Obama Aides Take Axe To Chrysler's Budget
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The Obama administration appears to have reminded Chrysler about the cost of accepting government bailouts: with federal funds comes federal control.
A report this week in Advertising Age said that Chrysler wanted to spend $134 million in advertising over the nine-week duration of its bankruptcy. But Mr. Obama's auto-industry task force sliced that figure in half.
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The Obama administration appears to have reminded Chrysler about the cost of accepting government bailouts: with federal funds comes federal control.
A report this week in Advertising Age said that Chrysler wanted to spend $134 million in advertising over the nine-week duration of its bankruptcy. But Mr. Obama's auto-industry task force sliced that figure in half.
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Obama Wants Government Control On Bank Paychecks
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In light of what he called in February a "reckless culture and a quarter-by-quarter mentality," President Obama's administration indicated that it is looking for ways to create tighter controls over pay in the banking sector. The administration is seeking ways to make employee compensation mesh with performance, something that it believes hasn't been happening.
"We had a period where compensation practices just became completely unmoored from reality, defied gravity, and they created incentives for risk-taking that overwhelmed all the basic checks and balances in the system," Treasury Secretary Tim Geithner in an interview with Associated Press.
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In light of what he called in February a "reckless culture and a quarter-by-quarter mentality," President Obama's administration indicated that it is looking for ways to create tighter controls over pay in the banking sector. The administration is seeking ways to make employee compensation mesh with performance, something that it believes hasn't been happening.
"We had a period where compensation practices just became completely unmoored from reality, defied gravity, and they created incentives for risk-taking that overwhelmed all the basic checks and balances in the system," Treasury Secretary Tim Geithner in an interview with Associated Press.
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Chrysler Preps To Close Failing Dealerships
(AP Photo/Tony Dejak)
- Despite losing 400 dealers since early last year, Chrysler still has too many showrooms too close together, especially in cities. Merging them would leave nicer and better-staffed franchises which would be more profitable, at least in theory.
- The criterion being used for deciding whether a franchise will close or stay open involves whether sales goals were met (can you imagine what goals were set much less met?) Profits, if any, will be a factor too, along with the condition of their facilities and whether they have all three Chrysler brands (Chrysler, Dodge and Jeep) under one roof.
- Up to 800 of 3,200 dealers will get the bad news otherwise known as "rejecting franchise agreements." That's a quarter of Chrysler showrooms around the country. Thought of another way, it means that probably 50 percent of the Chrysler dealers in big urban areas will be closing. There apparently are way too many Chrysler dealers in the Northeast.
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Where Will $2T In Health Care Savings Go?
(CBS)
CBSNews.com's Hotsheet asked the administration how curbing the growth of costs--not stopping it--contributes to actual reform. The administration replied that cutting costs is a goal in and of itself. Two trillion dollars is nothing to scoff at, but it helps to keep things in perspective.
Given the rate at which health care costs have skyrocketed for Americans over the past decade, these savings could be a first step toward expanding coverage, some health care advocates say.
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Some Madoff Clients Pulled Out Billions Before Arrest
(U.S. Marshals Service)
Some clients withdrew billions from their accounts the year prior to the financier's arrest on fraud charges – about $6 billion of which was pulled out just three months before Madoff revealed his elaborate Ponzi scheme, according to a New York Times report Wednesday.
Under federal law, Irving Picard, the trustee handling Madoff's bankruptcy, can sue to recover those funds. Picard's doing just that, filing two suits to retrieve $6.1 billion withdrawn from accounts over the last decade.
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It's A Good Time To Work For Uncle Sam
(AP Photo/Charles Dharapak)
President Obama's call last year for "shared sacrifice" doesn't extend to federal employees, at least based on the details of his administration's 2010 budget released this week.
At a time when the official unemployment rate is nearing double digits, and 6.35 million people are receiving unemployment benefits, the U.S. government is on a hiring binge.
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Obama's New Trustbuster Sends A Message
(AP Photo/Haraz N. Ghanbari)
But the person he chose to be the nation's top trustbuster telegraphed a message today, saying it was time for the authorities to more vigorously investigate corporations suspected of unfair competition - recession or no recession.
"This country's prior experience raises the question of whether current economic challenges reflect a failure of antitrust," Christine Varney, who heads the Justice Department's antitrust division, said in a speech to the Center for American Progress. "In other words, could United States authorities have done more?"
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Dr. Doom: We're Not Out Of The Woods
An NYU economics professor tabbed "Dr. Doom" for his dire predictions of an impending financial meltdown in the U.S. back in 2006 has yet to don the rose-colored glasses government officials have been wearing lately.
In a reference to Federal Reserve Chairman Ben Bernanke's comment that he sees "green shoots" sprouting in the economy, Dr. Nouriel Roubini told CBS' The Early Show Monday, "I see green shoots. I also see yellow weeds."
Roubini based his less-than-upbeat outlook on the decade of excessive spending that preceded the meltdown of the credit markets, as well as the unemployment rate which he forecasts hitting 11 percent by 2010.
In a reference to Federal Reserve Chairman Ben Bernanke's comment that he sees "green shoots" sprouting in the economy, Dr. Nouriel Roubini told CBS' The Early Show Monday, "I see green shoots. I also see yellow weeds."
Roubini based his less-than-upbeat outlook on the decade of excessive spending that preceded the meltdown of the credit markets, as well as the unemployment rate which he forecasts hitting 11 percent by 2010.
Was The Stress Test A Con All Along?
