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Robbers on the Loot - Why Should We Save US Auto Makers?

It is almost certain that Federal Reserve Bank will ultimately shut down. These are the final days. The major players in the White House, Treasury, FED,  major Banks like Citigroup, Bank of America and JP Morgan Chase,  Goldman Sachs, Insurance companies like AIG and last doyen of American strength – General Electric – all know pretty well that these are the final days of the Fed’s existence.

In ODI cricket match, when the last few overs are remaining, whichever batsman joins in starts willowing his bat all around the corners to score whatever runs he could muster before the stumps are drawn.  In the United States, who plays baseball, not cricket, there is a different story.  The FED cordoned off the entire area surrounding its massive building, invited only a few select guests, and started distributing extra ordinary largesse over $ 2 Trillion dollars in last 2 months.

A country, where a Senator’s seat can be sold for $500,000, how much money must have been corrupted at high places in Washington where the money rained from the sky in trillions minted at the printing press.  The naughty players took all precautions. While seeking passage through Senate, they ensured that free hand will be given to those in chair and no questions would be asked.

When Bloomberg sought information from FED for the disclosure of names of recipients of $ 2 trillions ($2000 Billions) of Tax Payer’s money, they were not even answered.  Bloomberg then filed a suit seeking those information under Freedom of Information Act – but alas, the judges in high places would not decide now or perhaps never. After all, they were appointed by the White House. Free press?  What’s that?  Just forget it. Let us talk green, not the environment – just our greenback – the dollar. When the advocates of democracy, freedom and fairness knocked the doors at US White House, Treasury and Federal Reserve, they were turned back. The rules have changed.

Never before in the world huge pile of money have, running into trillions of dollars, been printed with enormous speed.  There is over 60% probability that many Executives and Officials would have made huge sum of non taxable money in return of favor of giving extra ordinary loans, benefits, aids and equities to chosen few. 

"Take the money and run – we are unaccountable by law, and once the FED closes down, who is going to know what, how much, when  and where from we got such enormous wealth locked up in off shore centers. Who is going to chase us by the way?  Immerse yourselves in holy green waters at the Federal Reserve." murmur the participating players.

Look at the following numbers:

1. 
   $ 47 Billions:
   To cash strapped Citigroup in cash aid or bail out or loans or non refundable advance to fund its massive losses
2. 
   $360 Billions:
   Again to Citigroup in the form of State guarantee for its obligations arisen out of toxic debts against the collateral securities having zero value. And what did they do? They fired 75,000 employees (23,000 + 52,000) that will create unemployment en masse. 
3. 
   $   85 Billions Plus
   $ 150 Billions ($60 Billions loans + $40 Billions via Preference shares + $ 52.5 billions Securities purchase
   To AIG to fund its losses arisen out of guarantees in respect of CDO and other related toxic assets
4. 
   $   29 Billions plus
   $   30 Billions (carrying only 2% interest rate with no payment for first 2 years)
   To Bears Stearns and JP Morgan Chase with declared cause to save the BS but disguised help was rendered to rescue JPMC.

   And what did they do? They fired 9,000 employees in Investment Banking. They also announced possible 10,000 additional lay off.  Another 10% cuts is reportedly planned. This will create unemployment for at least 19,000 employees in short term. The news is very grim because 10% cuts looks small in percentage terms, but in absolute terms or numbers, it will be extremely devastative.  Citigroup’s firing of 75,000 works out to 25% of its entire workforce. You can count the numbers for BOA who owns Merrill Lynch having huge Investment Banking staff.

5. 
    $    29 Billions
   To Bank of America to fund its purchase of Merrill Lynch
6. 
   $ 2,000 Billions to undeclared financial institutions in last 2 months. The cost of rescue may exceed $ 3,000 billions ($ 3 trillions)... There was lot of drama to get the rescue package of $ 700 billions passed through senate, However, Bernanke distributed over $ 2 trillions without any authority – congressional or otherwise.

   And what they denied? And to whom? And how much?  Only $34 billions?

7. 
   $ 34 Billions to genuine Auto makers – General Motors, Chrysler and Ford, who wanted to protect the jobs of 3 Millions workers, staff, dealers and distributors. Look at the following statistics that missed the minds of ordinary Americans and those studious and yet stupid Senators: If 3 Millions jobs are lost at Auto makers; it would cost the State as under:

Alan Greenspan was derided for having followed easy money policy for long period of time that sows the seeds of today’s problems.  However, what Greenspan could not or would not do, was done by Bernanke in a matter of months at the speed of tornado.  He is without doubt one of the worst ever FED Chairman United States had ever produced.

Paulson also ensured that the US tax payers lose every thing while granting enormous dollar package to bankrupt companies. He asked them to issue most inferior security – Preference Shares – which are subordinated to debt. If the companies go under, the Preference share holders get nothing. Had he given the loans in the form of Convertible Bonds or Debentures, they would have had priority over other capitals like Preference shares and Common Equity, and also achieved the purpose of convertible warrants as well.

He knows pretty well that such preference shares trade at considerable discount and assume the character of “Most Illiquid Security” in the market place. And yet, he endangered and almost liquidated the interest of all tax payers while granting largesse to the bankrupt companies running into hundreds of billions of dollars that belonged rightfully to American people.

This leads us to the final step. What these two guys at the top be rewarded with?

Kalidas
Hong Kong (Ref: 0812-019 of December 18, 2008)

Blog: http://anilselarka.com/

About the Author

The author is from Hong Kong. He is finance professional having 36 years of experience as banker, stock broker, bond trader, convertible bond specialist, economist and practical solution finder for any kind of financial problem. He is author of new book (yet to be published) called "Sub Prime Resolved" which is a bible of economic recovery of United States of America. The author claims that at this moment, he is the only person in the world who has the complete solution for the current economic mess.

How do auto/home insurance companies share information with each other?

ISO reports, CLUE reports, and SIU departments of all insurance companies communicate with each other.

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