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Just How Bad it Really Is

Count on this blog for all the good news, folks.  But you really need to read just how bad things suck at GM before we start the process of bailing them out.

Given the numbers that pretty much all the media seems to agree on – that, for example, as many as 2 million jobs could be affected by the collapse of GM – I’m inclined to agree with the need for some sort of bailout.  But there seems to be such an endemic problem with our automobile industry that I begin to wonder if what we should be looking for is closer to a soft landing than a rescue.

I don’t know what the next thing after GM would be.  I don’t know how GM changes it’s ways and suddenly begins to research and develop new technology, or if the myriad of startups playing with green technology are capable of handling even parts of the marketplace that is currently dominated by GM in that venerable company’s absense.  I just don’t know.

But the times they are a-changin’, no matter what happens.

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Infrastructure

A major stimulus packages for the nation’s ailing economy begins to seem like an inevitability and all arguments against it will be quickly brushed aside.  That seems about right, as I’ve pointed out in the past, because government spending is the only long-term form of capital that has ever sustained us in our greatest financial crisises in the past.  Robert Reich does a great job of explaining the reasons for a sustained stimulus package that includes more than the clumsy rebate checks of the Bush Years.

I don’t know what the Obama team has in mind, but the word on everyone’s lips is “infrastructure.”  Since building roads and bridges (or repairing the ones we have) helps make commerce happen more efficiently in addition to creating jobs, this does seem like the best place to start.

But if I may, those of us in New York need to remind ourselves of a big infrastructure initiative in our recent past that deserves a second look: Wire New York.  Between our ill-fated Governor Spitzer and the economic troubles we have, this one kind of got brushed under the rug.  Obviously, with New York’s huge debt problems, this isn’t an initiative that can be picked up again all by our lonesomes.  But it is something that should be taken to the Obama team and presented as a critical part of our nation’s infrastructure – as important as roads and bridges in our modern economy.

It could mean the difference between rural workers without jobs and rural workers answering phones for Gateway.  It may not be the best job, but it pays the bills.  It paid mine at one time.

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Someone Else’s Money

Governors and Mayors of various cities and states across the U.S. are testifying before Congress on the need or lack thereof for a stimulus package to help aid the struggling governments.  In particular, our own Governor Patterson is testifying along with Republican governor Sanford of North Carolina.  I couldn’t help noticing this:

The New York governor reiterated statements he made Tuesday: that his state faces a $47 billion deficit by 2012 because of overspending, the Wall Street meltdown and the recession. He repeated his projection that 160,000 New Yorkers will lose their jobs as a result of the recent downturn.

. . . .

Rangel and other committee members grilled Sanford for opposing a federal stimulus package, saying that the economy needs a federal cash injection. But Sanford said that states and municipalities should take responsibility for their own financial affairs, making budget cuts instead of relying on federal support.

“Its always easier to spend somebody else’s money,” said Sanford.

Ah, indeed.  Someone else’s money.  So, here’s a question: how much federal tax money – originating from New York on Wall Street – was used to clean up how many hurricanes in North Carolina?  Just asking.

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Santa Claus is Coming to Town!

Never fear, noble bankers!  Just because you’ve fucked up our economy and taken our nation’s money to bail youselves out of the mess you made, that’s no reason not to celebrate this Christmas time with 20 billion dollars of bonuses.  God bless us, every one!!!

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Bernanke Testifies Before Congress: Live Now!

Fed Chairman Ben Bernanke is getting grilled on the bailout and the capital reinvestment portion.  Why isn’t it required that banks lend?  What is the pricing of the illiquid assets being bought out under the original bailout?  He’s not looking happy.  Watch it live now: http://www.msnbc.msn.com/id/27277381/

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How’s the Bailout Coming?

Felix Salmon at Conde Nast gives us a bit of perspective on how the details of the bankdebt buyout capital investment plan is going.  As always, it’s a bit of a read with a few weird jargon words, but this is about as straight forward as Felix gets most of the time.

The trouble, as Salmon sees it, is that whereas the British model of capital investment has been tied to strict requirements of the banks the government is funding and forces CEOs of those banks to step down, no such restrictions are present in the U.S. model.  Once again, we’re just handing money to rich people and expecting them to do good.  The practical outcome of this scenario is that banks are handed money with which to potentially gamble on riskier forms of investment to bail themselves out quicker.

