Financial Reform ALREADY Injuring Economy

This is something else.

From Business Insider:

Financial Reform Meets First Huge Unintended Consequence As Ford Halts Bond Offering
Joe Weisenthal | Jul. 22, 2010, 8:57 AM

Whenever you get new laws and “reform,” unintended consequences are sure to follow.

Usually they take awhile.

Not so with Dodd-Frank.

WSJ reports that Ford has already yanked a bond deal, because the ratings agencies, fearing legal liability, won’t let the automaker puts their ratings in the prospectus, making a sale impossible.

So did Dodd-Frank just kill the bond market? Well, probably not.. Regulators will likely find some way around this impasse, but it’s still amusing to see the bill INSTANTLY slow down the gears of capitalism (or at least capital raising) as its fiercest critics might have suggested.

Click here to see 15 signs the economy is rolling over

Here’s the Wall Street Journal piece cited above:

JULY 21, 2010
Ford Scuttles Debt Deal as Overhaul Chills Market
BY ANUSHA SHRIVASTAVA

Ford Motor Co.’s financing arm pulled plans to issue new debt, the first casualty of a bond market thrown into turmoil by the financial overhaul signed into law Wednesday.

Market participants said the auto maker pulled a recent deal, backed by packages of auto loans, because it was unable to use credit ratings in its offering documents, a legal requirement for such sales. The company declined to comment.

The nation’s dominant ratings firms have in recent days refused to allow their ratings to be used in bond registration statements. The firms, including Moody’s Investors Service, Standard & Poor’s and Fitch …

Oh, well. Nobody needs those stupid jobs that Ford would have financed through an expansion, anyway.  And who really cares if numerous deals that would have happened don’t now because of “finance reform”?  Surely we’re all fine with scraping our own feces to heat our homes as in the other socialist Utopia in North Korea?  Who isn’t willing to personally suffer to punish those greedy businesses?

Analyst David Rosenberg, in agreement with other market experts such as Bob Farrell, said on CNBC that the Dow could challenge the terrifying lows of March 2009 and drop below 5,000.

Well, surely the Chairman of the Federal Reserve would bring confidence to the market.

Not so much:

Bernanke says economic outlook is ‘unusually uncertain’
In congressional testimony, the Fed chairman predicts that unemployment will remain stubbornly high for years. His comments send stocks down sharply.

By Don Lee and Walter Hamilton, Los Angeles Times
July 22, 2010

Reporting from Washington and Los Angeles —

Saying the economic outlook was “unusually uncertain,” Federal Reserve Chairman Ben S. Bernanke predicted that unemployment was likely to remain stubbornly high for several years, straining families and endangering the nation’s economic stability and competitiveness.

“Long-term unemployment not only imposes exceptional near-term hardships on workers and their families; it also erodes skills and may have long-lasting effects on workers’ employment and earnings prospects,” he said Wednesday in his semiannual testimony to Congress.

“This is the worst labor market, the worst episode, since the Great Depression,” Bernanke said of long-term unemployment. “Not only for the sake of the unemployed and for the short-term strength of the economy but also for a long-term viability in international competitiveness, I think we need to be very seriously concerned.”

We look at the financial reform imposed by the Democrats and realize that it will cost banks billions and make them even more reluctant to lend than they already are even as they pass the increased costs to their customers in the form of a tax from Obama to you.

Business leaders are flat-out stating that Obama’s economic policies are stifling growth.

And I go back to the prediction of chief executive officers made prior to the worst decision America ever made:

In October 2008 I wrote an article which quoted Chief Executive Magazine as follows:

In expressing their rejection of Senator Obama, some CEOs who responded to the survey went as far as to say that “some of his programs would bankrupt the country within three years, if implemented.” In fact, the poll highlights that Obama’s tax policies, which scored the lowest grade in the poll, are particularly unpopular among CEOs.

Barry Hussein is preaching about his “summer of economic recovery.”  But he’s a liar without shame or principle.

On the flip side of the “summer of economic recovery,” there’s actual reality.

From CNN Money, July 22, 2010:

Jobless claims jump in latest week
By Blake Ellis, staff reporterJuly 22, 2010: 9:28 AM ET

NEW YORK (CNNMoney.com) — The number of Americans filing for initial unemployment insurance climbed last week, the government said Thursday.

