This is a very quick initial response to the extraordinary announcement of the Chrysler LLC bankruptcy filing. We don’t have all the answers, but that’s partly because we don’t even have all the questions. Something very new and different is happening here.

It’s very far from clear to me that this is a Chapter 11 bankruptcy in any normal sense. For one thing, why is it being announced by the President of the United States rather than by Bob Nardelli?

In reading the news reports, there’s a tremendous number of moving parts here, and no one is being very clear about it. I have at least two very big questions, one of which is public and the other isn’t.

The public question relates to Fiat. Marchionne has been very emphatic that he will put no cash into Chrysler in return for Fiat’s stake, which starts at 20% and could go as high as 51% by 2016. Fiat is giving nothing but access to small-car technology. That can only mean that the government intends to dictate Chrysler’s production mix. That in turn means that the government has chosen to enter the auto business in a forthright and unprecedented way.

The private question relates to the current owner of Chrysler, which is Cerberus Capital Management, one of the most powerful, most wealthy, and most feared private equity groups in the world. They easily have access to billions of dollars they could invest in Chrysler. The fact that they simply don’t want to, tells you that this company isn’t worth investing in, and ipso facto the taxpayers are flushing money down the toilet.

But I want to know much more than that. I want to know exactly what consideration will be paid to Cerberus in return for the common stock that will be ceded to Fiat, to the government, and to the UAW. Are we bailing out a bunch of politically-connected billionaires?

And you can’t say you haven’t noticed how effectively they’ve kept their name out of the news. Whenever you get a chance, ask anyone who will listen: WHY HAS OBAMA NOT TOLD US WHAT HE INTENDS TO GIVE CERBERUS IN RETURN FOR CHRYSLER?

Read More →

This isn’t going to be a major story, but I’m awfully sore about it, and I’m not the only one.

Shortly before 10am this morning, a low-flying airliner buzzed New York Harbor just south of Manhattan, tailed by a pair of fighter jets. In case you weren’t here one dazzling September morning eight years ago, that’s exactly the flight path taken by the airplane that hit the south tower of the World Trade Center.

So what do you do when you hear that sickeningly familiar sound? Of course: you go into near-panic and evacuate all the office towers. That’s pretty close to what we did.

Now, we’ve come to find out what it was all about. If you haven’t heard this story, please brace yourself.

It was one of Barack Obama’s planes. It was one of the 747s used as Air Force One. They flew it past the Statue of Liberty. To snap some publicity pictures.

Why are we hopping mad about this? Because no one bothered to tell us. Apparently, DHS informed the New York police, but then instructed them not to say anything about it. The only thing I can guess is that they were afraid one of our friendly neighborhood terrorists might take the opportunity to fling a shoulder-launched missile at the thing.

So people I talked to (who were there on 9/11) said they heard two really loud flybys, and ducked because the next sound they expected to hear was a big crash. If you’re not from here, it’s hard to explain how sensitive people still are about this.

Why on earth did our President do this to us? Was he just plain thoughtless? Or was the insensitivity willful?

Your RedState front-page contributors have a lively back-channel communications system, in which we plot and plan strategy and discuss the critical issues of the day. (And yes, we talk about you too, Dear Readers.)

One of my colleagues just expressed the meaning of his life thusly:

“I absolutely LIVE to drive fast.  I work and advance my career so that I can have frakking fast cars.  That pesky little house and other possessions are there merely to facilitate my car habit.”

This statement was remarkable to me, given that I’m a New Yorker (say what you want about that, I’ve heard it all), and more to the point, that I’m not a licensed driver. When I need to go somewhere in a car, I pay someone else to drive me.

But I believe that my friend and colleague’s views on the matter of driving are a lot closer to normal than mine are. And that got me thinking about some important aspects of Obama’s economic blueprint for America.

Read More →

You’ve seen the reports that Freddie Mac’s CFO was found dead at home this morning, an apparent suicide. One unstable newbie CFO doesn’t bother me too much, and the event isn’t causing much of a ripple in the bond markets this morning.

The interesting thing about Fannie Mae and Freddie Mac is that, quite below the radar, they’ve morphed into practically full-faith-and-credit debt issuers. The term sheet under which they were nationalized last September provided that they should divest about one-tenth of their portfolios each quarter, with proceeds to benefit the Treasury, putting them on a glide path to full dissolution in three years or so. Instead their role has only gotten bigger and more systemic.

It’s no exaggeration to say that most new issuance of mortgages in the US (including refis) goes through Fannie and Freddie. But these mortgages are ultimately being funded by people who think they’re buying Treasury paper with a slight yield kicker, not by people who actually want exposure to US mortgages. If the market were to find its own level without this implicit federal support, it would be shockingly lower than it is now.

This is bad for at least two reasons: first, it misallocates economic resources, by definition. We simply have no way to know what desirable and healthy things the economy would be doing with the resources being forcibly directed into keeping housing overpriced.

And second, how do we ever remove the Federal support? No Administration will ever be willing to find out just how low housing values can really go. US housing has been permanently socialized.

To my readers here at RedState: I apologize for my low blogging output in recent weeks. As many of you know, I’m a CEO, and sometimes business gets very busy. I’m happy to say that conditions have been getting noticeably better, at least in the markets I participate in. Once things settle down a bit, I’ll be blogging more again, here and elsewhere.