Kausfiles: A mostly political weblog.

When GM says 'Here's your money back,' they really mean it!

GM "says it will begin to pay back U.S. loans." But of course it's paying back that debt to taxpayers with money from ... taxpayers. Even the new, nicer Truth About Cars isn't falling for it. GM got $50 billion from the government, after all, mainly for a 60% share in the company. It's planning to pay back $1.2 billion in December--basically a PR attempt, TTAC speculates, to erase its negative consumer image as a bailout baby. The only hope for the taxpayers actually being repaid for their entire $50B investment is an IPO. TTAC pinpoints 2010 as the ideal year, when the innovative Chevy Volt will be conveniently not yet released. "GM’s hail-mary will provide a speculative upside to GM’s value as long as it’s still just around the corner." ...
 
P.S.: Also, these financial results are not GAAP-ready. "North American Operations are still bleeding cash. And, as Henderson has admitted, the fourth quarter results for 2009 are only going to bring worse news." [TTAC again]  ...  P.P.S.: But GM will launch a company-wide sale this week to clear excess U.S. inventory. A sure sign of success! ...  2:58 P.M.

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Amnesty's Last Chance?

New push for "comprehensive" (i.e. including amnesty) immigration reform:

1) Is it good for Obama's health care effort that this comes out now? Doesn't it potentially make 2010 midterm voters more uneasy about Dem overreach? Maybe it placates Hispanic lawmakers who might be upset at the treatment of illegals in the health bill itself--but that's Obama again playing the inside game of keeping Congress' factions happy. His problem is the outside game of keeping the public on board, no? ... Wait, I forgot. Health care reform is a fait accompli. Never mind. ... P.S.: Or maybe Obama has concluded that health care reform gets more unpopular when voters think about it, so he's changing the subject. ...

2) It seems like almost yesterday that the official, liberal pro-legalization position was that the decline in the number of illegals had little to do with increased enforcement. It was all the declining economy. (After all, illegals are here to stay and there's nothing we can do about that, right?  But if enforcement works to produce a big demographic shift ....) Now Obama Homeland Security secretary Janet Napolitano is claiming that we can go ahead with legalization because "better enforcement" has indeed worked to produce a decline in the number of illegals. But wasn't that all due to the economy? I sense a contradiction. ...P.S.: Maybe another factor was the 2007 defeat of comprehensive immigration reform itself. Without the promise of a legalization and eventual U.S. citizenship, crossing the border seemed less worth the risk and sacrifice ...

3) If the economy is even a partial factor, shouldn't we wait until enforcement techniques survive an actual, illegal-attracting economic rebound--and court attacks by the Chamber of Commerce, the Hispanic caucus and civil libertarians--before we proclaim those enforcement techniques enough of a success to withstand an illegal-attracting amnesty? Napolitano's speech never explains why the enhanced enforcement powers she says she needs--"tougher anti smuggling laws," greater penalties for "dishonest businesses" and immigration attorneys, etc.--couldn't be enacted without tacking on an amnesty.  Maybe she has an argument, but she doesn't make it.

4) Are Democrats going ahead with immigration legalization in 2010 because they realize the way things are going they will have no chance in 2011? ...

Update: Mark Krikorian, noting the number of times Napolitano said the onus was on Congress to act, thinks I'm being unsophisticated if I believe the White House actually plans a significant amnesty push in 2010:

But with unemployment over 10 percent, among other reasons, Congress isn't going to do any of this, so the White House is giving itself plausible deniability.

String along La Raza, prepare to blame Congress for failure, and make sure it's all reported in the least-read newspaper of the week. As my colleague Jon Feere writes, "Amnesty is a year away, and always will be." [E.A.]

But in a year, it won't be a year away. Not after the 2010 midterms. ... 10:11 P.M.

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If California's neighbors--Arizona, Nevada and Oregon--are almost in as bad fiscal shape as California (according to this Pew chart) doesn't it suggest that California's problem can't just be high taxes. Nevada and Arizona are relatively low-tax states, no? Yet they're going broke too. Of course they still have public employee unions. ... P.S.: Maybe it's some regional phenomenon. Gee, what problem might these states clustered in the Southwest near the Mexican border have in common? ... I'm thinking! ... Update: David Berger notes that "CA, AZ NV and FL have something else in common - most overbuilt during the housing bubble." ...  [Via John Ellis, who twitters more than I'd realized. Ellis, a Bush relative, is not a 'Don't Worry, Be Happy' kind of guy. He's a "Worry" kind of guy. Which is one reason he's valuable.]

P.P.S.: Like many people, I found William Voegeli's recent City Journal piece on the decline of the high-tax/high-service model of state government extremely clarifying. Nut graf:

Whatever theoretical claims are made for imposing high taxes to provide generous government benefits, the practical reality is that these public goods are, increasingly, neither public nor good: their beneficiaries are mostly the service providers themselves, and their quality is poor.

In short, now we pay high taxes and get lousy services. Worse than Texas! ... But looking at that Pew chart I wonder if this is really the explanation of California's current fiscal trouble--as opposed to a more general explanation of why Californians would be getting a lousy deal from their union-dominated state government even if the state's books were balanced? (You have to think that Jon Corzine in New Jersey was a victim of the same phenomenon.) The fiscal crisis is mainly just a convenient news hook, no? ...  9:40 P.M.

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Man Doesn't Bite Dog! Detroit-bashing Truth About Cars catalogues Chrysler's assets--and discovers they're not nothin'. The biggest one: faster-moving management than the GM lifers Rattner left in place. ... 9:23 P.M.

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The Man Who Didn't Save GM

Detroit Bailout II Nears the "Old News" Stage! 1) My colleague Daniel Gross thinks the GM and Chrysler bailouts weren't designed to actually save GM and Chrysler:

Sure, there was brave talk of reviving these once-proud brands and returning them to their rightful place in the pantheon of American corporations. But from the outset, I've believed that the interventions were simply efforts to delay liquidation rather than to avert it altogether, to provide a breathing space in which managers could find homes for valuable assets (other companies) and find chumps to absorb the losses from bad decisions (that would be the taxpayers). [E.A.]

2) I'm pretty sure Dan Gross is a friend of Steve Rattner. 3) Does Dan Gross know something we haven't been told? 4) If so, has anyone told President Obama, who--in Ryan Lizza's New Yorker piece, anyway--seemed to want the auto bailouts to actually "succeed." ... P.S.: Larry Summers was "comfortable Chrysler would survive," writes Rattner himself in an almost unreadably self-serving account of his bailout experience. "Comfortable"? Chrysler? Hello? Whose elevator goes straight to the garage? ... P.P.S.: For his part, Rattner characteristically hedges his bets, boasting only that his team gave Chrysler and GM a "healthy margin for error." Or, as Dan Gross might translate it, "a few more months." ... 12:15 A.M.