(CBS)
The healing process has begun, Quincy Krosby, the chief investment strategist at Hartford Investments told the New York Times. "You're seeing more conviction buying the banks, where investors are culling the weak from the strong and going into the strong names. The strong will get stronger and the weak will get weaker."
But the headlines buried the real lede.
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Why The Housing Bubble Didn't Mess With Texas
(AP Photo/David Zalubowski)
Over at the Wall Street Journal, Nick Timiraos asks: "Why Didn't the Housing Bubble Mess With Texas?"
One possibility, the Journal suggests, is Texas' ban on prepayment penalties. But then again, some bubblicious states had them too.
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Fed Reveals Stress Test Results
The Federal Reserve on Thursday revealed the results of its bank "stress tests," showing that 10 of the nation's 19 largest banks would need more capital to withstand losses and meet the credit needs of their customers in the event of a more severe recession.
Officially know as the Supervisory Capital Assessment Program (SCAP), the stress tests involved a comprehensive assessment by the Federal Reserve and other bank supervisors of the capital held by the 19 largest U.S. bank holding companies. The Fed decided to make the results of the stress test public to restore confidence in these financial institutions.
The following chart shows the additional capital buffer the Fed suggests each bank needs. The 10 banks in need of additional capital have until June 8 to come up with a detailed plan for putting that capital buffer in place, and they must implement the plan by early November.
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Officially know as the Supervisory Capital Assessment Program (SCAP), the stress tests involved a comprehensive assessment by the Federal Reserve and other bank supervisors of the capital held by the 19 largest U.S. bank holding companies. The Fed decided to make the results of the stress test public to restore confidence in these financial institutions.
The following chart shows the additional capital buffer the Fed suggests each bank needs. The 10 banks in need of additional capital have until June 8 to come up with a detailed plan for putting that capital buffer in place, and they must implement the plan by early November.
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Watchdog: "All The Chips Are On The Table" With Stress Tests
(CBS)
"All the chips are on the table," Elizabeth Warren, chair of the congressional oversight panel for TARP funds, said on CBS' The Early Show Thursday.
While the tests are designed to evaluate the financial health of the country's 19 largest banks, they also serve as a test of the government's ability to manage the credit crisis that has choked economic growth in the nation.
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Ford Retools Plant – This Time To Make Cars People Want
(Martin LaMonica/CNET)
Yes, this plant — idle since November — will soon be retooled so it can start producing smaller, greener vehicles including an all-electric version of the Ford Focus. Yes, Ford seems better positioned than any of the Big Three to make the pivot from gargantuan Navigators and Expedtions to more economical models that get good mileage without sending a black cloud of pollution everywhere they go. So, yes, Ford deserves a pat on the back for heading in a direction many consumers appreciate. (That bit about consumer appreciation for smaller cars is evident in the many, many vehicles that Japanese and Korean automakers produce and sell in this country. Would that Ford could produce cars of similar quality.)
Ford CEO Alan Mullally says stand by. A new deal in hand with the company's unions will allow Ford to build cars less expensively, less burdened by legacy costs. That will translate into lower sticker prices and a better competitive position in the market place.
But here's the obvious problem with all the hand-clapping and frozen smiles: there is absolutely no guarantee — or even a good sign yet — that the American consumer will now turn to Ford for small cars. Ford has made small cars for years and lost a ton of money on them. Now Mullally assures us that these will be really good cars. I thought they were supposed to be making good cars all along, but I guess I'm old-fashioned. Actually, Ford was making a really good small car and it was selling like hotcakes in Europe and Asia. It's called the Ford Focus. There's a Ford Focus in this country, too, but it bears little resemblance inside or out to the car that is so popular abroad. So Ford has decided — belatedly — to try to bring the successful styling to this country as well. Elementary, you say? Apparently not in the car business.
Ford can make this $550 million investment because it is in comparatively good shape financially. It farsightedly secured a $30 billion line of credit from private investors back in 2006 and the cash has helped to see it through the economic downturn. Chrysler and GM, of course, have been less lucky in their investment strategies to say the least. Mullally now envisions an economic rebound later this year and even profitability for Ford in two years. Wow. Profitability! Considering how far and how fast the auto industry has fallen in this country, that would be some kind of accomplishment. Of course, if the economy does not rebound as rapidly as Mullally hopes, many analysts believe Ford will be forced to line up — hat in hand — for the same kind of financial help from the government that its weaker domestic rivals have already secured.
So it's all well and good for the folks at Ford to be enthusiastic and excited about their company's prospects, but all they have right now is the tenuous hope that — after years of making the wrong moves — they are finally getting it right.
Report: Political Contributions From Bailout Recipients Grew With Subprime Problem
(AP / file)
The top subprime lenders largely blamed for triggering the economic meltdown were owned or financed by the banks now collecting billions in government bailout money, a report released Wednesday shows.
Coming on the same day the Democrat-controlled Senate shot down a bill that would have helped hundreds of thousands of homeowners escape foreclosure through bankruptcy, the report from the Center for Public Integrity also highlights the dramatic increase in political contributions from the financial services sector over the last three presidential cycles.
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Chrysler Won't Pay Back U.S. Loans
(AP Graphics)
Testifying in bankruptcy court on Monday, one of the top financial advisers overseeing Chrysler's restructuring said the U.S. government may never get back its loans to the company.
"They're offering financing with a low likelihood of being repaid," said Robert Manzo, an executive director for Capstone Advisory Group LLC, according to the Associated Press.
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