So, in short, we’re handing them back more money to do even more of the same risky crap that got us into this mess.

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Fannie and Freddie to Start Buying Mortgages?

Everybody’s a critic till they need Fannie and Freddie’s help.  I thought they were simply to unregulated to be trusted?

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How to Avoid a Depression: Spend Money

Dean Baker decided to comment on this article, which was sent to me yesterday, so I figure I will as well.

Thomas Edsall asks the question in the Huffington Post: should Barack Obama fess up and say he can’t do the things he wants to or should he just be quiet and win the election?  The implication being that Barack Obama has been promising everyone their own theme ride at Disney World, but that the growing economic crisis may not allow him to give this stuff away.

Here’s a question for Thomas Edsall: when the government spends money, does it just fly up into the air – dissolving into ether, ne’er to return again?  Here’s another question for Thomas Edsall: what were the Alphabet Agencies during the Great Depression and what did they do?

The answer to the first question is no, money spent by the government does not disappear.  It goes into the economy in the form of pure, liquid cash.  The very thing that the financial markets lack at the moment.  For an avowed liberal writing for a progressive website to advocate cutting programs – proposed or otherwise – in the face of an economic crisis is for a liberal to completely lose his morings in American history.

To whit, the Alphabet Agencies of the Great Depression.  They spent money like it was going out of style and ran up deficits to boot.  They built the Hoover Dam and brought electricity to the Tennesee Valley, cleaned up parks and replaced lights on street lamps, spending money the whole time.  And had it not been for that massive injection of government money, we might have been another decade in the Depression besides.

Barack Obama wants to provide every citizen health care, make it easier for them to go to college and foster volunteerism by revitalizing the Americorp.  I can hardly think of better programs to go full-steam ahead with than these if we’re to quickly rebuild after this most serious of downturns. . .  possibly another Depression.

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World Stock Markets to Close?

Just headlined on Bloomberg News: Italian Prime Minister Silvio Berlusconi said that the idea of maybe closing the world’s stock markets temporarily while they work out the problem and “rewrite the rules of international finance” has been floated.  If that sounds bad to you, you’re not alone. But it may be the only way to prevent further spiraling losses in global markets.

Of course, that requires EVERYBODY to agree to it, which in turn requires mustering much more international support than certainly President Bush is capable of.  What would it be like to actually have a working president right now?

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Government Bank Buyout Looking Inevitable

About the only take-away from Bush’s speech of a few moments ago – one which might have otherwise been as content-free as anything during the Katrina disaster – is that Bush claimed that the Federal Reserve “has injected hundreds of billions of dollars into the system.”

Mind you, that money while approved has not actually gone “into the system” just yet, but it does appear as though the government is now staring directly into the face of the fact that what is needed is cash and that the only way to get that cash into the system quickly would be to buy up shares of the company.  The original plan was to buy up the bad loans.  But while that would have gotten some capital into the market, experts have noted that buying shares of the banks would be as much as eight times as effective in solving this crisis.

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Hey, George! Don’t Let Our Problems Worry You

George Bush decided to take a moment from clearing brush and petting the family dog to be president for a while, seeing as how we’re in the middle of the worst financial crisis since the Great Depression while he’s in office.  How generous of him.  He says that “We can solve this crisis and we will.”  Gosh, that’s great.

And now, back to your regularly scheduled vacation:

Bush: ‘We can solve this crisis and we will’ – The White House- msnbc.com

Perino said Bush, after his statement on Friday, would proceed with his scheduled trip to Coral Gables, Fla., and Kiawah Island, S.C., for political fundraisers and a meeting with the Republican National Committee. He also will meet with representatives of the Cuban-American community in Florida.

Late Update: It seems that MSNBC has taken that last bit down.  Did she say it or didn’t she?

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World of Hurt

OK, things are getting ugly.  Via Channel 8, the Dow just dropped below 8000 and then rebounded.  It’s so bad, George Bush had to quit clearing brush to address the nation.  Market Watch has a new section: World of Hurt.  How nice.