President Obama overstepping his leagal authority? - How can that be?!

Even the corrupt Sen. Dodd is expressing consternation and confusion about the legal authority under which the Administration is acting with respect to the auto industry. The TARP legislation was specifically designed to make funds available to financial institutions, but as with last year's auto bailout, the Obama Administration wants to use those funds for GM and possibly Chrysler. While the Administration will undoubtedly make the same arguments advanced by President Bush (that the Treasury Secretary has broad discretion and that the auto industry has its own lending institutions that qualify), both the Democratic and Republican Congressional leadership seems uneasy about the power grab. I wrote about this the other day, but it does seem that the President and his Administration are intent on imposing their will on the private sector. Rep. Frank is helping them along with his proposal to dictate compensation packages for all employees of any institution receiving federal assistance. I love the new NBC show, Kings, but this is taking the whole life imitating art thing too far.

But, too cheer us all up, Fox Nation has provided us with a new music video to accompany tea party coverage. It's a lot of fun, so link over (I'll upload when Blogger stop freaking out on me) and enjoy.

The Collectivization of GM

President Obama and the 'auto task force' seem to be moving past just having a sacrificial lamb in Wagoner, to wholesale manipulation of production and management decisions. Jim Kuhnhenn writing for the AP today reports:

On Tuesday, Sen. Bob Corker, a Tennessee Republican whose state is home to auto manufacturing plants, said the administration's aggressive intervention in the industry sets "a very dangerous precedent."

It wasn't just the forced ouster of Wagoner that causes him concern, Corker said on CBS's "The Early Show." He accused the administration of taking a "we know best" attitude in connection with the problems in the domestic industry and said that should "send a chill throughout the country."

The president was hardly ambiguous about his desire to use the beleaguered state of the industry to press one of his top policy agendas — an energy policy that emphasizes the manufacture of fuel-efficient, environmentally friendly cars.

"The United States will lead the world in building the next generation of clean cars," he said.

If you're old enough to remember the last decades of the Soviet Union, you should remember the collapse of its state-run collectives and enterprises. These were utterly inefficient affairs, that produced little, polluted much, and often failed to pay their employees. The accompanying long 'bread lines,' that marked the 50s - mid-80s of the Soviet Union were mute testament to the utter failure of that kind of decision-making, but the Politburo continued to run a well-oiled PR campaign that forced citizens to pay lip-service to the 'glorious success' of the USSR.

The Administration's efforts to manipulate the market are no doubt well-intentioned, but they are doomed to failure. Not only does the government lack expertise and experience in these matters, it is trying to force both the supply and demand sides of the economy to meet what it determines is 'good,' rather than allowing demand to drive supply (and cost). Government determination of what products GM can and can not produce, and at what price they sell them, will not help to save the US auto industry, particularly if those products are not wanted by the majority of the public. Most studies indicate that consumers are interested in 'green' products, but that they also demand costs comparable to current prices, improved performance, space, (especially in the US), and power.

Government can play a role, however. Like it or not, fossil fuel supplies are not infinite, nor is their use particularly healthy (economically and otherwise) in the long run. The government can help fund the R&D side of the equation, and can provide tax breaks to encourage buyers. This allows the market to function, while still encouraging long-term changes in behavior and decision-making, and with far less cost to the tax payer.

GM's CEO takes the fall - UPDATED UPDATES

GM's CEO, Richard Wagoner, has abruptly resigned at the request of the Obama Administration as a condition of new federal funding. While the recent moves by the Administration toward tighter control of private industry are of great concern, at least this resignation will force some restructuring of the company (along with Chrysler). Of perhaps greater concern, however, is the continued flood of tax dollars to prop up failing industries. The sad truth is that the American auto industry (particularly as centered in Detroit) started failing long before the current recession, and should have restructured themselves years ago. Ford is the closest thing Detroit has to a success story, and that is not saying much.

The newest requests from GM and Chrysler total $21.6 billion, and even before meeting the requirement to present a restructuring plan to Congress, the Obama Administration appears to have promised a new bailout (although a figure has not been named). There is no indication on how far Congress and the Administration are prepared to go with the bailouts, what the final total will be, what the vetting process is, or if there is any kind of a plan whatsoever in place to ensure that the companies will be successful in the end. It all seems a little like fiddling while Rome burns.

UPDATE 1:
President Obama stated today that a short bankruptcy/restructuring period may be necessary for GM and Chrysler, and is giving them a 30-day extension on the original deadline to present a recovery plan. Additional federal funding is the carrot in all of this. Chrysler is also expected to complete a merger with Fiat within that time-frame. The shotgun wedding is being negotiated, in part, by the Administration, with pot-sweetener of $8-$10-billion likely. GM shares dropped like a rock (22.9%) in response to the firing of Wagoner and today's announcement.

UPDATE 2:
One has to wonder if Wagoner is being punished for funneling more GM pac-money to the GOP instead of the DNC. If they had been more like Sores, would he have survived?

The Dems Shop 'til We Drop

You have to love the 'audacity of hope' among the Congress and the big-three auto companies. Despite massive resistance nationally, and among many Congressional Republicans and the White House, they are pushing not one, but two competing plans to bail out the auto industry. Wagoner's testimony not-withstanding, the auto industry certainly doesn't deserve the bailout. They've already been bailed out on several occasions, and have continued to waste resources and time. The only ad that was on t.v. for Chevy over the past two weeks was for, you guessed it, a big-ole truck. The industry still doesn't seem to understand that it has dug its own grave and is now heading for the earth's molten core.

Don't get me wrong. It is very clear that bankruptcies among the major auto firms (as GM now claims it is heading for despite claiming adequate cash reserves and predicting a recovery just two months ago) will have a tremendous impact on the economy. But the big-three have become like that annoying uncle who's a hapless (and bad) gambling addict. They just keep coming back for a little more, swearing that this time they'll straighten up and fly right. And if you believe that one, there's a really cool bridge waiting for you in Brooklyn. Mitt Romney is right: bankruptcy is the only thing that will straighten out the industry. Whatever survives will emerge stronger, leaner and ready for competition. That's a much better scenario than the addicted uncle spending the nights on your couch, and it's a whole lot better than bailing him out again and again. Then again, Barney Frank and Harry Reid seems to find the uncle endearing. Maybe they can shop for a new couch on their own - mine's full up and I hate shopping.