The Right Thing To Do

Both fiscally and socially, more and more companies are doing the right thing. Walgreens is offering free health clinic care to the uninsured:

Walgreen's said patients who lose their job and health insurance after March 31 will be able to get free treatment at its in-store Take Care clinics for respiratory problems, allergies, infections and skin conditions, among other ailments. Typically those treatments cost $59 or more for patients with no insurance.

Hal Rosenbluth, chairman of the Take Care Health Systems division, described the plan as something close to an experiment: He said Walgreen isn't sure of patient demand or how much providing the services might cost the company.

It's likely to generate more attention for the clinics, however. Rosenbluth said a typical Take Care patient tells eight other people about his or her experience. So far, about 30 percent of Take Care patients were new customers to Walgreen.

The program is expected to last through the end of 2009. Walgreen runs 341 Take Care clinics in 35 markets around the country, including Chicago, Atlanta, Miami and Cleveland.

And Ford and GM are following Hyundai's lead to help unemployed keep their cars.

Ford Motor Co. and General Motors Corp. are offering payment protection plans to help reassure consumers who may be putting off buying a new car because of worries about losing their job.

The offers come as auto sales have been battered by the recession and tight credit, reaching their lowest levels in 27 years.

Ford said Tuesday it will cover payments of up to $700 each month for up to a year on any new Ford, Lincoln or Mercury vehicle if consumers lose their jobs. The program runs until June 1.

Hours later, GM said it will make a similar offer. GM's new CEO, Fritz Henderson, said the company will make up to nine car payments of $500 each for customers who have lost their jobs through no fault of their own.

Customers must qualify for state unemployment to be eligible for the program. The program starts April 1 and runs until April 30.

I'm hoping to see more and more companies take the lead in becoming good corporate citizens. These are the companies people will choose to do business with when the economy finally does stabilize.

Pile Of Crap

More dim economic news out today on housing and consumer confidence. The Case-Schiller index hit a new monthly and yearly decline record in home prices for January, and consumer confidence is still in a deep, deep hole at an index of 26. It's looking more and more like Helicopter Ben's efforts to re-inflate the housing bubble is failing due to all the holes in the balloon.

“It’s wrong to place too much hope on what the Fed would be able to accomplish in pushing rates lower,” says economist Dean Baker, co-director of the Center for Economic and Policy Research. “There’s a limit to what they can realistically do.”

That’s apparent in what some call the inevitable bounce back in rates since the Fed's announcement at the March 19 FOMC meeting that it would increase its planned purchase of GSE and MBS debt as well as finally begin buying longer-term Treasuries.

The yield on the 10-year note went from roughly 3.00 percent down to 2.50 percent, but has slowly climbed back to around 2.75 percent. Thirty-year mortgage rates, which track the 10-year yield, have moved accordingly.

“Rates are historically low, but the expectation is that interest rates should be much lower than they are,” says Manhattan Mortgage Company CEO Melissa Cohn.

Then again, Nouriel Roubini actually sounded almost...positive today.

Things might only be somewhat horrendous instead of biblically disastrous.

The Village Car Tune Caper

Needless to say, most pundits agree that GM and Chrysler should have faced bankruptcy back in the Bush administration, but since Barack Obama actually did something about it, the Village now hates his ass more than ever, staring with the LA Times:

President Obama's plan to save failing U.S. automakers -- and make them the instruments for creating a cleaner, greener transportation system -- marked a major step across the line that traditionally separates government from private industry.

His announcement Monday of a new position on bailing out Detroit went beyond a desire to be sure tax dollars were not wasted in bailing out struggling companies. It put the Obama administration squarely in the position of adopting a so-called industrial policy, in which government officials, not business executives or the free market, decided what kinds of products a company would make and how it would chart its future.

The Wall Street Journal:

GM's CEO Rick Wagoner got the Presidential boot over the weekend, and GM was given two months to reorganize, or get forced into a "quick and surgical" bankruptcy. For once, we agree with Michigan Governor Jennifer Granholm, who called Mr. Wagoner "a sacrificial lamb." The Administration needed someone to take the fall to sate the anticorporate furies it has helped to unleash. Mr. Wagoner wasn't solely responsible for GM's bad business decisions, but only recently did he promote the kind of radical restructuring the company has long needed. We only wish someone in Washington would also be shown the door, starting with those at the Federal Reserve whose oil-price bubbles also helped to break the car makers.

