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im Geithner is holding his breath. Will his announced new financial plan result in a repeat of his last debacle, when Wall Street roller-coastered downward after he ineptly punted on his plans? Early signs – the Dow opening up nearly three percent, Tokyo, Hong Kong, U.S. market futures up – indicate no, he won’t single-handedly destroy billions in wealth today.

But is it a good plan? The test of any plan is simple enough:  Will people accept it and get on board, or in this case, will financial institutions bundle toxic assets – now called “legacy” assets in a ridiculous bit of sophomoric word play – and sell them through a federal program?  Here, Geithner has real problems. The AIG bonus bruhaha, complete with radical zealots on bus tours by AIG exec’s homes, has made a lot of financial institutions wary of taking public funds – and the new plan has disincentives in spades. It’s not in Geithner’s op/ed, but Bloomberg reports:

Geithner will also announce plans later this week to ask Congress to give the Treasury and the Fed authority to step in and more easily tackle problems at systemically important financial institutions that are in danger of failing. Such powers would give the government the ability to limit payments to creditors, break contracts on executive compensation commitments and provide guarantees on particular categories of debt for companies that need bailing out.

It’s not clear whether these heavy-handed new powers will be wielded on all financial institutions (gasp!) or only on those who cozy up to the feds on the new plan (suckers!), but it’s evident that Obamarx and Geithner see statism as the solution to the economic problem – we give you guarantees, you give us power. I don’t think  Wall Street is about to go cowardly into the night, giving up authority and decision-making to the folks who run Amtrak, the post office and social security.

Paul Krugman doesn’t see it that way. Of course, he sees too much Bush in the plan:

Over the weekend The Times and other newspapers reported leaked details about the Obama administration’s bank rescue plan, which is to be officially released this week. If the reports are correct, Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy — specifically, the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson.

This is more than disappointing. In fact, it fills me with a sense of despair.

That’s hardly the lead Geithner was hoping for.  Krugman says the new plan is just rehash number three of the first Obama/Geithner plan, with more bells and whistles, as if they were obsessed with one idea and unable to move on to another.  He can’t quite get his fingers to type the words “free market,” but his advice to Obama:  Don’t subsidize the assets as this plan does; let the market price them, get them off the books no matter the cost, and move on.

That’s far too foreign to Obama’s belief system, so he’s let his Treasury Sec move a plan forward that is a high risk one for the admin.  If it doesn’t work out, Obama will have wasted time the economy doesn’t have to lose.

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R

eaders of the WSJ and even the NYTimes have known for a while now that Maxine the Maxi-Lib Waters has been scamming the bailout, setting up a meeting between federal regulators and a bank seeking of her acquaintance that was $50 million in bailout funds. (Yeah, yeah – that seems like chicken-scratch, but it’s real money.)

So now, just a tad late, the LA Times has decided it ought to tell its readers about the latest round of nefarious actions by one of LA’s long-term Dem electeds.

Of course, they did it in a blog, not even in the online edition, and they didn’t really report the story; they just quoted the NYT:

Representative Maxine Waters, Democrat of California [that would be LA], requested the September meeting on behalf of executives at OneUnited, one of the nation’s largest black-owned banks. Ms. [Waters'] husband, Sidney Williams, had served on the bank’s board of directors until early last year and has owned at least $250,000 in stock in the institution. Treasury officials said the session with nearly a dozen senior banking regulators had been intended to allow minority-owned banks and their trade association to discuss the losses they had incurred from the federal takeover of Fannie Mae and Freddie Mac. But Kevin Cohee, OneUnited’s chief executive, instead seized the opportunity to plead for special assistance for his bank, federal officials said.

Heaven forbid that Waters’ home town paper should let on to her constituents what she’s up to.

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merica is the land of dreams and opportunity and all, but really, what’s a bus driver doing with an $800,000 home? (That’s it on the right.)  And why should we bail out her hyper over-extension? Michelle Malkin provides the commentary from an SF Wrongicle sob story:

ACOSTA: Like countless other Americans, Garcia admits she and her husband bought more house than they could afford, but she says the lender made the purchase all too easy. Now her mortgage is worth more than her house.

(on camera): How much was the house when you bought it?

GARCIA: Eight hundred.

ACOSTA: Eight hundred thousand dollars?. And how much is the house worth?

GARCIA: Right now, it’s like $675,000 on the market.

Before you run out of hankies crying for Garcia, consider this comment from a discussion item I posted on a building industry LinkedIn page asking for commentary on the Obama housing bailout:

It will be a good stop-gap and stabilize market prices in many areas of the country. However, long term it will not solve the problem because many of these homeowners will end up back in the same situation. Even if the package paid off their mortgages completely, it wouldn’t be long before they leveraged all of that equity. So it will likely pass, it will likely work short term, and in the end it will fail to make a lasting difference.

Got that? Do you think Rahmbama has thought this through? Do they really think that these overly entitled, bailed out “victims” won’t immediately turn around and draw out the equity boosts they got thanks to non-victims like us?