There were 464,000 initial jobless claims filed in the week ended July 17, up 37,000 from a revised 427,000 the previous week, the Labor Department said.

The number of claims was much higher than expected. A consensus estimate of economists surveyed by Briefing.com expected new claims to rise to 445,000.

“It’s very disappointing to have this leading indicator of economic conditions jump higher,” said John Lonski, chief economist at Moody’s Economy.com. “This is the latest reminder of a weak labor market, and the jump preserves worries regarding the adequacy of economic growth.”

The Democrats passed a 2,300 page bill that is essentially mystery meat, which creates more than 20 new agencies that will write hundreds of as-yet unwritten regulations.

And even the author of the bill doesn’t have a clue how the massive Rube Goldberg Machine boondoggle will work:

“It’s a great moment. I’m proud to have been here,” said a teary-eyed Sen. Christopher J. Dodd (D-Conn.), who as chairman of the Senate Banking Committee led the effort in the Senate. “No one will know until this is actually in place how it works. But we believe we’ve done something that has been needed for a long time. It took a crisis to bring us to the point where we could actually get this job done.”

Never let a crisis go to waste.

If you are a Democrat, I suggest you burn your testicles off with a blowtorch.  Because that would be change.  And of course change is good.  And who really cares about the irrelevant details of “change,” anyway?

Analyst Meredith Whitney, famous for being one of the very, very few who predicted the economic disaster in 2008, has made another prediction that no one listened to:

“Financial Reform Will Cause ‘Tragic’ Unemployment Levels For An Extended Period Of Time“

So, as the economy descends into the hell of unintended consequences, please comfort yourselves with my assuring you that I told you so.

Car Sales Fall Back To Historic Lows, Proving Cash-4-Clunkers Was A Clunker

The problem with the liberal-glorified cash-for-clunker program was always obvious to anyone who would but contemplate: the spike in sales merely robbed future sales, or delayed past ones.

My own parents waited for at least a couple months to buy a car for the program to go into effect.  Ultimately they walked away from it due to the massive aggravations of the program (my father is a very patient man unless and until things stop making sense – at which time he starts to lose it) and decided to keep their “clunker” until they needed to buy a new car.

The funny thing is, they very likely would have already bought a new car had it NOT been for the cash-for-clunker program.

September Auto Sales Seen Slumping Post-‘Clunkers’
Published: Monday, 28 Sep 2009
By: Reuters

U.S. auto sales likely fell in September back to the nearly three-decade lows of early 2009 without government incentives to spur buying, leaving in doubt the timing and pace of a recovery for the battered industry.

Nearly 700,000 new cars and trucks were bought by U.S. customers through the government “cash for clunkers” incentive program from late July through the first three weeks of August, a leap from recession-stunted sales earlier in 2009. […]

“There are still a lot of obstacles out there,” she said. “I think we are still going to see the hangover from ‘cash for clunkers’ both in September and almost potentially through the end of the year.”

Sales Drop at All Major Automakers

U.S. auto industry sales rose 1 percent to more than 1.2 million vehicles in August from a year earlier under the “clunkers” program, the first time monthly sales pierced the 1 million mark in a year.

However, none of the largest manufacturers are expected to post sales gains in September, and Edmunds has forecast a 23 percent industry sales decline for the month.

Edmunds expects Ford Motor to post a 9.7 percent sales drop, GM a 46.1 percent drop and Chrysler a 48.7 percent decline among the Detroit automakers.

Edmunds expects Toyota Motor to post a 9.7 percent sales decline, Honda Motor an 8.3 percent drop and Nissan Motor a 1.1 percent drop among Japan-based automakers.

The August sales gain represented a seasonally adjusted annualized rate of 14.1 million vehicles, but did little to turn the tide on annual sales. U.S. auto industry sales were down nearly 28 percent through August 2009 versus last year.

Global Insight expects U.S. September auto sales to come in at a 9.33 million seasonally adjusted annualized rate, or well below the 12.5 million unit rate from a year ago when credit markets froze in the wake of the Lehman Brothers collapse.

The median forecast for U.S. auto industry sales was 9.5 million vehicles from 41 economists surveyed by Reuters, while J.P. Morgan believes the annualized rate could drop to 8.9 million vehicles — the lowest month since December 1981. […]

This comes as no surprise to people who had a clue.  For example, John Quelch predicted in August:

C4C disrupted the even flow of supply and demand. New car buyers held back in advance of the launch of the program; in fact, many prenegotiated with dealers to do so. And, now the promotion is over, expect year-on-year sales to be lower than they would have been because so much consumer demand has been concentrated in the promotion period.

