Eideard

Leave it up to Fibber McGee and Molly
Daylife/AP Photo used by permission

President Hu Jintao of China will arrive in Cannes, France, this week pondering a plea from Europe for tens of billions of dollars to help the continent get out of its debt crisis. And President Obama will arrive with a smile, some hearty handshakes, and his own plea: that Greece get its act together and that Europe fix its economic ills, which he has called one of the biggest drags on the United States’ own ailing economy…

The last few months may well end up being an inflection point, in which the United States, though easily still the world’s leading power, no longer has quite the responsibility or the burden it once did. The pattern has been evident in the Arab Spring, with the American military playing mostly a supporting role in Libya, and now in the European financial crisis, with Asian money coming to aid the Europeans…A significant difference in policy between Obama and traditional Cold Warriors in both of the TweedleDeeDum parties.

In many ways, the situation is a natural evolution of the campaign promises made by Mr. Obama in 2008, when he vowed to turn away from the Bush administration’s more unilateral approach.

As president, Mr. Obama is now overseeing the withdrawal of all troops from Iraq and has emphasized multilateral diplomacy in all its messy forms. He refused to consider American intervention in Libya until the United Nations approved a resolution supporting it, and then he stepped back and allowed France and Britain to take the lead though American military help remained essential…We only have about 174 countries to go to withdraw from the rest of our foreign military bases.

Mr. Obama’s backers say that he is simply acknowledging reality and developing a clear-eyed strategy for what the United States can and cannot do and that he ultimately may prove right in diagnosing Europe’s economic problems and its need to take difficult steps to fix them…

Arriving in Cannes on Thursday, Mr. Obama will be trying to balance providing that leadership while not taking on any of the additional burden — particularly financial — that such leadership often requires…

But for all the acceptance that the United States will no longer be the world’s policeman and financier, the emerging strategy carries risks…

The American military remains the world’s most formidable, and the most likely to be called on to back American allies like Israel, Japan and South Korea.

Of course, no one expects South Korea or Japan to invade one of their neighbors – and start a war.

Does Europe have too many people paid as political and financial journalists?

Journalists in the main media hall at the European Union summit in Brussels, October 27, 2011.

There are plenty of times everyone feels the European Parliament is roughly akin to a Roman circus. They’re not feeding xhristians to lions or staging phony sea battles in their shiny coliseum – but, the attention paid to the smoke and mirrors that passes for planning, that imitates serious well-thought-out legislation, is as much of a joke as the content of that legislation itself.

Peering in at row after row of people paid to report on these events as a serious record of history somehow reminds me of the scribes covering Roman holidays before the obligatory crucifixions.

Mike Luckovich / AJC

Shhhhh! Do you hear that? Neither do I. I’m talking about reaction from critics of the auto bailout to news that Chrysler will pay back the $7.5 billion that it borrowed from taxpayers of the United States and Canada. Chrysler is raising the cash to pay back its government loans through a combination of bond sales, a commercial loan and a cash infusion from its partner Italian automaker Fiat…

Granted, all this constitutes a refinancing of Chrysler’s debt and the company is far from being out of woods – it still owes the $7.5 billion. But the fact that an automaker that had been given up for dead a few years ago is now healthy enough to convince private investors to pony up billions is a positive sign. And the chief issue among bailout critics wasn’t the long-term survival of Chrysler (they were willing to let the automaker die after all) but whether the company could ever pay back the money it borrowed from the government. Well, it just did.

So Chrysler lives to fight another day, thousands of Americans keep their jobs and the company continues to expand and post profits. Which is good news, unless you are a Toyota state Senator, are paid by a think tank to opine that government can never do anything right, or are an ideologue who’s genetically incapable of uttering the word “government” without immediately blurting out the word “boondoggle.”

Ideologue being the operative word in my humble experience. Usually, the sloganeer is someone who could care less about the lot of someone who spent decades in an auto plant – overpaid for all the fun he had schlepping fenders onto a Chrysler chassis.

Nope. I have a lot more sympathy for the folks who spent a significant portion of their lives in the not-so-healthy atmosphere of an American factory instead of the ivory tower that makes some people “superior” to those getting a paycheck for manual labor.

The US treasury expects to net $312.2m on Monday when it sells the rest of its stake in Citigroup. The government holds 465.1m warrants in Citi that entitle it to purchase common shares in the banking group. The warrants, which it is auctioning, represent the remaining part of the US government’s $45bn investment in Citi during the financial crisis.