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So You Think You Have Swine Flu? Am I the only one--besides Michael Fumento--who finds reports like NBC's last night on the spread of swine flu ("galloping its way across the country") to be wildly unconvincing? The NBC piece claims "90 dead" last week under the rubric "swine flu cases." [See about 1:10 in] This is almost certainly BS. As this CDC report makes clear, that figure includes both the swine flu and the regular annual flu. Indeed, NBC promiscuously conflates a) swine flu (H1N1); b) regular flu and c) "flu like symptoms" which may not be any kind of flu at all. ... That may be because the CDC itself has decided to conflate at least the first two categories, as noted in this seemingly damning CBS story and confirmed in the CDC report itself:

This new system was implemented on August 30, 2009, and replaces the weekly report of laboratory confirmed 2009 H1N1-related hospitalizations and deaths that began in April 2009. Jurisdictions can now report to CDC either laboratory confirmed or pneumonia and influenza syndromic-based counts of hospitalizations and deaths resulting from all types or subtypes of influenza, not just those from 2009 H1N1 influenza virus. [E.A.]

I think this means the CDC does not really know how many cases are swine flu and how many aren't. (The regular flu kills many thousands of people every year.) ...12:43 A.M.

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Rattner's Legacy: The Chooch Is At the Door

Breitbart's Legacy? Rasmussen's latest poll finds, rather unbelievably, that voters say "government ethics and corruption" is now a more important issue than "the economy." With unemployment at 9.8%! Hello? Is this all James O'Keefe and Andrew Breitbart's doing? I can't think of any big recent corruption-related events other than the ACORN and NEA scandals. ... I doubt it is all liberals concerned about the power of the insurance lobby. ... P.S.: This might explain why, while the MSM still gives the ACORN scandals restrained coverage, the pols are running for the hills. They have pollsters too. ... P.P.S.: Rasmussen's survey, taken 9/26 --9/29, was half pre-Polanski, so that seems an unlikely explanation. ... Update: Ambinder writes as if Rep. Rangel's troubles are a central catalyst, which seems unlikely. Rangel isn't that famous. It's more plausible to blame general resentment over Wall Street sleaze and the bailouts. ... 4:02 P.M.

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The Call of Chooch: GM's sales are down 45% from last September (when sales were already bad enough to drive the company into bankruptcy). Chrysler is down 42%. Ford is only down 5%. Car buyers are clearly punishing the two bailout recipients brutally. Robert Farago of Truth About Cars--who has been right before--predicts that GM and Chrysler will both "go down by the end of next year" without a second, new federal bailout. The only question, he says, is whether the two manufacturers will need the cash before the 2010 midterm elections. He adds:

For those of you who say the Obama’s army never really intended to rescue either automaker, that they were simply subsidizing the companies to facilitate a soft landing, I say bullsh[xx]. Washington’s big swinging dicks, led by private equity money men with a similar anatomical affliction, honestly thought they could “fix” Detroit.

Maybe they could have. But it looks like they didn't. ... Most obviously, they seem to have grossly misperceived consumers' reaction to the equities of the bailout itself.  And that 45% can't be all Republicans. ... 1:53 A.M.

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Shafer couldn't take a full day of the Atlantic's "First Draft" conference. He tried. ... In the wheat vs. chaff contest, it appears to have been Chaff City. ... P.S.: Is it really true that only 220 people were watching the feed of the Petraeus session? Janet Napolitano drew 132? Those are almost Pseudo.com numbers! Don't tell Boeing. ... [Ah but they were the right 132 people--ed. No they weren't. One of them was Shafer.] ... Bloggingheads is CBS in comparison. ... 2:29 A.M.

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At kf It's All-Platform Game-Changers 24/7

Harry Reid or Casey Jones? According to Roll Call, Senate Majority Leader Harry Reid is "sketching a process for railroading the [card check] bill through the floor as quickly as possible."  And maybe not even the vaunted "compromise" card check bill, says Jennifer Rubin--she suggests some union leaders are holding out for allowing labor organizers to avoid secret ballots. ... Obviously this isn't legislation that holds up in public view for long, so the rush approach is strategically sound. But Reid sems like a deeply cynical operator. He apparently likes to engineer train wrecks. (Remember what happened to "comprehensive immigration reform"?) Is he really trying to ram this explosive bill through, or is he trying to demonstrate to labor that it can't be rammed through? ... I note that even Rubin, a congenitally optimistic they-don't-have-the votes card check foe, seems rattled. ... 1:54 P.M.

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Old Comeback: "I'd rather waitress."

New Comeback: "I'd rather have a seat in the European Parliament."

12:55 A.M.

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I'm sure the NYT has already assigned a top reporter to find out what Steve Rattner's old colleagues at Quadrangle think of him. Aren't you? ... 12:45 A.M.

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Postrel 1, Orszag 0: As originally presented, OMB Director Peter Orszag's vaunted "game-changers" were cost-saving changes to the entire health care system. The implication--in Obama's big February Congressional Address (and in Orszag's blog posts) was that you couldn't get the game-changing changes unless you had "comprehensive health care reform," including expansion of coverage to offer "quality affordable health care to every America," According to Obama

 [I]t's a step we must take if we hope to bring down our deficit in the years to come.

Along came Virginia Postrel, who noted in a blog post that if Orszag's changes were so great, why didn't he apply them to Medicare and Medicaid first? Orszag was concerned and conscientious enough to phone Postrel  to defend himself. But now, with Orszag and Obama having wholeheartedly embraced the IMAC plan to cut Medicare expenses in the long run, hasn't Postrel's suggestion won out? IMAC appears to be restricted to recommending changes in Medicare, not the entire health delivery system.

That, of course, is a tacit admission that controlling the federal budget deficit by cutting Medicare and expanding non-Medicare health coverage are two separate policy initiatives--and that Obama was dissembling when he said, in his address, that you had to do both parts at once "to bring our deficit down." It looks like you could have an IMAC panel to cut Medicare costs and shrink the deficit without any of the rest of Obama's "comprehensive" reform, including universal coverage. Or you could have the rest of Obama's reform without the IMAC panel.

The connection between the two appears to be entirely political, and conjectural--the idea that either you need IMAC as a way to get Blue Dog votes for expanded coverage, and that only by offering an extension of coverage can you get the senior lobby (AARP) to go along with Medicare changes. Like so many "comprehensive" reforms, it's not an interlocking web of mutually dependent policy mechanisms so much as an interest-group sandwich.

