Kansas' Lobbying Helps France Fly Citi to Its Tax Shelters

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Update: Apparently, Obama has explained to these Citi leeches the wisdom of giving up their new jet, and they have acceded to his demand wisdom. Well, so far, new-and-improved TARP is better than the old version.

It’s not that I’m bitter that Congress took away GM’s and Chrysler’s (but not Cerberus’) jets (in fact, I’ll let you in on a little secret. Without the jets it’ll make it hard to do business with suppliers in locations–like northern Mexico–that aren’t really well served by commercial airlines).

It’s that this makes the US look like world class chumps.

You see, earlier this month, Barney Frank tried to take the corporate jets away from those on Wall Street who–like GM and Chrysler–are sucking on the government teat to survive. Only, Kansas Congressman Dennis Moore hassled Barney until he took that provision out of the new-and-improved TARP.

To make sure corporate America got the message, Mr. Frank dropped a provision into the latest bailout bill, H.R. 384, the TARP Reform and Accountability Act, requiring would-be recipients of taxpayer funds to dump their corporate fleets. The message: If you want taxpayer money, sell your jet and fly commercial.

That sure sounded tough. And it sure sent a message to the automakers. When they came back to Washington, they drove.

But last week, Rep. Frank quietly stripped the no-jet provision from the bill. Why?

In a word: Kansas.

Kansas is a hub of aircraft manufacturing, particularly the making of corporate jets. One of Frank’s fellow Democrat[ic–sic] congressmen, Rep. Dennis Moore of Kansas, sent the powerful chairman a note that delicately suggested he re-think the tough talk.

"We have to be careful about Congress overreacting," Moore wrote in a statement.

What he told CNN he wrote to Chairman Frank was more diplomatic.

"It is clear that the auto executives were insensitive to American taxpayers when they flew in their private jets to request billions of dollars," wrote Moore. "But I have concerns that applying this well-intended provision may have unintended consequences of hurting the general aviation industry and its workers."

The congressman pointed out pointed out that 44,000 workers in Kansas work directly for the airplane manufacturing industry, and a lot of families depend on those paychecks. Last Tuesday, the "no-fly" language was dropped, and yet another get-tough message from Congress got a soft landing.

Late today, Chairman Frank sent a statement to CNN explaining his decision. Read more →

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Citi, Morgan Stanley, Not Paying Their Taxes

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Add one more thing to the "no one could have imagined" file: The GAO reports that Citigroup and Morgan Stanley have been sneaking their money off shore so as to avoid paying taxes.

The new Government Accountability Office (GAO) report, released today by Sens. Byron L. Dorgan (D-N.D.) and Carl M. Levin (D-Mich.), lists Citigroup and Morgan Stanley as having set up hundreds of tax haven subsidiaries, along with American International Group and Bank of America. Also in the tax-haven list are well-known companies and such federal contractors as American Express, Pepsi and Caterpillar.

[snip]

"This report shows that some of our country’s largest companies and federal contractors, many of which are household names, continue to use offshore tax havens to avoid paying their fair share of taxes to the U.S. And, some of those companies have even received emergency economic funds from the government," Dorgan said. "I think we should take action to shut down these tax dodgers, and we will be introducing legislation to do just that."

To illustrate the problem, Levin said the report found that Citigroup has set up 427 tax haven subsidiaries to conduct its business, including 91 in Luxembourg, 90 in the Cayman Islands and 35 in the British Virgin Islands. He said other havens include Switzerland, Hong Kong, Panama and Mauritius.

What Levin didn’t say, of course, is that these tax havens allow them to avoid financial oversight, too.

But I’m sure that won’t stop anyone from dumping billions of money into these firms–no questions asked–so they can continue to sneak the money off to the Caymans while the US goes broke. 

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TARP, the Consumer-Driven Version?

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Larry Summers just wrote a letter to Congress explaining Obama’s rationale for asking for the remaining $350 billion in TARP funds. One of the things he says Obama will do differently is get credit to consumers and businesses more quickly.

We must also do everything in our power to ensure our efforts are more directly reaching Main Street. It is neither right nor sound economic policy to allow the small businesses that are responsible for more than two-thirds of job creation and entrepreneurs who have worked hard and played by the rules to be victims of the credit crisis that they were not responsible for creating. We will work in close cooperation with Congress, the Federal Reserve and other agencies to strengthen financial institutions and restart lending for small businesses, auto purchases, and municipalities.