Taxpayers are expected to end up with a $12.3bn profit on the bailout, made under the troubled asset relief programme (TARP). The treasury sold its 34% stake of common shares of Citi last year.

“As we exit our investments in private companies and recover taxpayer dollars, it’s clear that the cost of the Tarp programme will be a fraction of what many had once feared during the depths of the crisis,” said Tim Massad, the treasury’s acting assistant secretary for financial stability.

The Tarp bailout is proving to be less expensive to taxpayers than first feared. The US government made $13.5bn selling its stake in General Motors. Last week the government chose four Wall Street banks to sell its stake in American Insurance Group (AIG), recipient of $180bn in bailout funds. The sale could be the largest in US history. AIG has already paid back significant chunks of the debt…

In his latest quarterly report, Neil Barofsky said “on the financial side, Tarp’s outlook has never been better. Not only did Tarp funds help head off a catastrophic financial collapse, but estimates of Tarp’s ultimate direct financial cost to the taxpayer have fallen substantially,” from $341bn in August 2009 to $25bn in November 2010.

Save a copy of this post for the next time your friendly neighborhood Tea Party nutball starts raving and ranting about how the socialist policies of the bailout were bankrupting the United States.

Of course, you’ll have to point out 14 more sources for the information on repayment and the resulting profits. There isn’t anyone in the KoolAid Party who knows what actually is happening in the world of commerce.

Most Americans oppose it, but the government’s bailout of Wall Street appears in hindsight as a heroic rescue that kept the world economy from collapsing, says analyst Fareed Zakaria.

The Wall Street investment bank Lehman Brothers failed two years ago, leading to a massive loss of faith in the banking system and to a dramatic drop in the world economy. Congress passed the bank bailout known as TARP, or Troubled Asset Relief Program, in October 2008, the month after Lehman’s collapse.

Zakaria said the creation and passage of TARP during the waning days of the Bush administration required extraordinary cooperation between Democrats and Republicans in Washington.

“It was a very difficult thing to do, to take billions of taxpayer dollars and bail out the financial institutions that precipitated the crisis,” Zakaria said. “I would make only two points, if it would make people feel any better. First, the management of most of the banks that really screwed up were, in almost every case, let go … and finally the government didn’t spend an enormous amount of money on it. Because TARP was so successful, the financial system recovered pretty rapidly and most of the government’s investments in those banks have made a healthy profit.”

The host of his own Sunday show on CNN, Fareed Zakaria, had this conversation with interviewers about the Great Recession, how we got here and what was done to prevent a total collapse of the American economy. Here is an edited transcript:

I shouldn’t be astonished at the numbers who are led around by conservative ideologues, opposing TARP without having the faintest notion of economics, history or politics. Not to mention some of my dearest friends on the Left who think we’ve already skipped past capitalism. Our nation leads industrial nations in cultural backwardness. Bleating about government and freedom is just one more product of superstition and ignorance.

NO, NO, NO!
Daylife/AP Photo used by permission

When Senate Minority Leader Mitch McConnell decided last week to portray the Democratic version of financial regulation as a Wall Street “bailout,” it seemed like a brilliant, albeit cynical, political move.

What do the voters hate even more than Wall Street? Bailouts. What’s the perfect way to combine their antagonism for big banks with their distaste for taxpayer-funded bailouts? Accuse the Democrats of bailing out the banks. Perfect.

A good political move in theory, only it didn’t work. First, the outcry was over a “bailout” that wasn’t. Granted, there is some money in the bill — $50 billion — but it’s provided by the banks, not the taxpayers. And it’s not there to bail out banks, it’s to help the sick ones die properly without creating a panic. “Paying for the funeral” is the way Treasury sources describe it…

And get this: When the GOP leadership hatched this idea, it found more than a handful of Republicans — and not just the usual moderate suspects — who actually want to vote for financial reform. In fact, the difference between Wall Street reform and, say, health care reform, is that “there truly is a group of us who will hold our side’s feet to the fire” to get a bill, one Senate Republican told me.

So when McConnell got all his Republicans to sign a measure to force more negotiations before bringing the bill to the floor, some were with him with a strong caveat: They would not threaten to filibuster a bill they think the country needs. Period.

The traditional Big Lie tactic worked well enough in watering down chances at real healthcare reform. Republicans had the aid of spineless Democrats on that one.

