that we have a president who would sign it, Specter took another look.

Card check would effectively abolish the secret ballot in unionization elections and impose unions on employers when union thugs -- er, activists -- persuaded a majority of workers to sign cards backing the union. And it would impose mandatory federal arbitration after 120 days of bargaining, so that for the first time federal arbitrators would set wages and working conditions without any guidelines.

With Specter firmly committed, Republicans now have 41 Senate votes against card check, enough to maintain a filibuster. Moreover, many Democratic senators -- as many as 15, according to one count -- have expressed qualms about card check. They've been hearing loud and clear from small and large businesses in their states that card check would be a disaster. And for any Democrat, it's a little hard to explain what's wrong about the secret ballot.

Other parts of the Obama program have, so far, not encountered resistance. Higher taxes on high earners are scheduled to come into effect in 2010 without a vote, though high-ranking Democrats like House Majority Leader Steny Hoyer and Ways and Means Chairman Charles Rangel have expressed doubts about the Obama proposal to reduce the charitable deduction for high earners. If you're a university president courting big donors, you don't want to see part of their contributions diverted to the U.S. Treasury.

The prospects for national health insurance look pretty favorable. The various healthcare lobbies that would be affected are sitting at the bargaining table, seeking to avoid destruction of their business models and advancing provisions that would give them an advantage over competitors. But then at this stage in Bill Clinton's first term, the healthcare lobbies were sidling up to the table, too -- or as close to it as Hillary Clinton would let them get.

The problem on healthcare, as on cap-and-trade and card check, is that this is a big and complicated country. America doesn't have one energy system, one employee relations system, one healthcare insurance and delivery system -- it has many. Members of Congress from different states and congressional districts have constituents who are very differently situated, and those differences cut across party lines.

Democrats from coal states like North Dakota see energy issues differently from Democrats from coal-free states like California. Democrats from heavily unionized Michigan see labor issues differently from Democrats from nonunionized Arkansas. And let's not get started setting out the regional differences in healthcare.

Setting up a welfare state is easier in European political systems, with their centralized governments and rigid parliamentary party discipline. American welfare state programs like Social Security and Medicare were set up and expanded step by step by very shrewd strategists operating over many years. Obama has the audacity to hope that he can jam things through with sizeable Democratic majorities at a time of economic crisis and uncertainty. But he has quickly encountered some roadblocks -- and may yet encounter some more.

DISTRIBUTED BY CREATORS SYNDICATE INC.

See Other Political Commentaries

See Other Commentaries by Michael Barone

Views expressed in this column are those of the author, not those of Rasmussen Reports.

 

[CougarKing]

Another sign that things are starting to get better?

http://news.yahoo.com/s/ap/20090402/ap_on_bi_st_ma_re/wall_street

Dow jumps above 8,000 for first time in 2 months
         
^DJI  8,068.17 +306.57
^GSPC  844.10 +33.02
^IXIC  1,619.34 +67.74

Business Writers – 44 mins ago
NEW YORK – Investors are buying up stocks again, sending the Dow Jones industrials above the 8,000 mark for the first time in nearly two months.

All the major indexes soared more than 3 percent on Thursday as optimism grew following more signs that the economy is on the mend.

Financial stocks led the rally, getting a big boost after the Financial Accounting Standards Board relaxed accounting rules forcing banks to value their assets at current prices. The change should help banks reduce losses.

Another positive indicator on the economy also lifted Wall Street sentiment. Factory orders posted a large increase in February, coming on the heels of better-than-expected readings on pending home sales, manufacturing activity and auto sales the day before.

"Everyone is in a buying mood," said Eric Ross, director of research at brokerage Canaccord Adams. "Everyone is feeling good. ... A lot of this is simply confidence."

The change in "mark-to-market" accounting rules sends another lifeline to the troubled banking industry. Many market participants believe financial stocks, which have largely carried the market's four-week rally, are a gauge of when the economy is turning.

