Day: November 21, 2008

More Bailout News

An extra-legal measure quietly enacted by the Treasury Department in the shadow of the $700 billion Wall Street bailout package will hand the country’s biggest banks another $140 billion windfall, the Washington Post reported this week.

In a five-sentence memo issued on September 30, on the eve of the first House vote on the bailout bill, the Treasury Department unilaterally overturned a two-decade-old tax law passed by Congress. The measure denied profitable companies the ability to shield their profits from taxation by buying up bankrupt firms as shell companies and using their losses as a tax dodge.

The law, section 382 of the tax code, was enacted by Congress in 1986. It was aimed at curtailing what was seen as an egregious corporate scamming of the tax system. The Republican right and corporate lobbyists have been pushing for the measure’s repeal or amendment ever since.

Treasury Department spokesman Andrew DeSouza defended the action, telling the Post that the administration had the power to overturn a law passed by Congress as part of its mandate to interpret the tax code. He further insisted that the action was a necessary means of rescuing the banks from the financial meltdown.

The action by the Treasury Department has been dubbed the “Wells Fargo Ruling,” as it apparently provided direct aid to the successful bid by Wells Fargo to buy up the failing Wachovia bank. According to sources cited by the Post, the tax change will net Wells Fargo $25 billion from the deal.

In other similar takeovers, PNC bank, enjoyed a windfall of $5.1 billion in its takeover of National City as a result of the scrapping of the tax law, while the Spanish Banco Santander gained another $2 billion because of the change when it gobbled up Sovereign Bancorp.

The clear aim of the tax measure was to steer the hundreds of billions of dollars that have been injected into the biggest private banks into the profitable buying up of their weaker competitors, thereby facilitating the concentration of economic power in the hands of a few giant banks, allowing them to exercise monopoly control over the financial system.

CAFTA–Part 2

Continuation of the report issued by the Council on Hemispheric Affairs:

Contrary to initial promises, DR-CAFTA has largely failed to expand Central American export markets, instead bolstering imports from the US to the region. In fact, Central American countries were better off prior to DR-CAFTA. Before this new deal was signed, 80 percent of Central American exports already entered the US duty-free under existing agreements including the Caribbean Basin Initiative, which was implemented in 1984. Under this previous initiative, Central American countries maintained tariffs on many US imports to prevent goods from flooding domestic markets and paralyzing the growth of nascent industries in the region. However, in a push to implement DR-CAFTA, the Bush administration threatened Central American governments with the removal of existing trade preferences, thus strong-arming them into signing an agreement that was not truly in their best interests. Despite rhetoric about DR-CAFTA’s benefits to Central America, the accord was in fact designed to remove the region’s existing protective tariffs, “leveling the playing field” to give the US significantly more access to Central American markets.

Upon implementing DR-CAFTA, Central American governments removed all tariffs on 80 percent of US industrial goods and most agricultural products. United States Trade Representative Robert B. Zoellick enthusiastically pointed out that “small countries can be big export markets for the United States,” and went on to say that “CAFTA will expand opportunities for US exports in everything from construction equipment to high-tech software, from fruits and vegetables to financial services.” Indeed, many Central American countries have seen imports from the U.S. grow dramatically since the implementation of DR-CAFTA. In 2006, imports to El Salvador from the United States jumped 16.7 percent, turning the country’s previous trade surplus of $118 million into a deficit of over $286 million. Likewise, in Honduras and Guatemala, trade deficits with the U.S. multiplied by two and three times in the first year after DR-CAFTA’s implementation. Not surprisingly, these uneven trade balances are causing negative repercussions in a number of Central American and Caribbean countries, and consequently lowering the standard of living across the region.

A Penny Short…….

The 73-year-old blind woman could not believe that Attleboro City Hall was threatening to impose a lien of up to $48 because she had mistakenly underpaid her last water and sewer bill by a penny. She couldn’t fathom why the city would pay 42 cents for a stamp to collect a penny.

“It made me sick – my adrenaline was really going up,” Wilbur said in a telephone interview yesterday of the notice she learned about on Monday. “You can do anything to me, but don’t touch my house. I paid for this house with very hard work.”

Wilbur, who raised seven children over the past 50 years at her five-bedroom house in South Attleboro, asked her daughter to fax the letter back to the city collector’s office with a note that read: “Why don’t you use the 42 cents of my tax dollars to clear that up? The lack of common sense is staggering.”

