Does Anyone feel like Bailing

[Griff]

Originally Posted by classicman

Watchdog: Gov't may have overpaid to bail out AIG



How easy is it to hide a few million bucks in a transaction this large. I wonder where all this money actually went.
Oh, and good job there Timmy. . . Not.

Yay for bailing out bankers! You'd hate to see society leveled a bit due to market forces.

[SamIam]

Private equity firms buy undervalued or underappreciated companies, impose short-term improvements and sell them for a fast profit. Some of the companies they've bought include Hertz, La Quinta, Dunkin Donuts, and Toys R Us. Josh Kosman, a private equity expert, says that the way the firms have been able to buy these businesses — through leveraged buyouts — means the majority of the money for the buyout has come from loans that the firms dump on the company they're supposedly fixing.

Now burdened with debt, many of those companies owned by private equity firms are in danger of defaulting. In a new book, Kosman writes that it's likely half of the 3,188 American companies bought by private equity firms between 2000 and 2008 could collapse. His book is called The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis.

http://www.npr.org/templates/story/s...ryId=120391729

Here is a highly interesting and spooky story from NPR.

~snip

In December 2008, the Boston Consulting Group, which advises PE firms, predicted that almost 50 percent of PE-owned companies would probably default on their debt by the end of 2011. It also believed there would be significant restructuring at these companies leading to massive cost cuts and difficult layoffs.
A rain of defaults is already starting. From January 1 through October 31, 2009, 175 American companies defaulted on their debt. That is almost double the number for all of 2008. Half of those companies have been involved in transactions with PE firms at some point in their corporate life, according to the Standard & Poor's rating agency.

If this analyst is correct today’s economy could look like a picnic by comparison with what's coming down the road.

[tw]

Originally Posted by SamIam

Here is a highly interesting and spooky story from NPR.

"Reagan proved that deficits don't matter." And then the bills come due four and ten years later. We must still pay for "Mission Accomplished". GM is still dumping more expenses on the American public having used GMAC and 0 percent financing to maintain fictional profits. GMAC will now go to the government for what - maybe another $5billion? Because wackos all but protected bin Laden and handed Afghanistan back to the Taliban, we will now spend $1million per soldier per year to refight the entire Afghan war.

We have yet to see many of the debts incurred over the previous ten years. Do not for one minute think the stock market proves a recession is over. The crash in 1929 resulted in job losses mostly in 1933. It takes that long for money games and 'welfare to the rich' to appear as expenses.

Some 15 million Americans are not sure if or where their next meal will come from. One in six Americans is now living in poverty levels. The average American income has dropped 2% in the past eight years. This is not a time to believe things are getting better. We were warned by moderates and economists (using history from some maybe 13 other recessions) that we will be paying for these problems for the next 10 years. We have not yet begun to sell off America to pay our debts.

Most read here in 2005 that a severe housing crisis was pending. When did it finally arrive? 2008. It is difficult to say when or how severe the resulting economic crisis may happen. But we know from history that it is not yet over.

An outside chance says things will not get worse. But nobody has any logical reason to believe so especially due to overt financial mismanagement throughout the 2000s. Any responsible person should be prepared for what could get very bad - for the same reason that a real estate crisis apparent in 2005 finally appeared in 2008.

[TheMercenary]

Originally Posted by Griff

Yay for bailing out bankers! You'd hate to see society leveled a bit due to market forces.

If we would have allowed that to happen the weak ones would have just filed for bankruptcy or outright failed. That would be true leveling.

[tw]

Originally Posted by TheMercenary

If we would have allowed that to happen the weak ones would have just filed for bankruptcy or outright failed. That would be true leveling.

Failure of some banks were discovered (after the fact) to be so deeply embedded into this nation's economy as to require bailouts. One that should have never been rescued is GMAC.

How did GM keep selling cars that would otherwise never sell - to avoid bankruptcy? GM mortgaged another asset - GMAC. Zero percent financing was the mortgaging of GMAC. In addition to the $60billion given to GM, the Feds also gave GMAC something like $12billion. More 'backdoor' corporate welfare to GM. Private investors who took a 50% stake in GMAC after GM so deeply mortgaged that bank should have taken a loss. Those private investors should have done due diligence - and did not. Therefore should have lost their shirt.