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W

ith Barney the dinosaur and Princess NanPo of the Golden Gate firmly in the driver’s seat, it looks like the Big 3 bailout is just about to pull out of the Monster Garage.

Given the direness of the economy and the potential for deflation, pumping a little freshly minted money into three big employers isn’t the worst thing in the news, especially since it looks like the bill will have a “car czar” who will have the authority to force any old car maker that’s on the dole into bankruptcy if it isn’t heading down the road to profitability.

My bottom line on this deal has always been that government must reject the Big 3′s ludicrous talking point that if one goes they all go.  What poppycock! If Congress were to endorse such economic insanity, it would be a sure sign that a full endorsement of the economic insanity that is socialism would soon follow.

There are two big flaws in all this.  First, it gives the UAW and its prez Ron Gettelfinger a trump card, because one of the conditions that would lead the car czar to force a company into BK is that failed to move the  unions far enough off their golden throne.  All Gettelfinger and his union goons have to do is dig in their feet and the car maker of their choice will be trudging off to bankruptcy court.  They’ll certainly use that power to their advantage, to protect what’s nearest and dearest to them.

The other big flaw, of course, is that George W. Bush gets to name the car czar.  This after his bailout czar, Treasury Secretary Henry M. Paulson Jr., has muffed, stumbled, baited and switched, blown, sucked and generally been the butter-fingered outfielder in the most important game we’ve played recently.  The fans are booing.  They’re yelling at the coach.

And now the coach gets to pick the car czar.

Who’s he going to pick?  Who knows?  All I know is that if there was someone around who was capable of saving the Big 3, he’d be making an 8- or 9-figure salary and major bonuses and options for running one of the Big 3 profitably.  But Lord knows that’s not happening, so who’s Bush going to find to do the job?  What clone of the blithering idiot Paulson will he give absolute authority to so the Big 3, like the banks, can use buckets of fed largess to accomplish nothing more than making the economy even worse?

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The now-shuttered Chicago Republic Windows and Doors factory is Prez-Elect Obama’s home turf:  Its workers are the sort of folks he worked with in his halcyon community organizer days, and its owners were the sort of folks he worked against.

Now Republic has closed a plant, fired a bunch of workers and renigged (if you believe the media reports) on due severance and vcation pay.  (Republic, for whatever its reasons, hasn’t commented on the situation, so we don’t have a counterpoint to offer.)  Yesterday, Obama sounded like the community organizer when asked about the situation:

When it comes to the situation here in Chicago with the workers who are asking for their benefits and payments they have earned, I think they are absolutely right. (source)

“Absolutely right.”  I’m not going to defend Republic here. It appears they’ve done very badly by their workers, but “absolutely” is a daring way to put it.  And he said it twice:

The workers who are asking for the benefits and payments that they have earned, I think they’re absolutely right and understand that what’s happening to them is reflective of what’s happening across this economy. (source)

At the base of this situation is a familiar villain:  Bank of America.  The bank canceled its financing to Republic, reminding me of this earlier post I wrote about B of A:

Bank of America has invested nearly half of the $15 billion it received as a federal bailout from the Troubled Asset Recovery Program – sending the money off to China instead of investing it in the U.S., where it would help local businesses and stimulate the economy.

The money was poured into the China Construction Bank even as B of A was shutting off funds to construction companies in the U.S.

Had the $7 billion been used as it was intended – to shore up the US economy – Republic’s doors might not have closed.  The bank says it’s not responsible for Republic’s promises to its employees – but is it responsible to anyone for how it uses its bailout money?

Obama hasn’t spoken out against B of A’s practices, and he should.  Neither have his comments about the workers gone as far as Jesse Jackson’s comment - “This may be the beginning of long struggle of worker resistance finally.” – but you have to wonder:  Are words like that lurking beneath Obama’s rhetoric?

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wo markets – the automobile market in the U.S. and the healthcare market in England – make interesting blog fodder this morning for free marketeer and big government junkie alike.

First, to the automakers, with the NYT reporting of General Motors:

G.M., the world’s largest automaker for decades, said Tuesday that it was in such dire straits that it would deeply cut jobs, factories, brands and executive pay as part of its plea to get $12 billion in federal loans and an additional $6 billion line of credit. …

G.M.’s president, Frederick A. Henderson, said the company would be insolvent if it did not receive federal assistance, including an infusion of $4 billion in cash before the end of the year.

“Absent support, frankly the company simply can’t fund its operations,” Mr. Henderson said in a call with reporters.

To which I say, why did it take having to grovel before the US taxpayers before you would promise to do what you should have done years ago on your own, Mr. Henderson?

Had GM dealt with its bloated workforce, eliminated costs associated with keeping Buick, GMC, Saturn et. al. afloat, and stopped paying its leadership losership as if they were actually accomplishing something, insolvency wouldn’t be just around the corner and Henderson wouldn’t be begging for $14 billion.

This is both a troubling and a glorious moment for any free marketer.