If all you had to do is appease the Blue Dogs and AARP, the strategy might be sound. The problem is that the IMAC "game changer" scares the daylights out of lots of people, and adds to the ballast of the whole package with the general public. ... 12:41 A.M.

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GM's best cars--the Chevy Malibu, the forthcoming Buick LaCrosse and possibly the next Buick Regal--are all basically Opel designs. Yet GM is selling Opel. I don't get it. ... 12:35 A.M.

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August is for Ankling

Monday, July 27, 2009 

Somebody's hiring. It's only Nick Denton. But a) he's hiring one of the best people away from the hapless doomed flailing retooling LAT, and b) I hear he's paying MSM money, not blogger money. ... Hacks will play this as another sign of the Net's rise at the expense of dying print dailies, and they'll be right. ...  Update: Felix Salmon ... 2:46 P.M.

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Rattner Rehab: What Do You Call A Source Greaser When the Source You're Greasing Has Already Left His Job? Micheline Maynard and Michael de la Merced's latest GM story has an "as told by Steve Rattner" quality to it. Not very informative--unless you read a lot into Rattner subtly distancing himself from the fate of the shiny new GM he was boasting about ("We're not going to fail") only a few weeks ago:

Like Mr. Rattner, [Jalopnik editor Ray] Wert is also concerned that G.M.'s deliberate and nonconfrontational corporate culture could stymie the changes that Mr. Henderson must pursue. [E.A.]

Or maybe the Times is just doing Rattner a favor by distancing him. ... Doesn't Maynard cover Detroit? Does she not have any inside-GM sources who might provide a skeptical take? ... P.S.: The other news tip to take away from the piece is that new GM CEO Fritz Henderson might not be GM CEO long.  The Obama task force didn't want him to begin with:

In truth, the task force had no interest in running G.M. But the only available alternative to Mr. Wagoner was Mr. Henderson, a lifelong G.M. employee, and he did not initially impress some task force members, according to administration officials involved in the discussions.

But they picked him anyway because they decided that after CEO Rick Wagoner's defenestration, G.M.'s employees "could not handle more uncertainty." ... But maybe they'll be able to handle it in a couple of months! ... P.P.S.: The Truth About Cars gives its not-uninformed, cynical view of Henderson's recent management 'shake-up.' ... 3:06 P.M.

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Rattner Got Out Just In Time?

But they got Car of the Year! BA/Merrill Lynch predicts GM will lose 3 more points of market share--down to 15% from 22% last year--largely because there are so few new products** in the pipeline. That means the company is heading for another federal bailout, says The Truth About Cars. ... Rattner got out just in time. (Reason #5) ... 

**--Though GM has demonstrated the ability to introduce new products and still not make up much ground. See the recent history of Saturn. ... 4:52 P.M.

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Obama v. Kurtz: [From Just One Minute] Obama implies that, not only did he never formally nominate CNN's on-camera medic Sanjay Gupta for Surgeon General, but he never offered him the job:

Obama: Could I say, I have great respect for Sanjay Gupta, but I never nominated him.  

The press nominated him. I never — you know, that was not — there were people who had suggested that he might make a good surgeon general.  And I think, in fact, he could have made a good surgeon general. He's a very well-spoken person and a lot of the job of the surgeon general is to get a message out. [E.A.]

It's the press' fault! Is Obama dissembling (so as not to insult his actual nominee, Regina Benjamin) or did CNN's Howie Kurtz get it wrong when he disclosed, on January 6, that:

President-elect Barack Obama has offered the job of surgeon general to Dr. Sanjay Gupta, the neurosurgeon and correspondent for CNN and CBS, according to two sources with knowledge of the situation.

I have no dog in this fight. I trust Marmolite will get to the bottom of it. ... 4:50  P.M.

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Tim Noah has what seems like a very good suggestion regarding the public plan  

[The House bill says the] public health insurance option "shall offer basic, enhanced, and premium plans" and may also offer "premium-plus plans," presumably at escalating levels of cost. This is to make it conform to the private plans also offered within the new, strictly regulated health insurance exchange created under the bill.  ... [snip]

Rather than provide a menu of four public-option plans, I'd prefer to see the government establish a single, reasonably generous public-option plan and leave the gold plating to private insurers. Doing so would allow the government to take a more egalitarian approach and at the same time would turn over to private insurers a decent-sized potential market for nonbasic health care. It wouldn't stop their squawking, but it might reduce it. [E.A.]

Would Medicare offer tiered service? It wouldn't. ... Tiered service also threatens to undermine the social-egalitarian benefits of universal health insurance. Instead of everyone waiting in the same waiting room, there might be a different waiting room for every purse and purpose. ... 4:48 P.M.

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One good thing the Presidental Task Force on Autos did--force some UAW patronage desk workers to actually start building cars again:

Unlike their nonunion rivals, the Detroit Three have paid for a small union bureaucracy at each plant to handle grievances, conduct union elections and support labor-management initiatives. Those people didn't work in the plant.

Now in the leaner post-bankruptcy environment, the UAW is eliminating at least 300 positions across its 23 Chrysler locals, according to several local officials. General Motors expects the initiative will affect less than 1% of its 52,000 U.S. hourly employees, according to Childers Arb.

This would fit with Rattner Departure Reason # 8. .... But note the fine print at the end of the story, disclosing that GM will not eliminate useless patronage positions where they are "required under the local labor contract." Oh. How many of them are there? ... P.S.: So the brother in law of some union official has been sitting behind a desk for 20 years. Now he's on the line, and pissed off about it. Do you want to buy the car that he'll build? ... [via TTAC] 4:46 P.M

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Matt Yglesias on the road not taken in health care reform. ... 4:44 P.M.

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3, 4, 5, 6, 7, 8 Rattner Theories

Phase Out: Why is Steve Rattner resigning from the Obama administration so soon? Remember that when he quit his investment firm to take his auto czarito job he sent out an email declaring he was leaving Wall Street to begin "a new phase of my life, in the public sector." Short phase. Why? Some theories: 1) The pay-to-play scandal is embarrassing. Obama let him do his job through the bankruptcy and then quit gracefully when fewer people would be looking. 2) Also, he needs to spend his efforts making sure the "unlikely" charges against him stay unlikely; Update: "NY AG probe of Rattner ... heats up"--Reuters; 3) He's too much of a press hound for the Obama crew**; 4) He's enough of a press hound to know that if he quits now he can get some suckup stories about how he's "going out on top;") 5) Indeed, the glamour work of the auto task force is done. All that's left to do is watch the bailed out auto companies fail to meet expectations, and quite likely fail period. It's either up or out for an ambitious guy like Rattner. There was no up. So it's out. 6) Ron Bloom always had the power. Rattner was the front man. That wasn't about to change. 7) He shares Sarah Palin's career adviser; 8) Ron Gettelfinger never liked him anyway. Also: Rattner is skeptical of auto unions and it's the union's show now. 9) Pinch needs him. 10) He wants to direct. 11) Obama and Geithner want to dramatize that "day-to-day management of these companies" is back "in the hands of the private sector"--and Rattner was the walking, leaking personification of government intrusion. 12) This extremely unverified but widely viewed undernews, about which I know nothing and which even its source blogger writes might be "inflammatory nonsense"!  ...