When Wilbur didn’t hear back from city officials, she went to The Sun Chronicle newspaper of Attleboro, which first reported the story.

City Collector Debora Marcoccio said the letter to Wilbur was computer-generated and sent out with 2,000 other bills for outstanding balances. She said she would have been happy to discuss the bill, but Wilbur’s fax didn’t include a phone number for her to call.

As word spread about the penny owed on Wilbur’s $45.61 bill, Wilbur said she received a flurry of calls from neighbors offering to help. A local limousine service called and offered to drive her to City Hall.

But before she could take anyone up on their offers, Antonio Viveiros, 62, a former city councilor from Attleboro who never met Wilbur, acted on his own.

He marched into the city collector’s office yesterday, but the clerk at the window didn’t recognize him. When he said he wanted to pay Wilbur’s bill, he said the clerk asked whether he had the bill. “I said, ‘I don’t need a bill to pay a bill.’ ”

After the clerk checked with a colleague about whether he could pay Wilbur’s bill, he wrote the city a check for a penny.

“I understand these things are computer-generated, but there has to be more compassion in government,” he said. “Arrogance is never appreciated.”

Why Bailout The American Autos?

The Repubs are saying that the US Auto industry should take a page out of the Japnese or Chinese play book, but would that really be wise?  Why do you ask?

China’s auto industry is quietly pressing Beijing for government help as it copes with a jarring slowdown, top Chinese auto executives said in interviews with the New York Times.

This autumn, after six years of 20 percent or more annual growth, vehicle sales were flat or slightly negative, a shock to an industry that has borrowed heavily to build ever more factories for a market that had once seemed insatiable.

Citing the $25 billion in loans that Congress has already approved to help American automakers increase green research, and the additional $25 billion in loans the American industry is seeking this week to cope with a hobbled economy, Chinese executives are now telling the government here that they also need emergency measures. They are seeking lower taxes on new cars, lower fuel prices and increased grants for research into hybrid cars and new technology.

The Chinese auto industry faces several threats simultaneously. Weakening economic growth, falling real estate prices and a yearlong plunge in the stock market have made consumers leery of spending money. Fuel prices in China are still high despite the recent decline in world oil prices. And Chinese auto exports, mostly to developing countries in Eastern Europe, Southeast Asia, Africa and Latin America, are starting to crumble.

China’s car industry is already bigger than Japan’s, and is approaching in sales the industries of the United States and all of Europe. China is on track to sell 10 million vehicles this year, while demand in the United States is dropping toward 14 million vehicles.

Automobiles have played a central role in Beijing’s recent plans to move up the manufacturing chain, from making cheap goods that require unskilled or low-skilled workers to more advanced products.

So maybe China would not be a good role model.  Plus the CEOs of the US Auto companies said that it was all about the world economic crisis….could they be right?

What about the European auto makers?

The meeting in Berlin comes as carmakers

in Europe and the US clamour for aid to help offset what GM has called the worst auto market since 1945. In the US, plans supported by President-elect Barack Obama are being drawn up to provide at least $25 billion in loans to GM, Ford Motor and Chrysler. European automakers are meanwhile lobbying the European Union for 40 billion euros in low-interest loans and incentives to scrap older cars.

Meawnhile, automakers in the UK will also ask the government for ‘a package of measures to stimulate demand,’ including assistance for their loan divisions, the Society of Motor Manufacturers & Traders said. The group, representing global carmakers including GM and Toyota, will send a letter asking for “access to special liquidity vehicles” as have been provided to banks, SMMT chief executive officer Paul Everitt said on Monday.

Holy crap!  Automakers worldwide are in trouble….ALL need a bailout one way or another.

Dick Cheney Gets Charged With Abuses

A Texas grand jury has charged US Vice-President Dick Cheney for “organised criminal activity” related to alleged abuse of private prison inmates.

The indictment says Mr Cheney – who has invested $85m (£56m) in a company that holds shares in for-profit prisons – conspired to block an investigation.

The indictment was overseen by county District Attorney Juan Guerra, an outgoing prosecutor at the end of his term of office.

He cites the case of Gregorio De La Rosa, who died on 26 April, 2001 inside a private prison in Willacy County, Texas.

