U.S. Economic/Financial News

Obama's Auto Task Force: More Inept than the Amazin' Mets

May 28 (EIRNS)—Baseball's N.Y. Mets were so inept in their early years, that manager Casey Stengel once plaintively asked about the team he called the Amazin' Mets, "Does anyone here know how to play this game?" Stengel's remark leaps to mind in the latest news about President Obama's "auto industry task force."

Fox News reported May 27, that the combined auto-industry experience of the members of the task force is: zero years. Cong. Louie Gohmert (R-Tex.) was quoted, "Of course we know that nobody on the task force has any experience in the auto business, and we heard at the hearing many of them don't even own cars. And they're dictating the auto industry for our future? What's wrong with this picture?"

Meanwhile, the Ohio Twinsburg Bulletin reported that the head of the task force, Dr. Ed Montgomery, visited the town on May 22 for talks with town leaders about the local Chrysler stamping plant. The Bulletin reported that "Montgomery said $50 million (!) in new funds will be made available on a competitive basis to communities most affected by closures. The money will fund training for workers to pursue careers in the energy efficiency and renewable energy sectors." Rep. Steven LaTourette (R-Ohio) said he doubts there are that many green jobs in Northeast Ohio. "I'm afraid the only green jobs that will be available will be cutting the lawns of Wall Street bigwigs," he said.

Who'd Bail Out GM's Bankers at 100%? Only the Obama Treasury

May 27 (EIRNS)—No Wall Street bailout is apparently too big for the Obama White House. GM's bankruptcy declaration at the beginning of next week became all but inevitable, when the Federal government proposed to bail out GM's secured bank creditors—the biggest are J.P. Morgan Chase, Citigroup, and Credit Suisse—at the full face value of their loans. Some bankruptcy! Would even Hank Paulson have gone this far for Wall Street?

In fact, the government-staged bankruptcy of GM has come to look a lot like fascist banker Felix Rohatyn's 2005 plan for the "strategic bankruptcy" of GM's former parts division, Delphi Automotive—with President Obama in the role of Rohatyn. GM would deliberately be changed into a "lean, global" maker of small, fuel-efficient vehicles, with its headquarters in the United States, but most of its production operations in Asia and South America, major parts of it sold off quickly in the bankruptcy, and its bank creditors made whole.

Rohatyn Associates' plan didn't work for Delphi, still in bankruptcy four years later, despite the virtual elimination of its U.S. production operations. Obama's won't work for GM's survival either, as the UAW union has belatedly figured out.

The GM bankruptcy was assured today, when the bank creditors refused to take stock equity for their debt. Wall Street Journal sources told the paper that about $30 billion of their debt will be bailed out at "about face value," leaving "only" $10-15 billion of GM creditor-debt unpaid after bankruptcy. The total Federal bailout cost could run to $70 billion, on top of the $19.5 billion already put in through the Treasury's TARP program for Wall Street bailouts. The United States will be 70% owner as well as debtor-in-possession financier.

The United Autoworkers has negotiated a slight improvement in its deal, taking somewhat less of worthless GM stock for its health plan, and getting instead $6.5 billion in preferred shares and a $2.5 billion (unsecured!) note. But the union still agreed to a buyout of 21,000 more production workers, one-third of those remaining at U.S. facilities of GM.

"The fear at the UAW was that ownership in GM could eventually be worth very little," said a union source.