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The Tripe With TARP & The Obama-Nation

If you're fed up with the Presidential politics, and want to get away from it with a little Xbox escapism, don't play Burnout Paradise. The racing game features VIRTUAL BILLBOARDS URGING GAMERS TO VOTE FOR OBAMA. Is the addition of political ads in console games change you can believe in? Caption & Image Credit: therawfeed.com
The Tripe With TARP & The Obama-Nation

The Troubled Asset Relief Fund (TARP) was originally created by the Bush Administration to help as a buffer for homeowners, who were in trouble of loosing their home when the flexible interest rates of the “sub-prime” mortgages they had used to initially purchase their home … increased. The idea was to be able to have the mortgages reset, or better, renegotiated to a level that the mortgages providers would not have their financial instruments be defaulted on by the people who had committed to pay the mortgages.

By having about 700 Billion dollars of TARP (read that as taxpayer money) set aside, the Federal Government felt that banks would be less inclined to foreclose on, or end the financial contract and the economy would remain relatively level and undisrupted.

This may have been effective … MAY … if the Federal Government applied the monies only where there they were needed. What has happened, however, is a massive level of “mission creep” where the Federal Government has decided to force all financial institutions to take money TARP money in exchange for specialized preferred stock, and if these banks did not participate, they would suffer additional activity brought about through audits and other Governmental investigative activity that hinders a bank from transacting a profitable business.

Further, the Federal Government unilaterally converted the Preferred Stock (non-ownership type) to Common Stock (ownership type) and now own an interest in the banks themselves … and remember, many of these institutions never participated in the issuing and selling of mortgages that are the topic of the TARP monies and/or do not have any loans in default.

The Federal Government forced a transition of ownership of privately held, once profitable businesses to be under the management control and influence of Federal Government bureaucrats who have never managed a private business for profit … in the first place.

The above description is an ugly enough scenario without looking at the additional uses of the original Troubled Asset Relief Fund (TARP).

Transportation Stock and Bond Certificates - Chrysler Corporation, Delaware, USA, 1970: $1,000 Sinking Fund Debenture certificate featuring the famous "Chrysler" radiator cap flanked by allegorical female character and company logos. Also includes traffic scenes showing old trucks and vintage cars in the background. Walter P. Chrysler, formerly of Buick and Willys, acquired Maxwell-Chalmers in 1923 and the first car bearing his name was produced in 1924. Chrysler laid the foundations for a motor empire to rival General Motors and Ford when he took over Dodge and launch the Plymouth Four and the De Soto Six in 1928. Punch cancelled. Scarce. VF+ - Red (12" x 8") $95.00 - Image Credit: stocksearchintl.com

This item published three days before Barack Obama took office excerpted and edited from the Washington Post –

U.S. Expands Aid To Auto Industry

Chrysler Financial Gets $1.5 Billion From Treasury; Ford Credit in Talks

By David Cho and Kendra Marr - Washington Post Staff Writers - Saturday, January 17, 2009; Page D02

The government expanded its bailout of the nation's troubled auto industry yesterday, announcing a new $1.5 billion loan for Chrysler Financial while Ford Credit said it was in talks to obtain federal aid.

The money for Chrysler Financial will come from the government's $700 billion financial rescue program. Senior officials from the Treasury and Federal Reserve are hoping the assistance, combined with earlier support for General Motors' chief lender GMAC, will keep auto loans flowing until the two agencies can make more funds available for credit cards, student loans and small business loans.

The developments came on a frantic last work day at the Treasury Department, as officials pushed out the door several key deals and announcements related to the rescue program, known as the Troubled Assets Relief Program, or TARP.

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Last fall, Paulson told lawmakers that the TARP would be used to buy bad assets. But soon after the bill was approved by Congress in early October, he moved away from the idea to provide more direct aid to financial institutions.

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The moves to aid the financing arms of the nation's automakers draw the federal government more deeply into Detroit's troubles.

To date, the government has committed TARP money to provide $17.4 billion for General Motors and Chrysler, $6 billion for GMAC, and now the new loan to back Chrysler Financial.

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"We're still funding our business," said Ford Credit spokeswoman Margaret Mellott, who confirmed the talks, which have been going on for months. "We have strong liquidity . . . It's an ongoing dialogue to free up credit."

Although Ford has said it can survive without federal aid or intervention, it continues asking to be treated the same as its struggling cross-town rivals GM and Chrysler.

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The support for Chrysler Financial is structured differently than most other loans the Treasury has made from the TARP. Instead of investing money directly into Chrysler Financial, the company is creating a special entity that will receive the government loan. Chrysler Financial can then withdraw those funds to make new auto loans.

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In addition, Chrysler Financial agreed to reduce by 40 percent the pool of bonus money for its senior executives relative to the 2007 levels, among other limitations on what it can pay its top officials.

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"This will provide a great economic stimulus for car buyers across the country," Jim Press, Chrysler vice chairman and president said in a statement.

Chrysler Financial applied for TARP funds in November. In December, Chrysler's sales slid 53 percent compared with the corresponding month a year before.

"This funding will better position us to withstand the current economic challenges until funding becomes available through more traditional commercial sources," said Thomas F. Gilman, vice chairman and chief executive of Chrysler Financial in a statement.

