Why not transparency?

The other day I listened to Terry Gross of Fresh Air talking to Gretchen Morgenson, a business editor for the New York Times about the bailouts and how the Treasury Department has been reluctant to disclose or report on many metrics about how the money is being dispersed and how the banks are spending the money.  While Morgenson did a good job explaining how bad it is for the Treasury to stonewall, she and Terry failed to address the obvious question; why aren’t they revealing this information? 

To me, that’s the interesting question because Obama has made transparency a huge issue so you would think they would have no incentive not to disclose information.  So why are they dragging their feet?  The reason(s)  may go to the heart of what’s wrong with our financial system.  Here are some of my guesses:

*If people knew how bad the situation was, they would panic.

*The culture of “we know best” is inherent in the Treasury department no matter who is President.

*Incompetence: the Federal Government is very slow to change its ways and create new systems.

*The financial industry doesn’t want to be forced to reveal this kind of information and the government is complicit because of a similar mentality and huge campaign contributions meant to guarantee special treatment.

Feel free to come up with more of your own.

Bank of America propped up like Citicorp

The feds have gotten smarter about how they takeover failed banks. Indymac failed the old fashion way and Lehman Brothers went bankrupt. The feds engineered a fire sale for WAMU in a deal with JP Morgan and it went on the books as a failed bank. Since then, they have avoided the failed bank approach with Citicorp and now I believe with Bank of America. Its probably a good way to avoid panic but aren’t they hiding the true costs of the meltdown from the public and won’t we be surprised some day in the future when they total up the bill and come collecting? The Bank of Americas will have smart lawyers to avoid the tax bills that the rest of us end up paying. Here is the latest press release that sound pretty much the feds have put BofA on life support:

The U.S. government agreed to invest $20 billion more in Bank of America Corp. and guarantee $118 billion of its assets to help the lender absorb Merrill Lynch & Co. and prevent the financial crisis from deepening.

The government agreed to the rescue “as part of its commitment to support financial-market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement shortly after midnight in Washington.

Bloomberg article

DHL pull-out creates domino effect

Wilmington Ohio braces for more job losses as ABX Air announced today layoffs of 1,900 because DHL terminates its contract with the company as of Jan.4th.   ABX operated planes and transport services for DHL in Wilmington Ohio where 1,000 of ABX jobs will be lost.

Its too late to bail out DHL and stop them from leaving the U.S. but in looking at candidates for bailouts, DHL acts as a model.  It is a company that acts as an economic hub where its failure cascades more failure through out an industry sector and such companies should be considered candidates for federal money if one of the goals of the bailout is to insure the continued basic functioning of the economy.

Listening to Elizabeth Warren who heads the Congressional bailout oversight panel on “Fresh Air” yesterday, its unclear the Treasury Department has a bailout strategy but given the likelihood of more sectors failing throughout the economy in the coming weeks and months, they had better come up with one.

Article on ABX layoffs

Auto industry stabilization plans

Okay, I think the car makers are beginning to get it BUT I’m sorry, stabilization plan?  That is how they are selling the bailout to Americans?

How about, “Car-makers fill taxpayers’ coffers plan”   You know, something about us, about what we will get out of this.

When businesses go to a lender for a loan, they talk about how the lender will profit from the investment.

Auto industry stabilization plans for all three car makers courtesy Docuticker:

http://www.docuticker.com/

What’s Wrong with the GM video

Where to start?  How about the music?  Did they commission Philip Glass and tell him it was a workplace instructional video?  It is creepy, repetitive and crude.   Like the video itself which is a series of statistics; how many people the car manufacturers employ, how many dealerships there are, how many people make auto parts.  Its interesting that GM hasn’t been particularly helpful to the later and but alas the video isn’t about them, its about us.  And how after the onslaught of scary statistics and the mind-numbing music, we are suppose to grab the phone and call our congressperson and tell them, “VOTE FOR THAT AUTO BAILOUT!”  Yes, we are suppose to be panicky and scared that our economy as we know it will disappear.  Does this sound familiar?  Like the last bailout?   And so we give them all this money, these capitalist losers and then what?  Expect that they will spend it wisely and build great fuel-efficient cars that people will want to purchase?  Why doesn’t the video even address that question?  How are we to believe they will be successful with our money?  No, they don’t want to even go there.  They would rather spend three plus minutes persuading us that cars are big business in America.  Did someone not know that?  If this is the best GM can do, I say NO! to the bailout.

GM’s Pathetic Begging for $$$

I’m not automatically against the automaker bailout.  I do think its a linchpin of the American economy and if AIG and the banks deserve bailouts, I can see a rationale for GM and the others.  HOWEVER, this video produced, I assume, by GM makes me angry.  See it yourself.  I’ll give my thoughts in the next entry.

General Motors:Using SEC filing to beg

Hummer anyone? Keys are in the ignition

Here is what GM say in its most recent 10-Q: (thanks footnoted.org)

“We do not believe it is likely that these adverse economic conditions, and their effect on the automotive industry, will improve significantly in the near term, notwithstanding the unprecedented intervention by the U.S. and other governments in the global banking and financial systems.”

More $$$ please!

Does Bailout Require Bank Execs to Forego Parachutes?

Got me my $$

Its unclear.  According to this post at footnoted.org, banks aren’t consistent in how they disclose the terms of the agreements they are making with the feds.  Recently, only Bank of New York Mellon has been explicit about swearing off golden parachutes.  This point relates to a topic I’ve wanted to blog about regarding SEC disclosures…(coming soon!)