Undoubtedly, Congress will complain about this second request, particularly given the way Hank Paulson completely mismanaged it. But there is already fairly good proof that getting credit to consumers and small businesses will have an immediate impact on the economy.

As I noted in my review of December auto sales, the GMAC-as-bank deal that BushCo negotiated in the last days of December had an immediate and significant impact on GM’s sales.

GM said its December sales were helped by a zero-interest financing offer that its GMAC finance unit was able to make during the last few days of the month after GMAC was granted status as a bank holding company by the Federal Reserve.

This allowed GMAC to access money from the federal government aimed at helping banks and Wall Street firms. GMAC had essentially run out of cash to make auto loans earlier in the fall.

Within days of negotiating this deal (which also undoubtedly freed up GMAC to make floor plan loans to dealers), it invigorated GM’s sales.

And I wonder whether the same move isn’t also having an impact on sales across the industry.

Early industry sales results for January indicate that industry conditions might be improving slightly, Ford Motor Co.’s group vice president for marketing and communications, Jim Farley, said during an interview at the Detroit auto show.

Farley described the increase as the first positive sales “blip” he has observed in months. However, he was hesitant to predict that the trend would even last through the end of the month. Read more →

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Oh Noes! Lobbyists Standing in Line with Labor Leaders!!

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standing-in-line.jpgThe really amusing part of this story–describing how a number of business interests who ran were warmly welcomed in the Bush White House are aghast that they have to stand in line in the same waiting room with labor interests–is behind a firewall (thanks to egregious for liberating it).

The extent of substantive interaction varies. Some lobbyists, particularly those representing industries Obama wants to promote, report numerous contacts and substantive meetings.

But other K Street veterans report a shocking new reality.

Top business officials accustomed to red-carpet treatment in the Bush White House say they must stand in line in the cold outside transition headquarters along with people they don’t recognize, waiting to be cleared to meet with Obama staffers they don’t know and who don’t always appear to understand their issues. One veteran business official lamented that the only Obama official he has recognized so far is former Environmental Protection Agency Director Carol Browner — along with lobbying foes for labor and environmental organizations he has seen milling around or standing in the queue.

"We were part of the team" during the Bush transition, reminisced another top K Street player. "The business lobby was not pro-Obama," he acknowledged. "And for good reason, if you look at the campaign rhetoric."

Several business representatives wondered whether they were involved in a "check the box" scam designed to show inclusiveness rather than practice it.

"You get your five-minute elevator presentation," said one top industry lobbyist who said his meetings have been devoid of meaty discussion. "They say nothing. It’s a pure note-taking exercise. Will they be able to say they reached out? Sure." [my emphasis]

And these poor lobbyists are also worried that the white papers they give the Obama Administration, which under the Jack Abramoff style system employed by the Bush White House would be printed out on White House letterhead and presented as Administration policy, will be released in original form on the net.

Obama appears so far to be sticking to his promise to shed daylight on the process, reversing Bush White House practices most famously exemplified by Vice President Dick Cheney’s secret meetings with energy lobbyists. Instead, business types huddling with Obama officials are immediately told that the position papers and other documents they are pushing across the table are going directly onto the Web. 

To be fair, the story describes the industries which Obama has welcomed warmly: Read more →

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We're All Detroit, MI Now

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A while back, I wrote a post called We’re all Flint, MI now. Mitch Albom just wrote a story that might as well be called We’re all Detroit, MI now (h/t Leen and dakine). He called it "The Courage of Detroit." It’s long–so to induce you to read it, I’m going to give you an almost-spoiler.

Because we may be a few steps behind the rest of the country, but we’re a few steps ahead of it too. And what’s happening to us may happen to you.
 
Do you think if your main industry sails away to foreign countries, if the tax base of your city dries up, you won’t have crumbling houses and men sleeping on church floors too? Do you think if we become a country that makes nothing, that builds nothing, that only services and outsources, that we will hold our place on the economic totem pole? Detroit may be suffering the worst from this semi-Depression, but we sure didn’t invent it. And we can’t stop it from spreading. We can only do what we do. Survive.
 
And yet we’re better at that than most places.

Go read the whole thing. 

(Photo by LHOON) 

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Shelby’s Claims To Be Anti-Bailout Always DID Smell Rather Fishy

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(Graphic by twolf)

When confronted by a bunch of UAW workers who were tired with Richard Shelby’s slander of their work ethic last week, a Shelby staffer explained the Senator’s opposition to the Big 2.5 bridge loan to be a principled opposition to bailouts. Given the Alabama Senator’s tireless efforts to claim that the non-union SUV assembly line workers in his state had a successful business model, whereas Michigan’s unionized SUV assembly line workers had a failed business model, that excuse always smelled pretty fishy to me.