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Yesterday was supposed to be their last day of work, but many senior Treasury officials kept their government-issued BlackBerrys rather than turn them in. They were given Federal Express envelopes to ship their devices next week, in case they had to work over the weekend.

Reference Here>>

So, just about three months down the road, Chrysler declares bankruptcy!

The company is broken up into several parts where the United Auto Workers Union becomes the majority share owner – surprise, surprise.

Oh, and the people who invested their money in good faith in the company to get a return on their investment protected by our country’s bankruptcy laws which stipulate that the primary share owners are first honored? The Obama Administration shafted their interests and moved them to the back of the line only allowing them, the investors, a chance at a loss on their investment.

MODERN TIMES: If only the UAW were such a victim as they are depicted here in this R.J. Matson cartoon. The worker caught in a web of gears waiting to crush them up - the truth is that with a 55% ownership of Chrysler, THEY ARE the gears ... they had created through negotiation and now own. Image Credit: R.J. Matson, The New York Observer

This excerpted and edited from CBS News –

Chrysler Bankruptcy Exposes Dirty Politics

Declan McCullagh: Obama Calls Creditors Who Lent Money To Chrysler "Speculators," But What About the Rule Of Law?

May 7, 2009 | by Declan McCullagh

Chrysler's sad tale that led to this week's bankruptcy hearing in New York is not only an important business and political story. It also encompasses morality, the rule of law and strong-arm tactics used by some politicians.
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During its slide, Chrysler borrowed money from lenders and in return signed a contract promising that as so-called senior creditors, they'd get paid before anyone else if the company went under.

These creditors, by the way, represent something of a cross-section of America: the University of Kentucky, Kraft Foods' retirement fund, the Bill and Melinda Gates Foundation, pension funds, teachers' credit unions, and so on.

A normal bankruptcy filing would be straightforward. Senior creditors get paid 100 cents on the dollar. Everyone else gets in line.

But President Obama and his allies don't want that to happen. So they interfered on behalf of unions (the junior creditors) and publicly upbraided the senior creditors who were asserting their contractual rights and threatening to head to bankruptcy court.

Last week Mr. Obama lambasted them as "a small group of speculators" who "endanger Chrysler's future by refusing to sacrifice like everyone else."

Rep. John Dingell, a Michigan Democrat, sent reporters a statement calling the creditors "vultures" and "rouge hedge funds." Michigan Gov. Jennifer Granholm piled on, taking aim during her radio address at a "few greedy hedge funds that didn't care how much pain the company's failure would have inflicted on families and communities everywhere."

It must be a coincidence that the United Auto Workers has handed $25.4 million to federal politicians over the last two decades, with 99 percent of that cash going to Democrats. And that Mr. Obama's final campaign stop on Election Day was a UAW phone bank.

If those politicians thought about this a bit more, they'd probably realize their mistake. Creditors didn't force Chrysler's management to head to the capital markets and beg for funds: It was poor management, uncompetitive wages, and a union that opposed pay cuts.

Without those greedy "vultures" and "rogues" injecting sorely-needed cash into a business they knew was risky, Chrysler might have been forced to declare bankruptcy much earlier. (And now that lenders know they may be demonized by the president, will they be as likely to help out next time?)

One of the better critiques of this unusual situation comes from Clifford Asness, managing partner at a $20 billion hedge fund named AQR Capital Management. His essay responds to what he called "toxic demagoguery" and says "the president's attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him."
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A document that the non-TARP creditors filed with the bankruptcy judge about the proposed sale to Fiat says: "The sale is far from an arm's length transaction, but rather, is the result of a tainted sales process dominated by the United States government... It is a sale that was orchestrated entirely by the Treasury and foisted upon (Chrysler)... Well before the filing, (Chrysler) had ceased to function as an independent company and had become an instrumentality of the government."

So if you're keeping score, you have a bankrupt company depending on the government for money negotiating with some TARP-funded creditors depending on the government for money and still more creditors who may hold insurance policies with AIG, which depends on the government for money. And we're already hearing similar allegations about General Motors and political interference.

One disturbing report came from a well-respected attorney representing the dissident Chrysler creditors. Thomas Lauria, the head of White & Case's bankruptcy practice, says that he was threatened by Steven Rattner, the White House's auto task force chief. (A White House spokesman denies making any threats.)

"I represent one less investor today than I represented yesterday," Lauria said on a Detroit radio show. "One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight. That's how hard it is to stand on this side of the fence." Lauria said that his clients were willing to compromise on 50 cents on the dollar, but the government offered them only 29 cents.

In the Federalist Papers in 1788, James Madison wrote that "laws impairing the obligation of contracts are contrary to the first principles of the social compact, and to every principle of sound legislation." Unfortunately, Washington politicians seem to pay little attention to history, morality, or the rule of law.

Reference Here>>

All of this economic upheaval and Federal Government takeover of private enterprises are only the beginning of the misuse of tax money and the trust of the American people.

Within the first six weeks, a "Stimulus" appropriations bill was passed that increased the budgets of all Federal Government entities by an average of nearly 80% followed by the "Omnibus" appropriations bill that increased the budgets of all Federal Government entities by an additional 8%.

Some agencies in six weeks, saw a 100% increase in the amount of tax money they could spend ... this at a time of under 4% inflation here at the beginning of Carter's Second Term.

SOURCE: http://carters2ndterm.blogspot.com/2009/05/tripe-with-tarp-obama-nation....