Sacking a CEO for appearance sake was the easy part. Good luck trying to get the unions to make concessions on wages and legacy costs, and bondholders to agree to reduce the debt burden. A senior Treasury official told us the Administration isn't holding its breath and considers "surgical bankruptcy" the likeliest outcome. In that event, "a shiny new GM" would emerge, said the official, who didn't want to be identified. Asked why GM wasn't forced into Chapter 11 immediately, the official said the Administration wanted to avoid "years of uncontrolled chaos" and needed time to set the stage for "the more surgical process."

David Brooks in the NY Times:

And yet by enmeshing the White House so deeply into G.M., Obama has increased the odds that March’s menacing threat will lead to June’s wobbly wiggle-out. The Obama administration and the Democratic Party are now completely implicated in the coming G.M. wreck. Over the next few months, the White House will be subject to a gigantic lobbying barrage. The Midwestern delegations, swing states all, will pull out all the stops to prevent plant foreclosures. Unions will be furious if the Obama-run company rips up the union contract. Is the White House ready for the headline “Obama to Middle America: Drop Dead”? It would take a party with a political death wish to see this through.

USA Today:

But critics said the president overstepped by forcing Wagoner out.

Sen. Bob Corker, R-Tenn., said the move was "a power grab." That level of federal control over GM "should send a chill to the people in this country," he said.

GM should never have gone to the government asking for help, said Gerald Meyers, former CEO of American Motors.

"It was a terrible mistake, pleading poverty and going to Washington asking for money," Meyers said.

The company could have survived without government help if Wagoner had been willing to search out alternative forms of financing, similar to the recent investments in Daimler by the sovereign fund of Abu Dhabi, he said.

Dana Milbank at the Washington Post:

When Obama, preceded by a sales team of a dozen economic aides, entered the Grand Foyer yesterday morning, he offered assurances that "we have no intention of running GM." But, in the rest of his 18-minute speech, he sounded as if he was doing just that. He ordered up "a better business plan" from GM and asserted that "Chrysler needs a partner to remain viable." In both cases, the restructuring "may mean using our bankruptcy code."

The idea of bankruptcy may be "unsettling," Obama allowed -- so he came equipped with a sales pitch worthy of Madison Avenue. "Some of the cars made by American workers right now are outperforming the best cars made abroad," Obama declared, tossing in phrases such as "unsurpassed around the world" and "some of the finest cars the world has ever known."

No credit? No problem. "We are working intensively with the auto finance companies to increase the flow of credit to both consumers and dealers," Obama pledged.

The Village universally hates it. It's funny. Of the five articles tearing into Obama as the First Used Car Salesman, only one bothers to mention Bush's December 2008 bailout of the auto industry and his requisite punt to Obama, and that was, ironically enough, the WSJ. Folks, Obama got stuck with this mess and is trying to do what he can to clean it up.

Let him work.

The New Reality

Despite wishful thinking from wingnuts, the reality is that Americans are not blaming Obama for the economy's problems, and in fact overwhelmingly approve of his efforts to fix it.

When it comes to assessing responsibility for the nation's economic plight, 80 percent said they put a "great deal" or a "good amount" of blame on banks and other financial institutions for taking unnecessary risks. The same percentage said they blame large corporations for poor management decisions. About seven in 10 blame consumers for overextending themselves with debt and the Bush administration for not vigorously regulating the financial industry.

Criticism of the banks, large corporations and consumers is roughly comparable across the political spectrum. But there is clear disagreement over whether Obama bears any of the blame, with Republicans far more likely to say yes than are Democrats or independents. Republicans, however, were as apt to blame the Bush administration for lax regulation as they were to target Obama for not doing enough to fix the problems.

Obama maintains a strong hand in his dealings with congressional Republicans. The public prefers his approach to that of the Republicans by more than two to one. But the percentage of independents siding with Obama has dropped 12 points, to 50 percent. Many of those independents in the new poll said neither has the upper hand in the economic debate. About a quarter of independents align with the Republicans on this question.

I wonder offhand just how many of these "independents"are in fact just disillusioned Republicans who have bolted from the Big Stupid Tent since the last election?

I'm guessing there's a lot more of them than there were six months ago. Even the die hard lifer Republicans have turned against Dubya, pretty much assuring that his legacy is that of "The Asshole Who Wrecked America" and will be for a long, long time.