The market's advance came as the world's finance leaders met in London to discuss efforts to fix the global economy. The G-20 ministers plan to give the International Monetary Fund $500 billion, and create stricter rules for hedge funds.

In midday trading, the Dow rose 256.79, or 3.3 percent, to 8,018.39.

The Standard & Poor's 500 index rose 28.25, or 3.5 percent, to 839.33. The Nasdaq composite index rose 60.25, or 3.9 percent, to 1,611.85.

The Russell 2000 index of smaller companies jumped 21.83, or 5.1 percent, to 450.99.

For every three stocks that fell, nine stocks rose on the New York Stock Exchange where volume came to 642 million shares.

     

 

[tomahawk6]

US House approves budget plan in line with Obama's 02 Apr 2009 23:11:01 GMT
Source: Reuters
WASHINGTON, April 2 (Reuters) - The U.S. House of Representatives on Thursday approved a $3.45 trillion budget blueprint largely in line with President Barack Obama's proposal after defeating a Republican alternative that slashed spending and taxes.

The Senate is working on its own budget for the fiscal year that begins Oct. 1 and any differences will have to be worked out. The budget legislation is nonbinding but sets guidelines for spending and tax measures that will be considered later this year.

The House Democrats budget would also allow legislation to overhaul the $2.5 trillion U.S. healthcare system to be considered in a speedier manner. (Reporting by Jeremy Pelofsky and Richard Cowan, editing by Stacey Joyce)

 

[CougarKing]

Continuing to post good news and improving economic news to the chagrin of the usual naysayer. 

Good news is underlined and in blue. Bad news is in red.

http://news.yahoo.com/s/ap/20090409/ap_on_bi_st_ma_re/wall_street

  Stocks surge as profits at Wells Fargo jump

By STEPHEN BERNARD and TIM PARADIS, AP Business Writers Stephen Bernard And Tim Paradis, Ap Business Writers – 57 mins ago
NEW YORK – Stocks bounded higher early Thursday after banking giant Wells Fargo & Co. issued a surprise profit announcement that was far above analysts' estimates.

The Wells Fargo news offered investors some of the best evidence to date that the credit and lending markets are improving.

Wells Fargo shares surged 25 percent and bank stocks led the market's climb. Bank of America Corp. rose 20 percent, while JPMorgan Chase & Co. jumped 12 percent. Citigroup rose 9.3 percent.

In midmorning trading, the Dow Jones industrial average rose 205.57, or 2.6 percent, to 8,042.68. It was the Dow's first trade above the 8,000 mark since Monday.

Broader stock indicators also jumped. The Standard & Poor's 500 index rose 25.64, or 3.1 percent, to 850.80, while the Nasdaq composite index rose 51.70, or 3.3 percent, to 1,642.36.

Traders looked past uneven monthly sales reports from retailers and mixed economic news as they pounced on bank stocks.

Wal-Mart Stores Inc. said U.S. same-store sales rose 1.4 percent as consumers continued to hunt for bargains, but the results missed Wall Street expectations. Target Corp.'s sales fell 6.3 percent but the results still beat expectations. Wal-Mart shares fell 4.3 percent, while Target rose 6 percent.

In economic news, the government said new jobless claims fell more than expected last week, but those continuing to receive unemployment insurance set another record.

The Labor Department said initial jobless claims fell to a seasonally adjusted 654,000, down from a revised 674,000 the previous week. Economists polled by Thomson Reuters expected claims to drop to 660,000.

But the total number of laid-off Americans receiving unemployment rose to 5.84 million, from 5.75 million. That was the most on record dating from 1967 and more than analysts expected.

The government also said the U.S. trade deficit plunged unexpectedly in February.

The jump in stocks on Thursday comes at the end of a quiet holiday week which will be shortened by the Good Friday holiday, when markets will be closed. Investors grew more upbeat Wednesday amid reports the government will provide support for battered life insurers and as two major homebuilders, Pulte Homes Inc. and Centex Corp., announced plans to combine.