P.S.: Full kf Rattner cache here. ...  

P.P.S.: No doubt his old firm, Quadrangle, will welcome him back with open arms! ...

**-- An example of Rattner's facility at self-promotion might be the number of journalists who think Ron Bloom was "his deputy." I don't think that was exactly the case. See this delicately worded press release. ... 2:54 P.M.

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WaPo's Michael Shear follows the Kinsley source-greasing formula with comic fidelity, says Omri Ceren. Not true! Shear is greasing up about 20 staffers at once. A challenging profit environment demands that journalists exploit economies of scale. ...Update: Actually, Kinsley seems to have anticipated that change too:

"Obama has changed the rules," [a character called the source-greaser-in-chief] says. "Everyone he appoints is so wonderful that there aren't enough positive words to describe all of them. My job is to centralize the sucking up and make sure that each subject gets a fair share of the available adjectives."

2:52 P.M.

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kf is Stupid: 4 Health Care Questions

As a health care non-maven, I have four problems with the New Republic's strangely ungalvanizing description of a world without a "public option":  

1) Jacob Hacker and Rahul Rajkumar suggest that, without a public option, a "59-year-old self-employed man with diabetes, or a 48-year-old single mother with breast cancer" won't be able to find private insurance "they can afford." But under the Dem reform plan, even without a public option, wouldn't "[i]nsurance companies ...be required to offer the same coverage to everyone, regardless of medical history"? If so, why won't these 59-year-olds with diabetes be able to find plans they can afford as much as 59-year-olds without diabetes? Is it because private insurers will resort to subtle tricks--e.g. offering free workout rooms, or long steep stairways--to attract only the healthiest customers? Which brings us to ...

2) The existence of a public plan--sustained "completely through enrollee premiums and federal premium assistance"-- is supposed to "keep the private insurers honest" and "control costs." OK. Suppose the public plan uses its purchasing power and lower administrative expenses to cut its prices to 20% below the leading private plans. What will the private plan do? Will it match the public plan by cutting costs--or pursue even more vigorously subterranean strategies to cherrypick the healthiest customers with perks? Or a combination of both? Clearly, faced with pressure on profits, it can respond with "good" behavior or "bad" behavior. But if we could rely on private insurers to have only "good" responses, we wouldn't need health care reform, right?  

3) What of the 59-year-olds with diabetes? Well, they always have the non-cherrypicking public plan! Which they will presumably choose, raising the public plan's costs. So there are two forces at work on the public plan's pricing.

One lowers costs, perhaps--an ability to forego administrative and marketing expenses and an impulse to use purchasing leverage to bid down payments to doctors and hospitals.

One raises costs--the tendency of public plans to attract the sickest patients.

Which of these forces will be greater? I don't know. But Hacker and Rajkumar don't tell me. It's not inconceivable that the public plan will confront a vicious circle of adverse selection, in which it attracts sick patients, driving up costs and premiums, which causes healthy patients to flee, requiring even more premium hikes, etc.--right? Remember that according to Hacker & Rajkumar the public plans will operate on a level playing field with no special subsidies from the government. If they have higher costs how are they going to avoid charging higher prices? And then how are they going to keep the private plans "honest"?  

4) TNR's whole disaster scenario--what will happen if there's no public plan to provide competition--seems beside the point. If the disaster  starts to happen, we can always set up the public plans later, no?

What am I missing? ... P.S.: I'm still for a "public" alternative, just so everyone has the security of knowing there's at least one insurer they can go to who won't try to game them out of coverage in the fine print of a 25 page agreement. I just don't understand how the economics is supposed to work. ... 9:00 P.M.

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Has Steve Rattner gone native? ... 11:59 P.M.

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Steve Rattner Saves Detroit!

Embarrassing suck-up post by Henry Blodget crediting "Barack Obama and Steve Rattner" with more-or-less saving General Motors, which "now plans to be profitable ... at a 10-million-unit US annual rate of sales, versus the 15 million previously" and which "has a new car that some people actually want to buy--the Camaro--which apparently gets 29 miles per gallon with 300 horsepower." ... Blodget's analysis: "Exciting!" ... a) "Barack Obama and Steve Rattner." I wonder how poor Ron Bloom feels. Bloom may have more power on the Obama auto task force than Rattner but he doesn't have the media connections. b) If General Motors doesn't "turnaround," will we be allowed to blame Rattner? ['Even Steve Rattner couldn't save GM'--ed Sigh] c) Rattner shows up and, boom, suddenly GM has "a new car that some people actually want to buy"!  It's amazing Rattner had time to design and produce the new Camaro so quickly with all his other financial and filmmaking activities. d) The 300-hp. Camaro gets 22 mpg overall--not bad, but it's deceptive for Blodget to use the higher "highway" estimate. e) The Camaro, with projected sales of around 100,000, isn't nearly a big enough deal in itself to save GM. And do you really think the Camaro's "halo" is going to get people to buy this? ...

Blodget seems like a journalistic marshmallow. Whatever news outfit helped rehabilitate this once-tarnished figure has a lot to answer for. ... Oh, wait. Never mind. ...

Update: A better-informed take from Robert Farago, who's perhaps too committed to the Bail/FAIL! thesis. Still ... On holdover GM bureaucrats:

If anything, Chapter 11 means they’re even LESS motivated than before. Think of it this way: if GM’s overlords screw the pooch (again), what are the feds going to do? Declare bankruptcy?

On the Presidential task force (PTFOA):

“Hands-off” or not, the 25-member PTFOA adds another level of bureaucracy above the existing GM bureaucracy. If each PTFOA member fires off fifty emails a day, that’s 1,250 more internal comms per day. The PTFOA also has a staff. Meetings. Agendas. Targets. Reports. Memos. The federal quango is a shadow governing body for a company that needs less management, not more.

True story: New GM is inherently worse than old GM. And it’s going to get worse from here.