It’s troubling because we’re seeing the desperate lust for government money accomplishing what the free market should have accomplished on its own. And it’s glorious because we are seeing an admission by one of the world’s largest corporations that it is NOT anywhere close to the free market, and it’s killing them. Or it should be killing them … they may yet get hooked up to financial life support.

And speaking of life support, that takes us to another NYT article, this one a much more troubling tale of government’s influence on the free market.

RUISLIP, England — When Bruce Hardy’s kidney cancer spread to his lung, his doctor recommended an expensive new pill from Pfizer. But Mr. Hardy is British, and the British health authorities refused to buy the medicine. His wife has been distraught.

“Everybody should be allowed to have as much life as they can,” Joy Hardy said in the couple’s modest home outside London.

If the Hardys lived in the United States or just about any European country other than Britain, Mr. Hardy would most likely get the drug, although he might have to pay part of the cost. A clinical trial showed that the pill, called Sutent, delays cancer progression for six months at an estimated treatment cost of $54,000.

But at that price, Mr. Hardy’s life is not worth prolonging, according to a British government agency, the National Institute for Health and Clinical Excellence. The institute, known as NICE, has decided that Britain, except in rare cases, can afford only £15,000, or about $22,750, to save six months of a citizen’s life.

This is a tragic but familiar type of real life story that girds our loins as we fight against the Dems’ drive to impose universal health care in the US. But wait, there’s more:

Drug and device makers, which once routinely denounced the British for questioning product prices, have begun quietly slashing prices in Britain to gain NICE’s coveted approval, especially because other nations are following the institute’s lead. Companies have said that they will consult with NICE to help determine which experimental compounds enter the final stage of clinical trials, so the British agency’s officials will soon influence which drugs enter the market in the United States.

The British government created NICE a decade ago to ensure that every pound spent buys as many years of good-quality life as possible, but the agency is increasingly rejecting expensive treatments. The denials have led to debate over what is to blame: company prices or the health institute’s math.

After seeing the auto execs fly to DC in their three private jets and looking at Wall Street execs rake in hundreds of millions as their companies fail beneath their incompetent feet, there’s no doubt in my mind that there’s more lurking behind the cost of pharmaceuticals than legitimate R&D expenses.

Government has no moral authority to use the lives and quality of life of citizens as bargaining chips in a price war; that’s verboten. While the cruel effectiveness of NICE can’t be ignored, we free marketeers must realize that whatever NICE is accomplishing, it is not doing it in a free market. Access to pharmaceuticals is highly regulated, and the companies are using that to their advantage.

If there were a free global market for these drugs (with only patents protected), then we could take our prescription to Canada or Mexico or Khartoum for filling, picking the market where Pfiser or Glaxco offers the best price. And if that were to happen, the global price would quickly fall to the best price. That price would support needed R&D and salaries at the level necessary to provide effective managers, but it would cut out excesses.

Meanwhile, Bruce Hardy will die a little earlier and his widow will be not just sad but rightfully very angry.

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B

ank of America has invested nearly half of the $15 billion it received as a federal bailout from the Troubled Asset Recovery Program – sending the money off to China instead of investing it in the U.S., where it would help local businesses and stimulate the economy.

The money was poured into the China Construction Bank even as B of A was shutting off funds to construction companies in the U.S.  Writes Mick Pattinson, the president of a California homebuilder:

We had thousands of homes in various stages of development, all funded with loans from Bank of America. During the 27 years my firm and I have done business with the bank, we have borrowed more than $1 billion to build more than 10,000 new homes.

We always paid off our loans.

Last year, when the housing crisis was just beginning its downward spiral, Bank of America started aggressively re-evaluating the property we had pledged to secure our loans. The bank told us that we would soon need millions of dollars in additional cash as collateral.

Then the bank told us it would not renew two of our loans, and it raised our interest rate. BofA told us to keep paying them; keep working; keep hiring sub-contractors. They were sure we could work something out. So that is what we did. Until the bank pulled the plug on us — and other homebuilders across the country.

B of A could have taken the $7 billion it ferried off to China and re-invested it in our local economy, renewling loans to homebuilders, making mortgages more available, and spurring jobs, home purchases and recovery.  Instead, it looked after itself, making a speculative investment in a country that’s no friend of America – an investment that creates no American jobs.

And it can do this, apparently without consequence, because the bail-out is so poorly structured it’s become an “anything goes” party for recipients and a great disappointment to people like Pattinson, who were hoping it would bring some relief. If anyone out there thinks this is no big deal, let’s put it in perspective:

Over the last two years, 3,000 homebuilders have closed their doors. Today, one homebuilder is going out of business every hour. And 3 million construction workers have lost their jobs.

Foreclosures, construction unemployment, property values, confidence are all going in bad directions at record rates.

All the while, builders have been losing their property to the banks, which have no idea what to do with it. So its value plunges even more, hurting shareholders in ways they could not imagine.

It didn’t have to stay this bad.  B of A could have done something about it, but they greedily looked after themselves instead.  There oughta be a law, and there oughta be a prosecution.

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