This is also a big fat warning to Evan Bayh and his Sensible Centrist obstructionist buddies trying to wreck Obama's budget: the people prefer Obama by 2 to 1 to the Republicans. You'd better think about picking the right side in this fight, and soon.

[UPDATE] Bonus wingnut stupidity: Why should we care what America thinks when only Wall Street's opinions should matter?

The Road To Car Tomb, Part 3

It took less than 24 hours for Chrysler and GM to telegraph their moves in the post-Obama auto industry. Chrysler is making every effort to join with Italian automaker Fiat, but many analysts remain skeptical, and even the Obama administration is hinting strongly that Chrysler will be opting for bankruptcy reorganization:

Chrysler LLC may face an “impossible goal” in completing an alliance with Fiat SpA and meeting an Obama administration deadline to erase debt and win more union concessions by April 30.

Chrysler got its blueprint for the next month yesterday from President Barack Obama’s task force, which said that $6 billion in new aid hinges on “extinguishing the vast majority” of outstanding secured debt and new givebacks from the United Auto Workers.

Meeting those requirements would require help from lenders, which haven’t negotiated in the three months since Chrysler got its U.S. loans and have little incentive to do so because they would be paid off first in bankruptcy. Even Obama’s autos panel suggested Chrysler might fare better by reorganizing in court.

“It is an impossible goal,” said Sheldon Stone, a partner at Amherst Partners LLC, a restructuring firm in Birmingham, Michigan. “The likelihood is that the 30-day period is going to allow Chrysler to get their house in order for a bankruptcy.”

Meanwhile, GM's new CEO is making no effort to hide where he sees the company going in 60 days: straight to bankruptcy court.

General Motors's new chief executive told CNBC that filing for Bankruptcy may be the best option for the struggling automaker.

In a taped interview to be aired tonight on NBC Nightly News, Fritz Henderson said that because of greater demands from the Obama administration to restructure, GM is considering the bankruptcy option. The auto giant previously had ruled out such a move, saying it would discourage people from buying GM cars.

Henderson's comments came after President Obama bluntly rejected turnaround plans by GM and Chrysler and demanded that both companies make fresh concessions in order to get more federal aid.

Henderson, who was GM's president and chief operating officer, was named the new CEO after the government forced the resignation of CEO Rick Wagoner on Sunday. GM's board is also being restructured.

Henderson told reporters that the company would still prefer to restructure outside of court, but the level of support Washington is offering would help the company quickly restructure through bankruptcy.

So, that's basically it then. It's looking like the Big Three will become the Big One in a couple months, and the irony is government restructuring to make GM and Chrysler leaner and meaner could actually end up putting Ford at a major disadvantage:

Ford Motor Co., the only U.S. automaker not taking federal aid, could lose its competitive edge if President Barack Obama is successful in slimming down General Motors Corp. with lower labor costs, debt and dealers.

Obama gave GM 60 days to come up with a new strategy to cut costs with its union, slash debt with bondholders and reduce dealers and brands. If GM does all that, it may have significantly lower costs than Ford, said Lexington, Massachusetts-based auto analyst John Wolkonowicz of IHS Global Insight.

“This really pulled the rug out from under Ford,” said Wolkonowicz, a former Ford product planner. “The government wants to have GM survive as a leaner and greener company and Ford is going to need further restructuring in order to compete.”

It's conceivable that there may not be any major American automakers by the end of the year. What will replace the Detroit automakers? How will it affect the rest of the US car and truck market? This is uncharted stuff here, folks. Then again, these days there's a lot of uncharted stuff going on.

StupidiNews!

• Another food recall, this time it's pistachio nuts.
• French President Sarkozy warns he'll walk out of the G20 summit if global financial regulations aren't toughened.
• Welcome to Mendota, California: a city with 41% unemployment.
• AT&T and Verizon want nothing to do with over $7 billion in broadband internet stimulus.
• NetFlix is upping the charges for renting Blu-Ray discs as the economy continues to weaken.

Dear America:

"Obama's use of the first-person pronoun 'I' is unequivocal and indefatigable proof that he not only owns all of Bush's failures in totality, but it also proves beyond a shadow of a doubt that he is a Socialist dictator."

--Victor Davis Hanson, The Corner

Banks Versus Automakers

Politico explores the real reason behind why banks got trillions, and automakers got the back of Obama's hand.