Plus: But by 2012, GM will be 82% of the way toward saving 29% on engineering costs! Even Automotive News is laughing at them, apparently. ... 12:27 P.M.

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Rattner: 'We're Not Going to Fail ..."

Micheline Maynard on GM: 1) Rattner: "We're not going to fail ." I would say that lets us say he failed if he fails! Specifically, it rules out the "We're giving them a shot but if they collapse in a couple of years at least we delayed it" defense.. .. 2) Rattner's problem has always been his high profiling in the press. Yesterday he was quoted boasting about not failing in the same newspaper in which his (possibly more powerful) auto task force colleague, Ron Bloom, was attempting to strike a lower key note in testimony to Congress.... 3) The government isn't going to run GM--it's a "passive shareholder"--but according to Rattner it is going to change GM's culture. OK!. ...4) So here's how the culture will change, if I read Maynard right: By empowering GM's holdover old guard managers who are steeped in the old culture to make decisions without consulting the holdover old guard CEO, Fritz Henderson. Sounds like a dramatic "wholesale restructuring" to me. . .. 5) This delegation of power to the existing bureaucrats will also be accompanied by "a deeper level of scrutiny" from the board of directors. But no second-guessing, of course. ..  

Meanwhile at FIAT/Chrysler: Sergio Marchionne is speed dating ...  

And I have buried the lede: Robert Farago has an amazing, Washington-Monthlyesque explanation for GM's "crap interiors." I don't quite believe it. But if true, it should be a segment on "60 Minutes" ... 2:39 A.M.

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Jennifer Rubin gives her trademark optimistic analysis (from an anti-Wagner Act union perspective) of the prospects for "card check" compromise. ... The CW is less optimistic, I think. ... 2:07 A.M.

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A Clear Test of Obama's GM Success

If more dollars are requested, then Obama will have betrayed the principle he articulated the day GM filed. He was quoted in The New York Times saying the government would take a hands-off approach to managing GM and divest its stock as soon as possible.

Even pithier, he said his three goals were,  "To get GM back on its feet, take a hands-off approach and get out quickly." [E.A.]

I'll settle for that. If Obama doesn't request more money for GM--even if the Feds never get their $50 billion back-- and GM survives he will have succeeded. If GM needs more to survive, he will have failed, by his own lights. Good to emphasize the marker he's more or less laid down. ... P.S.: Same goes for Chrysler, although Chrysler was always pretty obviously doomed. GM was not. ...

P.P.S.: Here's the LAT on GM's future product plans:

Among the new vehicles the automaker hopes will get the new GM off to a strong start are the redesigned Buick LaCrosse sedan; the SRX crossover and CTS sport wagon from Cadillac; the GMC Terrain and Chevy Equinox crossovers; the Chevy Cruze, GM's new global subcompact; and the reintroduction of the classic Chevy Camaro muscle car.

Do you see any "game changers" in there? I don't. Maybe the LaCrosse will be a solid hit--at least in China! But it's a bit strange-lookin'. And how many veteran Buick owners kept on buying Buicks because they trusted the dealer down the street--who won't be there anymore? The idea that these people will switch dealers and not also switch brands may be one of the rosy assumptions underlying the bailout plan. ....

Update: Robert Farago of The Truth About Cars notes that the projections of GM's financial adviser, the ones that show a profit of $3 billion in 2011, assume "a six million new car sales jump in the next two years." That's not pessimistic! Farago flatly predicts [E.A.]:

 New GM won’t last much more than a year without a fresh federal funding infusion.

It's on. Someone will be wrong. My bet is that it's Obama. ... 3:56 P.M.

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Obama Aides' Mission to WaPo: FAIL!

[U]nion concessions were "painful" only by the peculiar standards of Big Three labor relations: At a time when some American workers are facing stiff pay cuts, UAW workers gave up their customary paid holiday on Easter Monday and their right to overtime pay after less than 40 hours per week. They still get health benefits that are far better than those received by many American families upon whose tax money GM jobs now depend. Ditto for UAW hourly wages, though according to the task force, GM's labor costs are now within "shooting distance" of those at nonunion plants run by Honda, Toyota and other foreign firms. Cumbersome UAW work rules have only been tweaked.  

Whether or not the union has given up a lot less than it would have to give up in a normal bankruptcy in which union contracts can be voided--and it has--the question is whether it has given up enough to make GM a "viable" auto company. I would have thought the administration would, off the record, have already fallen back on the 'if-it-fails-at-least-we-delayed-it' defense. But apparently not--they are sticking to Obama's optimistic public line that the current deal is enough to get GM "back on its feet," even to become "once more a symbol of America's success." 

"The fear at the UAW was that ownership in GM could eventually be worth very little," said a person involved in the talks.

 

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Creepy Latte: Politico's Mike Allen, summarizing the day's news in his "Playbook" for those in a hurry, sees fit to print two long paragraphs of a self-serving letter from Starbucks' president, Howard Schultz, on health issues. Sample:

Over the past year, we expanded our food menu to include a variety of healthier options, including a yogurt parfait, fruit cups, protein plate, Vivanno Smoothies, and Perfect Oatmeal. ... [snip] ... Our commitment over the next 18 months is to increase the scope of our healthy food and beverage choices ....

Riveting stuff. Would Allen have delighted his readers with Schultz's prose if Starbucks wasn't frequently a sponsor of "Playbook"? ... It's a fine ethical line we all have to walk in these hard economic times! But not that fine. ... 3:06 A.M.

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GM: Is $50 Billion the Limit?

Key sentence in the government's GM bankruptcy release (via Ambinder) highlighted: 

The U.S. Treasury is prepared to provide approximately $30.1 billion of debtor in possession financing to support GM through an expedited chapter 11 proceeding and transition the new GM through its restructuring plan. The U.S. Treasury does not anticipate providing any additional assistance to GM beyond this commitment.

Hmm. If $50 billion ($30B plus an earlier $20B) really is the limit of the taxpayer subsidy, fine. Then GM and the still-privileged UAW will have to make some tough choices down the road--and whatever happens the bailout could be justified by the backup, background rationale of  'we delayed the end until the economy could handle it.' But is the Obama Administration really planning to cut off GM's intravenous drip of federal billions, if when the $50 billion doesn't put the company back on its feet? It doesn't look that way, from this quote in the NYT:

“We don’t think that after this next $30 billion, they will need more money,” one administration official said. “But the fact is there are things you don’t know — like when the car market will come back, and how much Toyota and Honda and Volkswagen will benefit from the chaos.”

