Chrysler, GM and the New Industrial Policy

  • While some people within the Obama Administration may think that threatening investors and violating their legal rights is a good way to conduct public policy, to us this puts the US in the same column as outlaw states like Venezuela and Russia, where investors and property owners have no rights. Will Secretary Geithner next be taking the example of Hugo Chavez in Venezuela and announce the expropriation of private property owned by speculators?
  • Even without the crisis, Chrysler was redundant and now that demand has fallen with the recession of available credit, a bailout of Chrysler seems a losing proposition for the taxpayer but a win for incumbent politicians. What about the shareholders and creditors of Ford (NYSE:F), who now face competition with two auto GSEs controlled by Barack Obama and the UAW?
  • Whether you talk about insolvent banks or automakers, the decisions made in Washington are increasingly political and accordingly, unlikely to be enduring or positive for the economy. Indeed, the growing sovereign risk evidenced by Washington’s increasingly lawless behavior is becoming "Topic A" for large investors.
  • we figure that GMAC, the bank holding company whose FDIC-insured bank unit we rate an "F" as of Q1 2009, will need $10 billion per quarter in subsidies just to keep the doors open.
  • Could Barack Obama be walking in the footsteps of Herbert Hoover?

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