The Dow had lost nearly 3 percent over Monday and Tuesday, which analysts said was a welcome respite following a powerful rally in March that gave the Dow its biggest four-week surge since 1933. Traders like to see the market make moderate, stair-step advances rather than shooting straight higher, which many see as a sign of unsustainable and impulsive buying.

In other trading, Treasury prices fell as the stock rally dampened demand for safe-haven investments. The yield on the 10-year Treasury note rose to 2.91 percent from 2.86 percent late Wednesday.

The dollar was mixed against other major currencies, while gold prices fell.

Overseas, Japan's Nikkei stock average rose 3.7 percent following reports that the country's ruling party is seeking a stimulus package bigger than originally announced.

In afternoon trading, Britain's FTSE 100 gained 1.3 percent, Germany's DAX index rose 2.8 percent, and France's CAC-40 rose 1.8 percent.

 

 

[a_majoor]

As the usual suspect, I might point out that there are vast problems moving along like the 90% of the iceberg you never see. The Medicare/Medicaid and Social Security Ponzi schemes are unsustainable in the mid term, the Obama administration can potentially double the debt if it goes two terms and the pension issue seems to be almost at the tipping point now.

San Jose pension costs soar as stock market withers
By John Woolfolk


Mercury News

Posted: 04/07/2009 07:11:55 PM PDT


Economic crisis
Full coverage of the economic crisis, including special reports and databases
Fresh off the news that next year's deficit could climb to $78 million, San Jose officials said Tuesday that the tanking stock market could force taxpayers to pony up as much as $50 million extra the following year to cover losses in the city's retirement funds.

Things look even worse in the longer term, as city officials say the cash-strapped general operating fund could have to pour tens of millions of additional dollars into the city's two pension programs by 2013.

A somber Mayor Chuck Reed announced that even with recently announced pay freezes, San Jose is headed toward "major layoffs."

Though the cost projections are preliminary, the staggering figures drew cries from some City Council members to cut benefits, which now allow career police officers and firefighters to retire in their 50s with pensions that pay 90 percent of their salaries.

"We can no longer persist in the delusion that our taxpayers can afford the current level of employee benefits," said Councilman Sam Liccardo, who was appointed this year to serve as a trustee on the public safety retirement plan.

Union leaders were skeptical of the figures, presented in a report by the city manager and retirement director late Friday and based on projections by the plan's actuaries.

'Out of alignment'

"It seems to be way out of alignment," said Randy Sekany, president of San Jose Firefighters. "I don't see numbers like that coming out of anybody, even plans where losses were greater than ours."

Public pension funds are funded by three sources: contributions from employees, contributions from the employer and investment returns on those combined funds. During down markets, public employers must offset poor returns with additional money to deliver promised pensions to retirees.

The projected increase in the city's pension rates is substantially higher than what Santa Clara County officials expect to have to pay into the California Public Employees' Retirement System, which covers county workers and those of most other local cities. Deputy County Executive Luke Leung said CalPERS has told local agencies to expect increases ranging from 2 to 5 percent of payroll, which would cost an additional $3.8 million to $9.5 million beginning in the county's 2011 budget year.

San Jose's projected new rates are much higher, in part because the city's investment strategy offers less time in which to make up for losses. The new report suggests the city's contribution rate for police and firefighter pensions will increase from the current 22.5 percent of payroll to as much as 57.8 percent in the 2010 budget year.

By 2013, that rate could hit 70.1 percent. And those rates do not include the additional costs of retiree health care benefits. (Projections for the city's other pension fund, which covers civilian workers, are still pending.)

Risk on city

Officers and firefighters would see their share of pension costs rise, too, but only slightly, from 8.3 percent of payroll to 9.4 percent. Retirement Director Russell Crosby said that's because under the city system, "all the risk of bad market performance is totally on the city, not on the employees."

The higher projected pension costs come amid a wave of budgetary bad news for the city brought on by the national economic collapse. San Jose has had an eight-year run of red ink caused by expenses — mostly for personnel — outpacing tax revenues.