That  official isn't saying 'We gave them $50 billion. If that's not enough they're on their own. Maybe the UAW will even have to take a wage cut.' The official is saying "We gave them fifty billion but if that's not enough to let them compete with Honda then 'they will need more money.'" In other words, they're not on their own. Indeed, if they want to maximize their subsidy from Uncle Sam, they'd be well advised to need a few more dozen billions within a year or so. ... You'd think that skeptics in Congress, perhaps noticing the surprisingly anti-bailout polls, could succeed in nailing the administration down to a firmer date for cutting off the federal subsidy (which might actually have the pro-GM effect of forcing the UAW to face reality).** ...

P.S.: Toyota has just unveiled a small, mileage-oriented luxurious Lexus hybrid. It seems to be way more than a padded Prius. Gets 34 mpg. Will sell like hotcakes in West L.A.. Elsewhere, might "benefit from the chaos." ... What are the chances that quality-challenged GM will be able to build something in the same league? I'd say that Elon Musk, for all his problems, has as much of a chance of doing it as GM--and Bill Clinton's good friend Belinda Stronach has a better chance than either of them. ...

P.P.S.: The NYT also says that

On Monday, Mr. Obama is expected to argue that any alternative to his plan would be worse, and that a liquidation of G.M. — the only other real option — would send the unemployment rate soaring over 10 percent and would radiate damage throughout the economy. [E.A.]

The unmentioned middle alternative would have been for Obama to actually have driven a hard bargain and forced a significant-but-tolerable reduction in UAW wages, maybe even enough to give GM a small competitive advantage (heaven forbid). WaPo's Steven Pearlstein, a bailout popularizer who seems to have good Obama sources, even predicted this outcome, assuring us back in April that "unionized workers will have to accept immediate reductions in base pay." Didn't happen. Instead, the Treasury sent more money. ... 

**--Two Bad Frames: Note that the way this issue is often framed in the press--'Will the government get back its money?'--actually tilts the argument in favor of continued subsidies. After all, if the government just puts in more money, maybe its investment will finally rise in value! Wouldn't want to lose it all after investing so much! If I were advising Congressional skeptics, I'd say 'Forget the getting the $50B back. Maybe it's gone--just like a lot of the TARP bailout money. So what. Forget about the government's "investment." Focus on turning off the spigot.' ... Similarly, as noted, when critics (and the press) frame the issue as "bondholders vs. the UAW' it minimizes the critics' chances of success. The bondholders are doing as well as they could expect to do--and they are, you know, bondholders. It's everyone else (including but not limited to taxpayers) who's paying the price of the unions' extraordinarily favorable bailout deal. ... 11:32 P.M.

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Rattner's Weapon

Wednesday, May 6, 2009

An eerily appropriate pro-card check scam. Using Twitter. ... 11:33 P.M.

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Why might a red-blooded hedge fund manager be intimidated by a phone call from Obama car capo Steve Rattner threatening public criticism? A Wall Street type emailed to explain why, even if Rattner doesn't control the press-- even if the press would side against Rattner and Obama-- the prospect of any increased press coverage might be terrifying.

[T]he thing that Hedge Funds fear most is investor redemptions.  If there is press about a hedge fund (again, in this environment) that suggests that that Hedge Fund is cross-wise with the Feds, redemptions would start 

Note that threat sort of publicity would be real whether or not the fears of the skittish investors (that the Feds might hurt the hedge fund) are justified, and whether or not the hostility of the Feds is justified. ... 11:31 P.M.

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"[I]t looks like reliability may be a challenge." Consumer Reports checks into FIAT's reliability rating in England. It's better than Chrysler's! Chrysler was 38th out of 38 brands compared. FIAT was ... 35th out of 38. Synergy! .. [via Autoblog via Insta]  11:30 P.M.

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Secret weapon for "card check" Dems? They have leverage with Sen. Specter now--if he plays ball (on health care, but maybe also on "card check") the Dems might give him his seniority back. ... 11:27 P.M.

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Obama's First Debacle?

Sunday, May 3, 2009 

1) NYT's Sanger and Vlasic, with what must be willed credulousness, describe how President Obama's "hard line" on Chrysler gives him and his "team" the "leverage" they will need going into the GM negotiations. Hard line? On Saturday, Micheline Maynard, also of the NYT, described how the United Auto Workers is slated to get a deal of unprecedented sweetness in the Chrysler bankruptcy. Despite all the press releases, the union didn't give up that much, apparently**--the word "lucrative" is even used:

Chrysler’s pension liability will shift from the defunct company to the new one, these people said, and workers will continue to have a lucrative contract.

Despite the concessions, Chrysler’s most senior workers, like those at Ford, still have healthy wages and benefits; bountiful health care coverage, at least until it is adjusted; and subsidies to help bolster unemployment benefits they receive while plants are closed, as they will be at Chrysler for weeks until the sale is final.

That carryover is unusual, [bankruptcy lawyer Mary Jo] Dowd said, since the buyers of assets in bankruptcy cases normally try to purchase them free and clear of their existing liabilities.

It also means the union will not have to come to terms with Fiat once it takes over the company, or risk having its contracts abrogated.

Does the Sunday New York Times read the Saturday New York Times?  

2) Sanger and Vlasic also give us a boastful, macho quote from Rahm Emanuel:

“G.M. is very different than Chrysler,” Rahm Emanuel, Mr. Obama’s chief of staff, said Friday. “But I suppose the one lesson for G.M., and all the other players, is that this is a moment when a Democratic president said, ‘I am really willing to let a company dissolve, and there’s not going to be an open checkbook.’ There’s got to be real viability.”

Huh? How was Obama "willing to let [Chrysler] dissolve"? Seems like the opposite. And "real viability? Has Chrysler really achieved "viability"? This is at best an open question. Here are Chrysler's new sale figures. They're grim. Chrysler sold 1,320 Sebrings this month, for example--compared with almost 7,000 a year ago. The Sebring is is the mid-sized car that's supposed to compete with the Accord and Camry. How about the lower-end Jeep Compass? 712 sold. "These are the stats of a dead car company." Why the poor sales? Maybe this: Of fifteen manufacturers rated for 2009 on reliability and performance by Consumer Reports, Chrysler came in fifteenth. ("No Chrysler, Dodge, or Jeep vehicles are recommended.")  And it's not like Chrysler has lots of appealing new models in the pipeline.

That appears to be the part left out of the Obama administration's self-aggrandizing deal spin: Who is going to buy the New Chrysler's cars? Consumers "in new markets around the world," say Sanger and Vlasic, with a straight face. Is Steve Rattner going to call and bully each and every one of them? At best Chrysler won't have new products to sell for 18 months, when in theory (and only in theory) Americans will be lining up to buy tiny FIATs.

