Comments on: The Giant Pissing Contest over the Auto Bridge

By: bmaz

bmaz — Sun, 07 Dec 2008 16:27:01 +0000

I understand what you meant, perhaps you are right, but that is not my belief. To the best of my reasoning, the government cannot run them any better, and I actually believe that current management, at least at GM (Ford is not germane at this point, and Chrysler just flat needs to be sold to someone (and not GM) is doing a decent job under the circumstances. The only reason GM is in this position is the cratering economy and credit market. They have really made a lot of the right moves over the past two or three years; at this point, the is no chance the government could do any better and the shock of that kind of transition would be brutal. Just extremely ill advised in my opinion. You may easily be right and me wrong, but that is how I see it.

By: CasualObserver

CasualObserver — Sun, 07 Dec 2008 14:21:35 +0000

bmaz,

I was referring to the cost of nationalization, well less than 3 Billion, as opposed to giving 12 Billion in “loan”, which would only last them (they say) through the next quarter–March, I believe. Yes, the credit issues would then be assumed by the Govt. But I believe I’d have more faith in a temporarily nationalized GM, with current leadership thrown out, and a thorough overhaul done, including a complete audit, than I would in simply throwing money at this corporation.

By: Neil

Neil — Sun, 07 Dec 2008 04:13:56 +0000

Sen Levin and Sen Shelby will be on Fox News Sunday tomorrow to debate the auto industry loan. Do you think Levin will ask Shelby about campaign donations from Toyota? Nah, me neither. I think I;d rather have Frank doing the talking on this one.

Obama is on MTP. If its MTP it’s mail-it-Tom Brokaw… or does David Gregory start this week?

By: phred

phred — Sun, 07 Dec 2008 03:18:29 +0000

Ah thanks massacio! And speaking of too many tabs open… I finally went back again to your diary to follow up on the thread, so I appear to be asking my moratorium question in too many places ; )

You raise a good point in distinguishing between (what are they called “regular”?) CDSs that are based on real underlying assets v. naked CDSs that are flat out gambling. My understanding (which is limited) of a lot of this market is that these were private deals made between two parties. In general when I think of hedge funds I think of well-heeled private investors trying to get better-heeled.

However, the fact is that most of us are investors now via work related benefits. Do you have any idea the level of exposure various pension funds and 401k assets might have? I would have thought they would be required to stay in more transparent transactions, but perhaps that is wishful thinking on my part. If the retirement savings of ordinary Americans are in the soup in a big way, then simply writing off naked CDS bets would have serious consequences for too many people to go that route…

By: prostratedragon

prostratedragon — Sun, 07 Dec 2008 03:11:26 +0000

Ay, they’re even more politicked up than I’d thought, I see.

Ever since the Chrysler-GMAC purchase my assessment of Cerberus was that any investment value that might be realized from their strategies was purely gravy; note for instance that those two nearly simultaneous moves gave them a crowbar that could be used against both companies at the same time.

By: phred

phred — Sun, 07 Dec 2008 03:10:00 +0000

Thanks for the reply. I was just curious, I can’t quite picture how the moratorium would pan out.

By: prostratedragon

prostratedragon — Sun, 07 Dec 2008 03:01:18 +0000

do read that article–it’ll make you spit

And lord knows I do so need to. Let me make haste and away …

By: masaccio

masaccio — Sun, 07 Dec 2008 01:37:27 +0000

Sorry, Phred, you already saw the diary, my mistake, too many tabs open.

By: masaccio

masaccio — Sun, 07 Dec 2008 01:32:34 +0000

Phred, I’ve been thinking about this. You might take a look at my diary, which gives some idea of the complexity of the problem. Several commenters on earlier posts have suggested that the solution is to declare CDSs unenforceable, and that may be the case.

There are two classes of CDS holders, those seeking protection against losses on securities they own, and those who are merely gambling, that is, they don’t own the underlying securities, or anything related to them. We need to worry about the former class. It includes at least some banks, which bought CDSs to protect against losses on loans made to their customers, and it includes the GM pension plan, which bought the swaps to hedge against the bonds they bought to rebalance their portfolio.

I think the big losers if we closed out the non-hedging CDSs are hedge funds. That would hurt a lot of big investors, which include the very rich, but also a lot of university and pension investors. On balance, I’d be ready to crush these classes of holders, but I doubt the current administration would even consider it.

By: masaccio

masaccio — Sun, 07 Dec 2008 00:58:09 +0000

I’m pretty sure the first thing we should do is raise taxes on the rich to significant levels, including a tax on wealth. This will make it possible for the rest of us to stomach the wrenching changes that are coming. It’s too much to ask us to eat the trillions of losses without punitive impact on the people who got us into the problem: the rich and their slavish agents.