The Daily Plunge predicted:

The auto industry received a short-term “sugar high” at the expense of lower future sales when the program is over. The program apparently boosted sales by about 750,000 cars this year, but that probably means that sales over the next few years will be about 750,000 lower. The program probably further damaged the longer-term prospects of auto dealers and automakers by diverting their attention from market fundamentals in the scramble for federal cash.

And whaddyaknow?  That’s basically exactly what happened.

In addition, the fuel savings came at a very high cost.  In fact, in order to save $815 million in oil via the better mileage of the new cars, the U.S. Treasury had to pay out $2.877 billion.  In other words, for every dollar saved in fuel, the taxpayers lost $3.53 cents.  Some savings.

Poor people – who couldn’t afford to buy a new car with the cash for clunker incentive – will also now lose out on billions of dollars’ worth of used cars that were destroyed under the program.  The price of the cars that would have improved their lives (and their mileage) were shipped to China as scrap metal.  And law of supply and demand guarantees that the price of used cars will go up for the people Democrats always say they’re trying to help.

The cash for clunkers program ought to sound eerily familiar to people who’ve done any reading about the Great Depression, because it was the same kind of program that led to the slaughter of hogs under the Agricultural Adjustment Act (which was intended to raise hog prices but led to famine instead).  The issue here is the same one as back then: the profound arrogance of economic planners who think if they just get enough data, and they turn all the diodes exactly the right way, and if they get all the right memos and all the right forms, that they’re going to be smarter than free market would be.

Big government liberals invariably believe they know how to allocate resources better than markets do — just like the Marxist economic planners did.  And the problem is like that fairy tale about the old woman who swallowed a fly; every single solution they come up with just creates another problem, and then you get this continual snowball effect that just keeps getting more insolvable.

And thus it is with the cash for clunkers thing.  Maybe some of these people who bought a new car didn’t really need a new car; what they really needed was a new refrigerator or a new washing machine – but they got such a great deal on that car!  The government knows better that they needed to buy a new car more than they needed to buy a new refrigerator or a washing machine or a host of other products.  And so the government artificially incentivized people to buy the car that they really didn’t need.  And instead of buying all the things that they really should have bought and WOULD have bought anyway WITHOUT the billions in taxpayer dollars, now people have taxpayer-funded cars they really didn’t need to buy.

So, as an example, were told that “Durable goods orders show unexpected decrease in August,” but it shouldn’t have been “unexpected” at all.  What it was was the opportunity costs due to all the people buying cars instead of other goods.  Like refrigerators and washing machines.

And at the same time, all we’ve really done is rob demand from a couple of years down the road, where these people were almost by definition ultimately going to buy new cars anyway.  Why?  Because they have CLUNKERS, dammit!

‘If you want to get that taxpayer money back, buy a GM product’

Heard that little slogan over the radio today.  Didn’t catch who said it, as I’d just turned the radio on.  But from the tone of the interview, it either came from a government-type or a union-type who favored the bailout-laden bankruptcy.

I immediately asked myself, “I wonder how Ford feels about that reasoning?”

Here’s another slogan for you: “Buy your car from Government Motors so Ford can enjoy going bankrupt, too.”

Obama says his auto strategy is to “level the playing field.”  What could be more “level” than the entire industry bankrupt and under government thralldom?

How would you like it if one of your primary competitors in business had been nationalized by the government, which has already pumped $50 billion into your competitor (with Canada pumping in another $10 billion), and which now had a 60% (70% counting Canada) ownership stake in your competition’s future success.

Mind you, if you’re a GM shareholder, you’re probably not real happy either.  You just got wiped out so that the UAW could get a 17.5% ownership stake.

Now, on the bright side for Ford, both Chrysler and GM will now be compelled to make pathetic little “Obamamobiles,” while Ford still has the freedom to continue building the cars people actually want.  That should help Ford continue to continue to gain in market share – at least until Obama artificially increases the price of gasoline to try to force us all into his putt-putting Obamamobiles.

