Nader Opposed Bailout For American Auto Makers. It's Time For A Pro-active Policy For Bailouts, Loans and Investments In Failing Companies.
First off, I have been relatively silent as the market forces are at work again pounding those at the roulette table. I guess I could say the finance sector hasn't bottomed again. And again. And again. But then I have already done that. Along those lines, I have often noted that technical analysis is a self-fulfilling function of underlying fundamentals and since most technicians don't understand fundamentals, bottom callers using methods that worked over the last ten years are getting their heads handed to them. In fact, anyone wanting to "play" at the roulette table is getting their head handed to them. I'll say it again but because of fundamentals we are not likely to see the massive rallies that took place in the 2000-2003 collapse. The market isn't going to its final destination in a straight line but we aren't likely to see 30-50% rallies in the major averages either. Now, onto the post.
Are we all tired of every corporation under the sun holding out their hand for a favor from Washington? That is our money. And, our government. To be loaning the American auto industry taxpayer money is ridiculous when people are losing their homes, being denied unemployment insurance and starting to form lines at the soup kitchens and shelters. Where is the help for those people? Where is my government loan or handout? Nader may be an eccentric on some levels but many of his views are grounded in reality.
Now, if any of the automakers go bankrupt and then need possible assistance that the market doesn't offer or their failure creates systemic risk, maybe society needs to take a look at a proposal to assist. But, that is not the case today. Instead this is a handout for management's failure. The government doesn't have the money to give everyone a handout and given the extent of this crisis, they are going to need to start prioritizing.
Let me tell you what I believe might be acceptable if Bill Gross, GM, Lehman and every other corporate executive who wants the American taxpayer to hand them our money. Obviously, it wouldn't look exactly like this but I'm capturing some sort of essence for dialog's sake.
The Federal government would make investments on behalf of the American society to those companies on the verge of collapse that are deemed to present system risk or strategic. That is obviously government picking economic winners and losers that I abhor but they do that today anyway. At least it is a sensible framework instead of the first-come, first-served activity we are seeing.
The terms of those investments are made under a blanket contract with no special privileges given to any borrower. You know, like banks are supposed to operate. The terms of that contract are transparently shared with the sovereign - the people - so that we, the bank's CEOs, confidently know how our money is being spent. If this contract is agreed to, the boards are to be immediately removed and replaced with new officers chosen through some audited process. Company executives must sign a retainer contract to remain with these firms for the duration of the investment if auditors see fit or until satisfactory replacements are found. Should auditors see fit to have them removed, they forfeit any separation compensation in their existing contracts. That retainer contract will also absolve them of any litigation surrounding their failures. Otherwise, any failing company's management will be personally held liable for their company's failures. This will incent CEOs to keep their abject failures from coming to fruition. Yes, that is strong-arming. So what? That's getting off scott free.
Any employees in these organizations receiving Federal assistance with salaries above the Federal government pay grades must contribute excess salary above the Federal government pay grade into a Federal fund until the contract is terminated. In other words, they are temporarily civil servants working for the benefit of society. The same goes for dividends, bonuses or other payouts that would also be kept in this fund. Additionally, these corporations give the Federal government non dilutive equity positions within the company in exchange for Federal assistance. Companies agree to whatever corporate governance changes are recommended by third party auditors and State/Federal regulators as part of this contract. When the companies return to health, the Federal fund containing the excess employee salaries, dividends, bonuses and gains from equity positions are equally shared with every person of legal age in the U.S. in the form of rebate checks.
I suspect the American people might go for something similar to this. And, more importantly it might create an environment where most people feel as though we are working for the common good of society and restoring a sense of confidence. That compares to the miserable failures in government policy we see unfolding before us that has an effect of making the sovereign feel as though we are being duped by the people responsible for this mess.
Are we all tired of every corporation under the sun holding out their hand for a favor from Washington? That is our money. And, our government. To be loaning the American auto industry taxpayer money is ridiculous when people are losing their homes, being denied unemployment insurance and starting to form lines at the soup kitchens and shelters. Where is the help for those people? Where is my government loan or handout? Nader may be an eccentric on some levels but many of his views are grounded in reality.
Now, if any of the automakers go bankrupt and then need possible assistance that the market doesn't offer or their failure creates systemic risk, maybe society needs to take a look at a proposal to assist. But, that is not the case today. Instead this is a handout for management's failure. The government doesn't have the money to give everyone a handout and given the extent of this crisis, they are going to need to start prioritizing.
Let me tell you what I believe might be acceptable if Bill Gross, GM, Lehman and every other corporate executive who wants the American taxpayer to hand them our money. Obviously, it wouldn't look exactly like this but I'm capturing some sort of essence for dialog's sake.
The Federal government would make investments on behalf of the American society to those companies on the verge of collapse that are deemed to present system risk or strategic. That is obviously government picking economic winners and losers that I abhor but they do that today anyway. At least it is a sensible framework instead of the first-come, first-served activity we are seeing.
The terms of those investments are made under a blanket contract with no special privileges given to any borrower. You know, like banks are supposed to operate. The terms of that contract are transparently shared with the sovereign - the people - so that we, the bank's CEOs, confidently know how our money is being spent. If this contract is agreed to, the boards are to be immediately removed and replaced with new officers chosen through some audited process. Company executives must sign a retainer contract to remain with these firms for the duration of the investment if auditors see fit or until satisfactory replacements are found. Should auditors see fit to have them removed, they forfeit any separation compensation in their existing contracts. That retainer contract will also absolve them of any litigation surrounding their failures. Otherwise, any failing company's management will be personally held liable for their company's failures. This will incent CEOs to keep their abject failures from coming to fruition. Yes, that is strong-arming. So what? That's getting off scott free.
Any employees in these organizations receiving Federal assistance with salaries above the Federal government pay grades must contribute excess salary above the Federal government pay grade into a Federal fund until the contract is terminated. In other words, they are temporarily civil servants working for the benefit of society. The same goes for dividends, bonuses or other payouts that would also be kept in this fund. Additionally, these corporations give the Federal government non dilutive equity positions within the company in exchange for Federal assistance. Companies agree to whatever corporate governance changes are recommended by third party auditors and State/Federal regulators as part of this contract. When the companies return to health, the Federal fund containing the excess employee salaries, dividends, bonuses and gains from equity positions are equally shared with every person of legal age in the U.S. in the form of rebate checks.
I suspect the American people might go for something similar to this. And, more importantly it might create an environment where most people feel as though we are working for the common good of society and restoring a sense of confidence. That compares to the miserable failures in government policy we see unfolding before us that has an effect of making the sovereign feel as though we are being duped by the people responsible for this mess.
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