Comments on: The Detroit face-off A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: Observer Fri, 17 Apr 2009 22:06:06 +0000 Slip of the keys there — I meant that Chrysler is likely to be a contract -supplier- to OEMs. This is a not uncommon thing in Europe where a bunch of no-name companies make cars for the big brands.

By: Observer Fri, 17 Apr 2009 21:59:10 +0000 Chrysler won’t be liquidated? I’m not so sure. But a higher probability is they will end up as the no-name contract OEM for other brands, with perhaps a residual amount of their own vehicles to pretend that it’s still part of the Big Three. The outsiders probably won’t be Fiat, which was a daft idea anyway, but other Euro and Asian companies.

By: Christopher Fri, 17 Apr 2009 20:57:50 +0000 This is just one indication among many of the fundamental incoherence of the Obama team’s strategy.

What exactly are the banks supposed to do with the TARP money, anyway? Keep it on the balance sheet to build up capital reserves and look sound? Or lend it out, thereby emphatically NOT building up reserves and taking further risks?

Peters says, “We hope they [the bankers] will understand that what was given to them was not for their benefit, but to get the economy moving again and maintain American jobs.”

Well, that’s the problem. First, what was given them was in the crudest individualistic sense precisely “for their benefit.” The bankers kept their jobs, and thanks to Chris Dodd kept their bonuses.

Second, what was given them was also supposed to be for their benefit in a less crude, institutional sense. Those balance sheets. Making the toxic assets (um, legacy assets? or whatever the latest buzzword is?) less toxic.

Separate measures, the “stimulus” stuff, is supposed to be doing the separate job of “getting the economy moving again.” Or is it? This administration has no clue. [I was no fan of the last one, by the way, and don’t regret the change — but I have to call things as I see them.]

The interaction of PPIP with the mark-to-market changes gives us another form of the same logical incoherence.

Under a good deal of pressure from the administration and its friends on Capitol Hill, the FASB gave in on mark-to-market, allowing for certain assets to be kept on the bank’s books at higher nominal value than previously. Not unsurprisingly, this has reduced the incentives of the same banks to sell those assets to the public-private hedge funds the administration is trying to create.

Hold them or fold them? You can demand of a card player that he do one or the other. But you can’t coherently demand that he do both at the same time.

By: JG Fri, 17 Apr 2009 20:00:08 +0000 This is insanity. I don’t blame GS and JPM for wanting to return their TARP money as soon as possible. If the government is going to strong-arm them and move goalposts throughout the exercise to suit their needs, then good riddance. This is nothing short of corporatism. What is this country turning into?

By: Don the libertarian Democrat Fri, 17 Apr 2009 15:59:55 +0000 So, at a meeting, we have a Chrysler rep and Geithner on one side of a table. They tell the Citi rep to accept the losses for the good of the country.

Then, Geithner walks around the table and sits with the Citi rep, who says that they need the money and can’t afford to take a hit for the team, and Geithner points out that Citi is part of the team. We’re giving money to Citi, on the one hand, and telling them to accept losses, on the other hand. Makes sense to me. What shareholder doesn’t want their company to lose money, after all?

By: Charlie Fri, 17 Apr 2009 15:23:26 +0000 Thanks for this Felix. If I understand you correctly, the gap b/t the govt offer and what the banks want is roughly $2.45 billion. Meanwhile, another story in the Post notes that despite pledges to return the TARP funds, banks — including these four — have accepted $1.56 trillion, of which only 200 billion is TARP money.

I noted the discrepancy in my own blog — o-not-pass-go-do-not-collect-156-trillio n-dollars/

To call this scandalous is an insult to scandal.

By: dWj Fri, 17 Apr 2009 15:21:33 +0000 And of course those rules spell out that if unsecured creditors — e.g. bond holders — are receiving 15 cents on the dollar, then secured creditors — e.g. these banks — should be coming out whole. They are not suddenly at par with unsecured creditors, and they shouldn’t have the market price of more junior debt used to crammed down the notional size of their claim.

By: dWj Fri, 17 Apr 2009 14:56:39 +0000 Title 11 of the U.S. Code and much additional debtor/creditor law has spelled out who is due what when not everyone can be paid what they were promised. If this has to run through a bankruptcy to get the assets of Chrysler sold to Fiat, do that. Don’t go about trying to cobble together ad hoc plans when a perfectly serviceable plan is on the shelf. (We’ve had way too much ad hoc in the past year.)