But financial reform is different. Voters want it done. In most cases, the supply of government exceeds the demand for it. In fact, a slew of recent polls show that only about 20 percent of the people trust the government to do the right thing. But even so, a majority of folks actually want the government to intervene to fix Wall Street’s excesses.

In other words, the banks are so out of control that even the inept government needs to step in and do something.

Republicans just may be smart enough to trade one class of opportunism – the Party of NO, after all, appeals to their teabagger trolls – for another more traditional role. Work to water down any possible sanctions that might rank the needs of American taxpayers above Wall Street profits.

Daylife/AP Photo used by permission

The US government is preparing to sell its 27% stake in Citigroup, in what would be one of the largest share sales in history.

Some 7.7 billion shares in the bailed-out bank will be sold in tranches throughout 2010, the US Treasury said. It will mark another stage in Wall Street’s recovery, and could make the US taxpayer $8bn in profit…

The bank has received a total of $45bn in bail-out money from the Treasury’s $700bn Troubled Asset Relief Program (Tarp). It was the largest amount given to a bank (and was equal to the sum given to Bank of America).

Citigroup was given $25bn in return for 7.7 billion in shares, and was loaned another $20bn in two tranches. This $20bn was repaid in December…

Citi follows other Wall Street banks, including Goldman Sachs and Bank of America, who have repaid the government investment.

Not that most will ever recognize [a] which administration initiated the loans and purchases; [b] which administration sorted it out and started the repayments rolling; [c] what went to banks and what went to insurance companies and car companies. Nor do I expect any admission of the matching segments of the programmatic stimulus and healthcare contributing to the process of recovery.

After all – that would require some knowledge and understanding of history and economics – in addition to the more common populist skills like hollering and obscene gestures.

Daylife/Reuters Pictures used by permission

Ten of the nation’s largest banks have received a green light from the Treasury Department to repay $68 billion in government bailout money that they got during the height of the financial crisis.

The banks have been busy strengthening their balance sheets in recent weeks by raising private capital. This move raises hope that the worst of the banking crisis is over.

The ten banks, including JPMorgan Chase, Capital One and Goldman Sachs, all got a clean bill of health following the recent stress test administered by government regulators.

Many had voiced a desire to pay back the money. Some had taken it very reluctantly, at the insistence of the Bush administration as it was trying to stabilize the financial system and insure that banks had money to lend. Along with the money came government limits on compensation for executives, which the banks are anxious to escape.

As the financial system has stabilized and the economy has shown signs of bottoming out, a number of the banks have been able to raise new capital from investors.

If the 10 large banks repay the full $68 billion, it would be a development welcomed by Congress and taxpayers. Added to loans already repaid by some smaller banks, it would bring the amount of TARP funds recovered to $70 billion. That’s about one-third of the nearly $200 billion the Treasury has injected into the nation’s banks.

Not so incidentally, these ten banks have also provided $2 billion in dividends to the Treasury during the course of the so-called bailout.

Yes, that’s right. We, the taxpayers, made money on this part of the deal.

Luca di Montezemolo with some other car company in the gruppo Fiat
Daylife/AP Photo used by permission

Italian carmaker Fiat has confirmed for the first time that it is interested in a takeover of Opel – the German business of General Motors.

Fiat chairman Luca Cordero di Montezemolo said Opel would be an “ideal partner” and that a takeover was an “extraordinary opportunity“.

Har! Does he sound hungry enough?

Opel has said it needs 3.3bn euros (£2.9bn; $4.3bn) to get through the economic crisis, but the German government has encouraged it to find an investor. It has said it does not intend offering Opel a bailout, but that it would offer investors state support…

Group CEO Sergio Marchionne will meet the German economy and foreign ministers on Monday to assess the viability of a deal, Fiat said.

However Canadian car parts maker Magna International has also put forward what the German government has called a “rough concept for a commitment with Opel”.

German Economy Minister Karl-Theodor zu Guttenberg said that any investor would have to present a plan that kept Opel plants open in order to secure government support.

Opel has been under the thumb of GM for so many decades, I’m not confident they could be moved to offering an attractive line of cars with adequate quality.

UPDATE: According to the BBC, this morning, looks like Fiat might also be interesting in picking up the other GM bookend in Europe – Vauxhall. Does anyone in England still buy Vauxhalls?