The grand jury in Willacy County, near the US-Mexico border, accuses Mr Cheney of committing “at least misdemeanour assaults” of inmates by allowing other inmates to assault them.

It said there was a “direct conflict of interest” because Mr Cheney had influence over federal contracts awarded to prison companies.

US grand juries weigh evidence to decide whether a case is worthy of being sent for a full trial, before issuing formal charges known as indictments.

The three-page indictment also alleges that former US Attorney General Alberto Gonzales “used his position…to stop the investigations as to the wrong doings.”

The grand jury wrote that it made its decision “with great sadness,” but said they had no other choice but to indict Mr Cheney and Mr Gonzales “because we love our country.”

Gez!  I love these guys….but will it stick?….probably not if Bush does a blanket pardon before he leaves office.

Do They Really Want To Save The Auto Industry?

There is a way, whether you like it or not, maybe the only way.  The foolowing is from an article written by John Case for Political Affairs magazine.
A raging debate is underway across the country, in Congress, and between the incoming Obama and outgoing Bush administrations on the fate of the US auto industry. Today CEOs of GM, Ford and Chrysler will face tough questioning in Congress. GM comes to Washington to beg for a $25 billion bailout to keep it and its ailing Detroit counterparts going next year. But nobody seems too thrilled about the prospect.

Some dwell on the companies’ gas-guzzling sport-utility vehicles. The right-wing obsesses over all the well-paid union members with alleged gold-plated benefits. (You would think it a crime to fight for full medical coverage for workers and their families!) Not just conservatives pile on the unions but the New York Times and Washington Post – also feel free to falsely double the average wage and benefit costs of US automakers by folding in all legacy retiree obligations in their reporting on what a UAW covered auto worker is paid. “The downfall of the American auto industry is indeed a tragedy,” the Washington Post editorial board sermonized recently, “but the automakers and the United Auto Workers have only themselves to blame for much of it.”
The essential argument for letting GM fail is the assumption that bankruptcy would be no big deal: But, while bankruptcy has worked OK for reorganizing airlines, among others, it’s very unlikely a GM failure would have the same result. In order to seek so-called Chapter 11 status, a distressed company must find some way to operate while the bankruptcy court keeps creditors at bay. But GM can’t build cars without parts, and it can’t get parts without credit. Chapter 11 companies typically get that sort of credit from something called Debtor-in-Possession (DIP) loans. But the same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate.

Nationalization is the only appropriate form in which the necessary re-organization and re-tooling of the US auto industry to meet the requirements of the high-tech and fuel efficient future can succeed.

Only nationalization provides an opportunity to show how a concentrated effort can renew a great industrial city like Detroit.

Only nationalization provides the framework in which collective bargaining over the pay and working conditions of workers in the automobile industry can result in a fair agreement that ends the destructive two-tier arrangements of the recent past, and grants auto workers with a sustainable, long-term stake in the industry.

The US auto industry, like the major financial institutions, is “too big to fail” in the words of Federal Reserve Chair Bernanke. But its executives cannot be trusted with public funds.

Once retooled and re-focused, it’s possible the government could resell the industry in whole or in part back to private producers if that proved to be more efficient. This writer would hope that the government – UAW partnership in rebuilding auto could create a sustainable, profitable, public enterprise. But regardless, for now, nationalization is the only practical course with any reasonable chance of success for the foreseeable future.

I know…I know…nationalization is a socialist idea….but we need an idea that will save million of jobs.  This economy cannot afford all those displaced workers.  If anyone has a better idea, please shout out.

Senate Extends Unemployment

The Senate approved a House bill to extend unemployment benefits by at least seven weeks on Thursday, sending the measure to President Bush on the same day the Labor Department reported continuing claims for jobless benefits hit a 26-year high.

The Senate bill extends benefits by seven weeks. It would extend them for 13 weeks in states with unemployment rates higher than 6%.
The House approved the measure on Oct. 3.
The current U.S. jobless rate is 6.5%.
U.S. workers are facing a gloomy job market. Earlier Thursday, the Labor Department reported that first-time jobless claims rose to a 16-year high of 542,000 in the latest week. The number of people receiving benefits rose to 4.01 million in the week ending Nov. 8, the highest level in 26 years.
OMG!  They pigs are doing something good.