If Chrysler fails in the marketplace again two or three years from now, after billions more in government subisidies, won't that reflect badly on Obama and his "economic team"? WIll it then appear to have been better to let Chrysler go into an actual, non-prearranged, non-jawboned bankruptcy, in which it would likely have been liquidated or in which the UAW would have had to make far more substantial concessions, like workers in other bankruptcies? The government could have assumed some of the U.A.W.s pension and health care liabilities (which it will probably end up doing, in part, in any case). But Chrysler's demise would have been a real cautionary example that gave the administration leverage in the GM negotiations (which may be what the U.A.W. was really scared of). Chrysler's rapid departure would also have opened up market share for GM--and for Ford, which is not wildly healthy itself.

Maybe Steve Rattner has saved Chrysler the way he saved Blender.

P.S.: It's one thing to politicize the reorganization of a prominent failed firm, leaning on private investors and making up new rules--if it works, are voters going to complain? It's another to engineer a slow-motion calamity.

Update: The Truth About Cars reacts somewhat more harshly to the same absurd Emanuel quote and tries to add up the GM and Chrysler subsidies so far ("just north of $37 billion" and "[t]hat doesn't include" ... well, a lot). ... Car and Driver runs down the uninspiring list of potential future FIAT/Chrysler products. The most promising alleged vehicle--the 200C EV--isn't due until 2012. ... 

Backfill: Evan Newmark last week. He notices that "[o]n top of the $4.5 billion committed to Chrysler, the Fiat deal was originally supposed to require another $3 billion, but now the president is putting up $6 billion." ...

Psst: FIAT "doesn't actually have any money." .... 

**-- Here's a WSJ news story on what the UAW seems to have actually given up: 1) Suspended cost-of-living adjustements; 2) Overtime only after 40 hours a week of work.[That wasn't the rule already?] 3) No Easter Monday holiday in 2010 and 2011." Some additional concessions in this AP report: 4) "The union also agreed to consolidate nonskilled labor job classifications into a team concept at all factories." [You mean unskilled workers were separated into different classifications before?] 5). Performance and Christmas bonuses suspended for two years. 6) In what seems like the only major cut, retirees will lose dental and vision benefits, at least temporarily. ... The 2015 contract will also go to binding arbitration if no deal is reached. I don't know if this is a "concession" or a protection. ... Most significantly, there is apparently no reduction in current UAW workers' high basic wage rate of near $30/hour. See also "Hourly Employees Spared Painful Cuts in Chrysler Bankruptcy".  2:53 P.M.

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Fix It Again, Treasury!

Saturday, May 2, 2009 

"Kids don't have a union": What it takes to fire a lousy teacher in the Los Angeles public schools--a chart. ... From the LAT's accompanying story:

Jettisoning a teacher solely because he or she can't teach is rare. ...

When teaching is at issue, years of effort -- and thousands of dollars -- sometimes go into rehabilitating the teacher as students suffer. Over the three years before he was fired, one struggling math teacher in Stockton was observed 13 times by school officials, failed three year-end evaluations, was offered a more desirable assignment and joined mentoring programs as most of his ninth-grade students flunked his courses. ...  [snip]

Meanwhile, said Kendra Wallace, principal of Daniel Webster Middle School on Los Angeles' Westside, an ineffective teacher can instruct 125 to 260 students a year -- up to 1,300 in the five years she says it often takes to remove a tenured employee.

It's worth saying again: If the twittish, PC L.A.Times is now going after the teachers' unions, those unions have lost the PR battle in the mainstream press. Does President Obama ("We can afford nothing but the best when it comes to our children's teachers") know this? Do the Republicans who are desperately looking for an issue to use against the Dems? ... [via NewsAlert] 5:57 P.M.

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The Dish is a revenge best served cold: President Obama's reliance on the excitable Andrew Sullivan has predictably led him into embarrassing error. Even NPR felt it necessary to correct Obama. ... Note to NPR's Robert Siegel: In interviewing the Guardian's Ian Cobain about the London Cage interrogation center, you say

President Obama was quoting Britain's wartime prime minister Winston Churchill. Do we know that Churchill, when he made those remarks, knew very well what was going on in the interrogation centers? [E.A.]

Huh? Do we have any evidence that Churchill ever made those remarks? (Obama's version: "And Churchill said, 'We don't torture,' ..."). As far as I can see, the evidence is Sullivan, which is perilously close to no evidence at all. ... P.S.: Sullivan's characteristically vigorous post-error backpedaling and ass-covering focuses on whether Churchill knew about the torture at Britain's interrogation centers. The claim that Churchill not only didn't know about the torture but actually banned it--or that he said (or even thought) anything like "We don't torture"--has seemingly been left by the wayside. ... 3:38 P.M.

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Friday, May 1, 2009 

We'll know the Chrysler bankruptcy is in trouble when the press starts reporting that Steve Rattner really had nothing to do with it. ... 5:40 P.M

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Faced with the prospect that it might have to balance interests and act responsibly as a new owner of Chrysler, the U.A.W.'s Ron Gettelfinger desperately tries to recreate an adversary system. (The UAW's VEBA health care fund is "independent"! Controlled by "outside ... directors"! We can go on strike against them anytime we want, really we can!)  There's something infantile about this, as if a teenager were given the keys to a new car and said, "I'd rather you kept the keys and I'll throw tantrums when I need it." ... If you were a neoliberal from the 1980s you might say the Wagner Act has given them permission to be singleminded, legalistic, and irresponsible--and that's the only role they know. Luckily there are no neoliberals around anymore to make this annoying point. ... 5:38 P.M.

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Despite its CEO's appearance on David Letterman, electric car startup Tesla is looking a little more granfalloonish today than yesterday. ... 5:37 P.M.

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I was waiting for the first undocumented-immigrant-legalization advocate to declare that the Mexico-centered flu epidemic required the immediate passage of "comprehensive immigration reform." I figured Tamar Jacoby would win. I was wrong. The winner appears to be the Southern California Immigration Coalition, which wants President Obama to simply legalize all illegals by executive order:

To deport all these people to Mexico would create an emergency crisis in their own economy. And that's the crisis we would have in Mexico. Coupled with the drug wars that are going on, the problem that we have with the virus, the flu, it would just create great havoc for Mexico in its economy.

 5:33 P.M.

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Is Obama Whistling?