What is truly sad is that, had GM simply filed for bankruptcy protection when it first became obvious that it didn’t have the wherewithal to meet its obligations, it would have been able to enter into a government-free structured re-organization.  Instead, George Bush punted the company to the Obama administration.  And then Barack Obama caught it, and began sprinting down the field with it – in the wrong direction.

The reason Obama pumped all this taxpayer money into GM and Chrysler was so he could control the bankruptcy outcome.  Obama now gets to reward his union base even as he imposes his radical leftwing environmental agenda on two of America’s largest manufacturers.  Which will in turn create a precedent to demand even more control from more manufacturers whether they needed bailouts or not.

Once the liberal political class gets the taste for using American industrial financial capital as a slush fund to purchase political power and advantage, it will never give it up until all the meat has been devoured.

Someone has to sacrifice to pay for that.

Obama said:

It’s “a sacrifice you may not have chose to make, but a sacrifice you are nevertheless called to make so that your children and all of our children can grow up in an America that still makes things, that still builds cars, that still strives for a better future.”

The only problem  with that is that the man who is calling upon Americans to sacrifice for all our children is the very same guy who stole our children’s money in the first place.  Obama has been engaging in generational theft since the day he took the oath of office – which includes the oath he took as a state senator as part of the corrupt Chicago political machine.

And by no means is that sacrificing over yet.

You might look at the fact that GM just lost its spot on the Dow Jones industrial average which it had held since 1925 and say, “Thank God I didn’t buy any stock in GM.”

But you DID buy stock in GM.  And you’re going to be buying a lot more before it’s all said and done.

GM says it owes $172.8 billion, with $82.3 billion in assets.  That means, on top of the extra $30 billion Obama is making taxpayers fork over right now, we’re going to be on the hook for more than $60 billion more down the road.

That is an awful lot of taxpayer sacrificing so that Obama and his liberal lackeys can maintain control over their new political slush fund.

Is this what Americans want?  Not according to Rasmussen, it isn’t:

Only 21% of voters nationwide support a plan for the government to bail out General Motors as part of a structured bankruptcy plan to keep the troubled auto giant in business.

The latest Rasmussen Reports national telephone survey finds that 67% are opposed to a plan that would provide GM with $50 billion in funding and give the government a 70% ownership interest in the company.

Even when presented with the stark choice between providing government funding or letting GM go out of business, only 32% of voters support the bailout. Most voters (56%) say it would be better to let GM go out of business.

As on many issues, there is a huge gap between the views of the Political Class and the rest of the nation. By a two-to-one margin, the Political Class says it is better to provide the bailout funding than to let GM fail.

The people don’t matter any more.  And what is ironic is that we voted not to matter.  We the Sheeple voted to allow ourselves to be rushed down the roadway to Marxism or fascism.

We learn – from the Russian source Pravda, no less – that:

It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breathtaking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people. […]

Those lessons were taken and used to properly prepare the American populace for the surrender of their freedoms and souls, to the whims of their elites and betters. […]

The final collapse has come with the election of Barack Obama. His speed in the past three months has been truly impressive. His spending and money printing has been a record setting, not just in America’s short history but in the world. If this keeps up for more then another year, and there is no sign that it will not, America at best will resemble the Wiemar Republic and at worst Zimbabwe. […]

The proud American will go down into his slavery without a fight, beating his chest and proclaiming to the world, how free he really is. The world will only snicker.

If you want to enjoy the full flavor of having a Russian who has learned from his own history that what we are doing will lead to our doom – and who is gleefully relishing the prospect of the United States plunging off the same socialist cliff his country plunged down – read the full article.

And what Obama is doing to Government Motors and the auto industry he wants to do to the entire nation.

You say you’re not going to buy an Obamamobile?  By the year 2016 he has ensured that you won’t have any choice: his cafe standards will guarantee that every single car sold in the United States is an Obamamobile.

You’re also going to have Obamacare for your health care system and Obamapower for your energy.

The “new GM” represents the death of America.  The symbol of American prestige, economic power, and military supremacy has bit the dust.  It continues on only as a Marxist mockery of its former glory.  In that sense, it is rather like the crappy cars of recent times that were badged with the names and logos of the fabulous muscle cars of the past by some cynical marketing department.

If I may end by paraphrasing the final stanza of T.S. Elliot’s The Hollow Men:

This is the way America ends

This is the way America ends

This is the way America ends

Not with a bang but a whimper.