The city's projected deficit in the budget year that begins July 1 jumped from $63 million to $78 million in recent days. The Santa Clara County assessor reported that the economy has driven down property values more sharply than at any time since the Great Depression, taking projected tax revenues down with them.

Even as the city's revenues have plunged, the stock market's erosion of the pension funds has put added pressure on the general fund. Since July, San Jose's two retirement systems have seen combined losses of more than $1 billion, more than a quarter of their total value.

City officials say the bill for taxpayers to cover recent losses in the police and fire retirement funds may be about $31 million next year, and losses in the fund for retired civilian workers could push the added costs to $50 million next year.

By 2013, the added costs just for police and firefighter pensions could total $100 million. The city currently pays $120 million a year into its employee retirement funds.

No effect in 2009-10

The resulting higher projected costs to cover those pension losses won't affect the city's deficit for the 2009-2010 budget year that begins in July; that's because pension contribution rates are reset every two years to reflect updated financial projections and statistics on life expectancy. The new rate will be set June 30, and the city will begin paying it in the budget year beginning July 1, 2010.

Crosby, who joined the city in 2007, said San Jose will have to consider lowering the too-rosy assumption that its pension funds will return 8 to 8.25 percent. Those assumptions, he said, have kept city and employee contribution rates too low.

He also said the city might consider switching from a five-year model of "smoothing" investment losses to a seven-year model.

Reed — who came into office in 2007 vowing to eliminate the chronic deficits, but has made little headway, in large part because of the skidding economy — called Tuesday for the council to discuss its worsening financial picture at next week's meeting.

"We have to re-examine how we operate," the mayor said.

In a statement released before the council's pension discussion, Reed also said recently announced wage freezes by thousands of workers, including the firefighters' union, "will not be enough to save us from major layoffs." Earlier this year, the city marked its first layoff since the early 1990s, though so far just two employees have left the work force.

And of course public service unions have huge entitlement mentalities, and will defend their benefits to the last taxpayer. In practical terms I expect panicy calls to Washington to start bailing out municipalities, and adding billions more to the already gargantuan deficits, with predictable results on the rest of the economy.

 

[a_majoor]

Maybe the bankers will become tired of being the whipping boys for demogouges and stand aside for the crowds with pitchforks.....

http://pajamasmedia.com/blog/just-who-is-protecting-whom-from-the-pitchforks/

Just Who Is Protecting Whom from the Pitchforks?

Posted By Eric Florack On April 10, 2009 @ 7:12 am In . Column1 02, Money, Politics, US News | 22 Comments

America’s bankers lack backbone.

Maybe I’m being unfair to the current crop of bankers. After all, the problem has always existed. It’s just that it has come to a head recently because we have a political power structure in place that clearly plans to take advantage of that perceived weakness. As a rule, financial types are not exactly noted for their bravery. And we all know that predators tend to attack where they see weakness — particularly if they anticipate some gain for themselves.

So it was recently when [1] we saw a Democratic president of the United States suggesting that his administration was the only thing standing between the bankers and the pitchforks.

To anyone who has been watching the events unfolding recently and understands the causes of those happenings, the statement of the president was absurd on its face. The issue, of course, is that most people today really don’t have much of a grasp of economics. Thus, any Democratic Party propaganda offered to explain away Democratic/big government culpability in the current financial mess will have far more credibility than it would with people who do understand economics. Most Americans might say, “Well, I don’t know this stuff, but he must — it sounds reasonable.” So along comes President Obama trying to push the image of the bankers being the problem. And of course his supporters, who know little to nothing about economic matters, [2] nod in unison like so many [3] bobblehead dolls glued to [4] the dashboard.

But it’s not true.

Very seldom do economic crises occur without government being at or near the root of the problem. So it is with this crisis.