Turns out his claims to be anti-bailout were even fishier than all that. 

Alabama Senator Richard Shelby, one of the infamous politicians of the auto bailout fiasco, recently obtained $160 million for the fishing industry nationwide. A portion of this amount is headed for the Alabama fishing industry for reasons they have no control over. Shelby states on his own website and we quote "This funding will provide much needed assistance to an industry that is a vital part of the Alabama economy". The taxpayers of this nation should be aware this is not a government approved loan to the fishing industry but rather a handout.

Of course, given the handouts that Alabama used to convince foreign SUV manufacturers to his state in the first place, I shouldn’t be surprised that his "principled" stance is no such thing. It’s clearly just a stance that ensures Alabama gets to suck at the federal teat, but no other state gets to. 

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After Tennessee and Alabama Refuse, Canada Agrees to Help US Automakers

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ambassador_bridge.thumbnail.jpgTurns out I mistook which signature Michigan bridge would serve as a symbol for the loan the US automakers will get to hold them over until a saner Administration takes over: that bridge is not the Mackinaw bridge, connecting the two peninsulas of Michigan, but the Ambassador bridge, connecting Detroit to Canada.

The Canadians, you see, are coming to Detroit’s rescue.

 U.S. and Canadian governments say they will ride to the rescue of the beleaguered Detroit auto makers, hoping to head off a catastrophic collapse of Chrysler LLC or General Motors Corp. that would cascade throughout the North American economy.

Ottawa and Ontario will provide an estimated $3.4-billion to the Canadian units of the Detroit Three, while U.S. President George W. Bush will throw a $14-billion (U.S.) lifeline to their parent companies.

[snip]

[Canadian Industry Minister Tony] Clement would not provide a specific figure, but he said the amount of money in the Canadian bailout represents this country’s one-fifth share of the Detroit Three’s North American vehicle production and on Canada maintaining that percentage.

“Clearly, this amount of money is meant to be, as the U.S. is finding out, a way to keep the doors open for the domestic auto sector while they continue their long-term planning,” he said.

The move is not all that surprising. Ontario probably has more Big 2.5 workers than either Indiana or Ohio, and it has assembly plants that are at risk of being closed down, as well as a chunk of suppliers hoping to get paid.

Still, I wonder if it embarrasses Senators Corker and Shelby and McConnell that the Canucks care more about the American auto industry than the plantation caucus does? 

Though I guess it’s not surprising. For all his shortcomings, Prime Minister Stephen Harper probably realizes–as members of the plantation caucus apparently don’t–that it’s a stupid idea for politicians to actively pursue the impoverishment of a country’s workers.

In any case, skdadl, Petrocelli, the rest of you lovely Canucks? Thanks for the help! I’ll have to buy you all a bridge loan beer when we have that meet-up in Toronto, I guess.

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It’s Your Local Car Dealer’s Fault that a Congressional Auto Bill Failed

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The NYT, never an institution to quit when it’s behind, continues its crappy reporting on the auto crisis. In today’s installment, Micheline Maynard uncritically regurgitates GOP spin on why the auto bill failed last night, buying the GOP claim that it’s the UAW’s fault that Congress couldn’t give the auto companies a loan.

Opponents of a Congressional bailout for Detroit auto companies laid blame for its defeat Friday on the United Automobile workers union, which refused to agree to grant wage concessions in 2009 as a condition of the deal.

The entire article continues by totally misrepresenting the reason the UAW refused the GOP "deal."

Representatives for the union, which had already accepted a series of cuts in its current contract, sought instead to push any more concessions back to 2011, when the U.A.W.’s contract with Detroit auto companies expires.

Um, no. As the quotes included in the article make clear, the problem wasn’t starting concessions now. The problem was completing them by an arbitrary date within the next year. 

In a statement Thursday night, the union said it was “prepared to agree that any restructuring plan should ensure that the wages and benefits of workers at the domestic automakers should be competitive with those paid by the foreign transplants. But we also recognized that this would take time to work out and implement” using programs like buyouts and early retirement offers to bring in new workers at lower rates.

“Unfortunately, Senate Republicans insisted that this had to be accomplished by an arbitrary deadline,” the statement said.