This is the hard reality facing automakers: their failure would be devastating to their executives, workers and suppliers - but probably not to the broader U.S. economy.

Obama is convinced that if AIG or some of the big banks collapsed, the economy could go down with them. That’s not the case with Chrysler, for sure, and probably GM, too.

The president’s budget plan is focused on building a new transportation system, one dominated by a new brand of vehicles running on new kinds of fuels. The U.S. auto industry has gotten its clock cleaned when it comes to producing hybrid cars Americans are willing to buy. The Obama plan forces both companies to move faster to catch up.

“While the impact of the auto industry is huge, it doesn’t touch everyone who needs to get credit or hire someone, like the banks do,” said the Democrat close to the White House. “The optics aren’t good, but the autos are a more discrete problem that can be dealt with on a targeted basis.”

Automakers and the couple million or so jobs they represent are apparently expendable compared to the entire financial system collapsing. Nice of Bush to leave that problem to Obama. Amputation vs. fatal infection is always a fun choice to make.

Banks on the other hand? Too Big To Fail. One would imagine that it would be time to break the banks up if they are that large.

Some Good News

On why Obama is still a thousand times better than McCain:

Conservationists claimed one of their most significant victories of the new administration Monday as President Barack Obama signed sweeping land reform legislation designating two million additional acres of public wilderness areas.

The federal wilderness designation provides the highest level of government protection from logging and other forms of commercial use and development.

As opposed to drilling, blasting, and burning the hell out of it like the GOP would do with every inch of Federal land if possible.

Who Is Left Holding The Bag?

If this wasn't so depressing, I'd be laughing my ass off (emphasis mine)

City officials and housing advocates here and in cities as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.

The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan. The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure.

In Ms. James’s case, the company that was most recently servicing her loan is now defunct. Its parent company filed for bankruptcy and dissolved. And the original bank that sold her the loan said it could not find a record of it.

“It is what some of us think is the next wave of the crisis,” said Kermit Lind, a clinical professor at the Cleveland-Marshall College of Law and an expert on foreclosure law.

The real estate market has gotten so bad that the costs of foreclosing on some houses now exceeds the value of the house. The owner has walked away, the bank is walking away, and due to the maze of arcane bullshit that is your average CDO, nobody seems to know who actually holds the title to the home.

The practical upshot? The city/county taxpayer gets stuck with the bill and an eyesore of a vandalized, broken down property they can't move and they have to maintain, losing money off of it. Now multiply that by thousands nationwide, and you're beginning to see why we're only beginning down the steep slope to hell.

The commercial real estate crash is bad enough, but the residential real estate crash still has a long, long way to go.

Slipped And Told The Truth

GOP Senator John Cornyn vows Al Franken will never be seated before every conceivable avenue has been exhausted for Norm Coleman to try to steal it back, a process Cornyn anticipates taking "years".

Texas Sen. John Cornyn is threatening “World War III” if Democrats try to seat Al Franken in the Senate before Norm Coleman can pursue his case through the federal courts.

Cornyn, the chairman of the National Republican Senatorial Committee, acknowledges that a federal challenge to November’s elections could take “years” to resolve. But he’s adamant that Coleman deserves that chance — even if it means Minnesota is short a senator for the duration.

Eric Kleefield at TPM has more.

TPM asked DSCC communications director Eric Schultz for comment. "Republicans have made it clear they will hold this Senate seat hostage in order to pursue their political agenda - at the hefty expense of Minnesota having full representation in Congress," said Schultz. "We're all awaiting the three-judge panel to return its verdict, and once they do, we will have yet another confirmation that Al Franken won the election - and hopefully he can get to Washington to do the job he was elected to do."

Little chance of that, it seems. Hello, Democrats? Your Big Fat Party Of No Issue is calling.

Zandar's Thought Of The Day

Jon Chait has a valid point:(emphasis mine)

George W. Bush came to office having lost the popular vote, with only 50 Republicans in the Senate. After his disputed election, pundits insisted Bush would have to scale back his proposed massive tax cuts for the rich. Instead, Bush managed to enact several rounds of tax cuts that substantially exceeded those in his campaign platform, along with two war resolutions, a Medicare prescription drug benefit designed to maximize profits for the health care industry, energy legislation, education reform, and sundry other items. Whatever the substantive merits of this agenda, its passage represented an impressive feat of political leverage, accomplished through near-total partisan discipline.