GMAC is example of one bank that should never have been bailed out. But, in the fear and turmoil created in almost entirely in a month by almost a decade of fiscal mismanagement, GMAC was one of the lucky ones that got saved - and shouldn't. In that month, few had time to do sufficient research.

GMAC was not necessary to this nation's economic survival. GMAC was how GM corporate management saved their jobs and reaped massive bonuses at the expense of every American.

A problem that could have been avert years or even decades ago if so many Americans did not buy what was so obviously crap. Had the problem been forced upon GM early enough (because consumers stopped buying crap that needed two extra pistons to get the same horsepower), then bankruptcy (even in 1991) could have averted this problem. Bankruptcy applied early only eliminates what creates 85% of all problems - in this case GM management.

GMAC is probably one bank that should have been bankrupt - then sold to more responsible management for pennies. Unfortunately, GMAC got saved when the only solution to complete economic freeze was more oil – massive liquidity.

[xoxoxoBruce]

GMAC was sold to Cerberus Capital Management in 2006.
Chrysler was sold to Cerberus Capital Management in 2007.

Seems Cerberus Capital Management was at the bailout trough, bigtime.

[ZenGum]

Also seems that Cerberus Capital Management are not wise shoppers.

[xoxoxoBruce]

Not necessarily. They bought so cheap, and set it up so Cerberus remained healthy, regardless of what happened to their purchases. That's why those purchases were bailed out by us, instead of Cerberus. They're very smart, or well connected, or both.

[TheMercenary]

http://www.gao.gov/new.items/d10223.pdf

The Government Accountability Office released a report [1] (PDF) today criticizing the quality of the data used to calculate how many jobs have been generated by the stimulus.

Welcome to the club [2], GAO. Here are some of the highlights:

Nearly 4,000 reports filed by recipients of stimulus money showed no dollar amount received. Yet those same reports claimed to have created or saved more than 50,000 jobs.
Some 9,200 reports showed no jobs, even though they spent a total of almost $1 billion in stimulus money.
Nearly one in 10 stimulus recipients failed to file reports.
Almost one quarter of reports from primary stimulus recipients were not reviewed by a federal agency.
Recipients used different formulas to calculate how many jobs they had created or saved.

[classicman]

Recipients used different formulas to calculate how many jobs they had created or saved.

I wonder how many used the PFA method. I'm afraid more than we'd like to think.

[TheMercenary]

A very insightful look at the economic collapse and it's roots...

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."

http://www.pbs.org/wgbh/pages/frontl...rivatives.html

[TheMercenary]

Good God...

The Obama Administration is touting that their stimulus program has saved or created 640,329 jobs since it was enacted back in February through the end of October. This number is updated and posted on the Administration’s recovery.gov web site. That amounts to $246,436 per job based on the $157.8bn that has been awarded so far! Total compensation earned by the average payroll employee during October, on an annualized basis, was $59,867. If the government had simply used the funds awarded so far to pay for a year’s worth of labor, that would have paid for 2.6mn jobs!

http://blogs.reuters.com/james-petho...jobs-stimulus/

[classicman]

give a man/ teach a man and all that. Hope for Change...

[classicman]

I heard a similar thing about the mortgages too - If they had just paid off x million of them the banks would have money and people would have homes paid for and more disposable income would flow back into the economy...... <shrug>
People way smarter than I are making decisions . . . I hope

[classicman]

A company I'm involved with got a contract to develop tracking software for a southern city. They wanted to measure the job creation from the stimulus training dollars they got. After a couple of months, they killed the effort, saying the resulting numbers might "confuse the public."

I saw the numbers. No confusion, much ugliness.

This municipality decided that in order to meet the mandate to spend this money fast, they'd better give it all away to local universities and colleges and let them worry about training. So they did, spending something north of $20 million. The mandate to invest quickly was met.

There's no reporting due back from those schools. And they're all public. No private schools got a nickel. Of course private schools have higher job placement records than the public outfits. Go figure.

OK, enough. I confess to having not read all 2,000 pages of this bill. In fact, I wouldn't have known about Section 2521 if a friend hadn't pointed it out to me.

But you've got to wonder how many other toxic paragraphs are threaded through this mammoth thing.

Link
Just a piece from one man's perspective on the "job creation"