[snip]

Mr. Corker said he proposed that wages and benefits of U.A.W. members be competitive with lower rates at American plants run by foreign rivals — Toyota, Honda, Nissan and B.M.W. — during 2009, and offered the union the opportunity to pick the date next year when the changes, which would be certified by the Labor Department, could be put in place.

See?!?! A deadline–and end point, not a beginning point. (And never mind that you could get mired in the question of what "competitive" means for that entire year.)

Maynard’s big problem, though, is in ignoring the underlying point: the UAW was the only stake-holder being asked to accept such a deadline.

Read more →

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Who Killed the Combustion Car?

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I have to admit, it’s pretty gloomy in MI right now. Suppliers are doing quarterly plans–but putting a giant asterisk on the plan saying "If GM fails, we don’t know WTF happens." Ford is trying to anticipate how they can chase down and reclaim the tools from dying suppliers in time to keep their own supply chain alive. And a local environmentally-focused pol and I started plotting yesterday to turn MI into the beacon of new agriculture–not just because we’ve got the foundation to do so, not just because we need to think about what to do when our economy dies completely, but out of spite at the Californians who seem ready to jettison the Midwest and its jobs of late (soon their dying way of irrigation-dependent industrial Ag will be begging MI for a bailout!).

So it’s tough getting back on the automobile beat, when I can just blithely read tea leaves in the Blago mess. That said, readers are rightly kicking me in the ass for avoiding this very important subject. So I’m watching an empty Senate on CSPAN 2 and making a list: a list of all those who, either out of self-interest or because they are salivating to bust the union, have decided to let the American auto industry–and with it, the economy more generally–die. 

That list starts, of course, with the self-interested union-busters: Richard Shelby, Bob Corker, Jeff Sessions. Mitch McConnell has officially jumped onto the union-busting Japanese SUV, though it goes against the interest of a goodly number of his constituents. And Jim DeMint seems anxious to jump to the head of this class, with his call to free car companies from the "barnacles of unionism wrapped around their necks."

Fuck you, Jim DeMint.

But I am taking a perverse kind of solace out of the discovery that the guy who’s on top of all my other shit lists is on top of this one too.

Dick Cheney.

You see, Dick went to Congress to try to get them on board with the idea of saving the auto industry. And that made it worse.

Yesterday, [in spite of Cheney’s similar failure at rallying support for the financial bailout in September] White House nevertheless dispatched Bolten and Cheney to meet with Senate Republicans about the auto bailout plan, where they “heard a barrage of criticism — and offered few satisfying answers.” Read more →

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Hysteria over a $15 Billion Loan, But Not $285 Billion in Takeovers?

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Man, the NYT’s pathetically bad reporting on the auto bridge loan continues.

David Sanger writes a story purporting to be news that presents a loan to the auto industry–with conditions–as a crisis of capitalism of epic proportions.

But what Mr. Obama went on to describe was a long-term bailout that would be conditioned on federal oversight. It could mean that the government would mandate, or at least heavily influence, what kind of cars companies make, what mileage and environmental standards they must meet and what large investments they are permitted to make — to recreate an industry that Mr. Obama said “actually works, that actually functions.”

It all sounds perilously close to a word that no one in Mr. Obama’s camp wants to be caught uttering: nationalization.

Not since Harry Truman seized America’s steel mills in 1952 rather than allow a strike to imperil the conduct of the Korean War has Washington toyed with nationalization, or its functional equivalent, on this kind of scale. Mr. Obama may be thinking what Mr. Truman told his staff: “The president has the power to keep the country from going to hell.” (The Supreme Court thought differently and forced Mr. Truman to relinquish control.)

The fact that there is so little protest in the air now — certainly less than Mr. Truman heard — reflects the desperation of the moment. But it is a strategy fraught with risks.

The first, of course, is the one the president-elect himself highlighted. Government’s record as a corporate manager is miserable, which is why the world has been on a three-decade-long privatization kick, turning national railroads, national airlines and national defense industries into private companies.

The second risk is that if the effort fails, and the American car companies collapse or are auctioned off in pieces to foreign competitors, taxpayers may lose the billions about to be spent.

And the third risk — one barely discussed so far — is that in trying to save the nation’s carmakers, the United States is violating at least the spirit of what it has preached around the world for two decades. The United States has demanded that nations treat American companies on their soil the same way they treat their home-grown industries, a concept called “national treatment.” [my emphasis]

"Not since Truman," Sanger writes, "has Washington toyed with nationalization."

"Not since Truman," that is, so long as you ignore the very recent nationalizations of AIG, Fannie, and Freddie.

Read more →

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