Obama has come into office having won the popular vote by seven percentage points, along with a 79-seat edge in the House, a 17-seat edge in the Senate, and massive public demand for change. But it's already clear he is receiving less, not more, deference from his own party. Democrats have treated Obama with studied diffidence, both in their support for the substance of his agenda and (more importantly) their willingness to support it procedurally.

What's wrong with the Democratic Party in 2009?

Two words:

Evan Bayh.

Here endeth the lesson.

The Road To Car Tomb, Part 2

More details about GM and Chrysler are out today, and they aren't good news at all. Bottom line: both companies failed Obama's test fantastically and are now paying the price.

GM will get 60 days and Chrysler 30 days in which to make a final push toward proving they can run viable businesses. If Chrysler succeeds, it will receive a $6 billion loan. In GM's case, the officials would not specify how much money the carmaker might receive.

In the case of both companies, the officials said, stakeholders - and particularly debt holders in both companies - had not done enough to relieve the automakers of ongoing financial burdens.

"We have made very clear that we expect a very, very substantial reduction in liability for both companies," one official said.

The administration also said a structured bankruptcy is possible.

"While Chrysler and GM are different companies with different paths forward, both have unsustainable liabilities and both need a fresh start," according to an administration document. "Their best chance at success may well require utilizing the bankruptcy code in a quick and surgical way."

In order to help assuage consumer fears about buying cars from these companies as they restructure, the government is also setting aside funds to back up warranties on vehicles GM and Chrysler sell.

So Chrysler has until April 30 and GM May 30 to turn it around, or the Big 3 is the Big One: Ford. Oh yes, this is a disaster of a mess of a screw-up...but it's yet another mess Obama inherited from Bush. Let's not forget this. An orderly bankruptcy six months ago would have solved the problem. Now? Bush punted because he didn't want to be the President that had to make the tough calls on automakers.

How long will it take I wonder before the wingnuts call for Obama to completely dissolve the UAW in order to save these companies? They're already comparing him to Hugo Chavez. How quickly the wingers forget Saint Ronnie fired 11,000 air traffic controllers and Reagan and the Bushes spent 20 years busting unions afterwards, but American workers are supposed to feel fear and dread at this "unprecedented" interference in the workplace for canning a CEO.

You get bailout money, you get rules.

StupidiNews!

• Eight people were killed in a shooting rampage at a nursing home in NC.
• Economists predict nearly all the G8 countries could be facing double-digit unemployment by the end of 2010.
• Insurance companies are seemingly blacklisting millions of people with common ailments.
• A second terrorist attack this month in Lahore leaves 22 dead in Pakistan.
• A new study shows playuing video games may improve your vision.

The Road To Car Tomb

Today, the day before the auto companies' deadline with the government, where President Obama announced that the carmakers were "not there yet", we have sudden news that GM CEO Rick Wagoner has stepped down.

It is unclear if Wagoner's resignation is one of the stipulations for the federal government to lend billions more to GM. But sources close to the talks say tough conditions will be attached to any future aid.

President Obama will update the public on the Treasury Department’s next step in helping GM and Chrysler on Monday afternoon.

A senior White House official did not deny to CNBC that the Obama administration influenced Wagoner's departure.

Asked if the administration forced him out, the senior official replied, "'forced' is a little strong."

Odds of this being a coincidence roughly equal the odds GM can make it without government help. Smart money has to be on GM's "orderly bankruptcy" now proceeding. The CEO leaving at this juncture strongly suggests the tough new restrictions go far beyond forcing Wagoner's resignation. Bloomberg notes that as recently as ten days ago, Wagoner had no intention of resigning. There has to be a CEO to run the company, and the government asking GM to change the CEO without forcing a bankruptcy seems pointless. Regardless of the deal involving bankruptcy or not, a deal has been struck, and part of that deal is Wagoner's resignation.

If only Obama would attach the same caveats to all the bank bailout money and bank CEOs.

[UPDATE] The NY Times reports:

A person with direct involvement in the auto bailout discussions said the administration would set a new deadline of April 30 for the automakers to come to terms with the bondholders and the union.

“Thirty days from now, there will either be a bankruptcy or the naming of a chief restructuring officer who will have government authority to ‘knock heads together,’ ” this person said. In addition, the government must come up with a backup guarantee on loan for G.M. to operate during bankruptcy because the banks will not do it.

So that's it then: it's either nationalization or bankruptcy for GM.

More tomorrow.