[5] This is not a failure of regulation of any kind, particularly of banking. Nor is it a failure of free markets. Rather, it’s a failure of over-regulation and a lack of free markets. In short, it’s a failure of government. Governmental interference in the market [6] requiried bankers, for example, to make loans to people who couldn’t afford them. Fannie Mae and Freddie Mac — government-created entities — [7] helped to create this artificial boom, and government also caused the bust [8] by way of serious mismanagement.

The scheme got Democrats lots of votes and created a lot of [9] very rich Democratic cronies (including players within the current administration), but eventually all fell apart because the people who benefited in the short term from these government-imposed loan deals [10] couldn’t pay their mortgages. Of course, the people who passed the law forcing the banks to make those loans don’t pay for it; you and I do.  And the banks, which were simply following the law, get the blame for the [11] government-mandated mess.

Obama’s efforts at solving the financial crisis are less than successful because you can’t use government to solve a problem created by government. The president would like us to forget this fact because to admit it would mean he would have to confess that government was the problem. That is something a big government Democrat will never do.

Such an admission would also force the Democrats into the uncomfortable position of admitting there was a logical business reason for some folks not getting home loans — a reason that had nothing to do with the rich, racism, or any of the other Democratic Party codewords. Since those same people who got loans they couldn’t afford are among the Democratic Party’s core group of voters, that’s not going to happen.

Clearly, it is in the political interests of the Democrats to make us forget it was government, and not the bankers or anyone else, who created this problem. This effort would doubtless be aided by the perception on the part of the voters that Obama’s not the problem but the solution, which was part of the president’s message in that “pitchfork” line.

It sure doesn’t help that we have so few true fiscal conservatives and free-market thinkers in government right now. If we had more of them (and people of courage to boot), we could see honest discussions of the problems and the solutions. We’d actually see people in government propose the unusual idea that government is the problem and thus can’t be the solution. Then again, given the Democrats’ hold on all three branches of government, one can hardly expect such miracles to occur within those marble halls.

But imagine what would have happened  if one or more of the bankers in that meeting with Mr. Obama had had the courage to stand up and remind him of of the facts:

“No, Mr. President. The only thing between the Democrats and the pitchforks is us, the bankers, and that’s the way it always has been. You Democrats used us to buy votes with home loans, requiring us to lend money to people who could not pay it back. You left us holding the bag, Mr. President — you and the rest of the Democrats then in Congress. And you need our cooperation to save your political hide from the people with the pitchforks.”

One can only conclude we’d all be in better shape (both from a financial standpoint as well as from the standpoint of freedom) if the bankers showed that kind of  mettle. Trouble is, I fear, such courage is not in them.

Article printed from Pajamas Media: http://pajamasmedia.com

URL to article: http://pajamasmedia.com/blog/just-who-is-protecting-whom-from-the-pitchforks/

URLs in this post:
[1] we saw: http://www.politico.com/news/stories/0409/20871.html
[2] nod in unison: http://firedoglake.com/2009/04/03/obama-triangulating-between-the-banksters-and-the-pitchforks/
[3] bobblehead dolls: http://www.newmajority.com/ShowScroll.aspx?ID=4707d686-13c7-47e2-8fa1-c2e5a087fc72
[4] the dashboard: http://yglesias.thinkprogress.org/archives/2009/03/who_watches_the_credit_rating_agencies.php
[5] This is not a failure of regulation: http://www.itbusinessedge.com/cm/blogs/bentley/blogger-let-the-market-do-its-job/?cs=15366
[6] requiried bankers: http://www.aim.org/guest-column/the-cause-of-the-2008-financial-crisis/
[7] helped to create: http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626.html
[8] by way of serious mismanagement: http://www.verumserum.com/?p=4347
[9] very rich: http://www.foxnews.com/story/0,2933,423701,00.html
[10] couldn’t pay their mortgages.: http://www.bloomberg.com/apps/news?pid=20601087&sid=awXBoS.M0ZRE&refer=home
[11] government-mandated mess: http://www.bloomberg.com/apps/news?pid=20601087&sid=a.lUj_ASQaEE&refer=home