Thursday, April 30, 2009  

Jennifer Rubin worries that we're headed for a "card check lite" compromise--i.e., dropping the most controversial provisions but still giving labor organizers a boost--and that the vaunted business lobby has no weapons on hand to combat it. She suggests some. ...P.S.: Certainly the post-Specter statement of "principles" from AFL-CIO legislative director Bill Samuel was compromise-ready:   

The Employee Free Choice Act is built on three fundamental principles and we believe a bill that stays true to these will become law: Workers need to have a real choice to form a union and bargain for a better life, free from intimidation; We have to stop the endless delays (and) companies can't just stall to stop workers' choice, and; There have to be real penalties for violating the law," Samuel added.
...

Samuel doesn't mention either a) bypassing secret ballot elections or b) compulsory arbitration. ... P.P.S.: Part of the problem, of course, is that some anti-card-checkers (not me!) have pretended they don't oppose greater union power--they just object to eliminating the secret ballot, etc.. But now it's time for a debate on whether more (and more powerful) Wagner Act unions really are a good thing. If business can't yet make the case that they aren't--at a time when the unionized auto industry has collapsed under the weight of its own rules and the unionized urban public schools are flailing to reverse their contract-protected incompetence-- when can they make it? .... 5:14 P.M.

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You are my Journolist! Question of the Day: Is the UAW contract (aside from the already-approved concessions) protected in bankruptcy? Reading today's NYT, it looks like the answer is "no"--meaning Obama is maybe whistling past the graveyard in downplaying the significance of Chapter 11  and suggesting the bankruptcy will necessarily be “quick, official and controlled." From Micheline Maynard's trot:

Contracts covering members of the United Automobile Workers union and other unions will remain in force, until the company asks a judge to void them. U.A.W. members approved changes to their contract on Wednesday that presumably would mean the contract would stay in place.

But if the company asked for contracts to be terminated and replaced with terms it can more readily afford, the union would have a chance to respond in court. Negotiations would take place before any cuts were imposed. This process could take months. [E.A.]

An "administration official" says that "no judge is going to override" the contract, given all the concessions the UAW has made. Really? Concessions that don't involve a decrease in a very high base wage? ... But you tell me. ... Update: IBD suggests the administration's confidence masks at least some nervousness. ... Complication: Once the UAW owns 55% of the company, why would it let the company ask for the contracts to be voided? ... But UAW's president says he doesn't intend to hold that stake for very long. Once he sells ... More useful bankruptcy speculation here. ... In the end, if this whole thing is going to fly, doesn't somebody have to buy Chrysler's cars? Who is that going to be. ...  5:08 P.M.

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I can plug too: So how come Rush gets all the money? ... 5:06 P.M.

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kf hears: Bon Appetit and Gourmet are the next Conde Nast mags slated to die. ... Steve Rattner isn't nearly as key a player in the auto bailout as his media profile would suggest. Ron Bloom is doing the job lots of people think Rattner is doing. That might meant that Rattner--mired in a "pay to play" controversy--will be expendable when the dust settles.  ... 5:05 P.M.

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Scariest thing I've heard about Obama: He reads Andrew Sullivan's blog. ... The Churchill/torture anecdote Obama told last night (from "an article I was reading") apparently came from Sullivan. Not surprisingly, the "facts had altered slightly" by the time they'd made their way through Andrew to Obama. ... Sometimes it's best to stay in the bubble!** ... Update: Relying on Sullivan, Obama left out the London Cage. ("Beatings, sleep deprivation and starvation used on SS and Gestapo men," reported The Guardian in 2005.) Michael Tomasky says "[T]he White House may have to walk that one back a bit ..." [Tks to reader M.] ...

**--Earlier version of this item said "cocoon," not "bubble." But Sullivan arguably is in Obama's cocoon on the issue of torture, no? Not sure about the issue of genital warts! ... Update: "Isn’t that kind of like Zac Efron reading Tiger Beat?" ...  5:04 P.M.

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Rattner: Master Investor or Master Spinner?

From the New York Times' non-probing April 5 story on Steven Rattner's ascension to auto czarito:

[I]n 2000, after a power struggle at Lazard, Mr. Rattner co-founded an investment firm, Quadrangle Capital, specializing in private equity investing focused on communications media. ... Quadrangle's funds have performed well, on average ... [snip]

One thing that is clear: Mr. Rattner knows how to make money. Not only has he stockpiled a personal fortune, but Quadrangle’s two private equity funds have performed well, despite some soured investments.

The first Quadrangle fund returned 15 to 20 percent, according to one investor. The second, which has yet to use all its capital to complete its investment portfolio, is already showing single-digit gains. ... [Emphasis added.]

Not so fast says author William D. Cohan, who claims to be an investor in Quadrangle's first fund. Writing in Fortune, Cohan notes that while the Wall Street Journal reported that the fund "fund delivered 'net annualized returns of 10.7%' to investors as of the end of 2008" (while the NYT had its "15 to 20 percent" gain) "It is very hard for Quadrangle's investors to see where the 10.7% IRR number comes from because it is based upon in part Quadrangle's subjective valuation of unrealized gains."

The key to understanding how the firm calculated the 10.7% IRR for the first fund rests with its fully audited valuation of the firm's unrealized investments. Some of these investments - such as those in NTELOS, Cinemark, a movie theatre operator, and Protection One, a home security-alarm company - are in the equity of publicly traded companies. Together these three companies alone represent 59% of the first fund's unrealized value as of December 31. The problem for investors in that fund - and the IRR calculation - is that in the first quarter of 2009, NTELOS' stock has fallen 32%, Protection One's stock has fallen 35% while Cinemark's stock has increased around 27%. The rest of the unrealized investments are in private companies that are valued through a series of generally accepted but purely subjective methodologies.

For instance, Quadrangle valued its equity investment in ONO, the Spanish media company, at $49.8 million as of the end of 2008, even though the senior debt of ONO trades at around 25 cents on the dollar, implying that investors don't think that loan will be repaid. To value the ONO equity then at anything above zero is a bit of an investment-banking dream. If the unrealized investments in Quadrangle's first fund are excluded from the IRR calculation - implying a valuation of zero for them - then the fund has returned to its investors (including me) on an annualized basis very little indeed: $1.294 billion of gross returns - before fees, expenses and carry, on invested capital of $1.079 billion. The fees and carry alone reduce that $215 million to close to nothing. Meanwhile, Quadrangle's partners and employees have taken out from the first fund alone $94 million in management fees and millions more in carried interest. Quadrangle declined to comment for this article. [Emphasis added]

Maybe a return of zero is an achievement in the market of 2008. And I still think Rattner may be just the man to help wring enough concessions from the UAW to prevent General Motors from requiring a permanent Treasury transfusion. But the gap between the legend and the reality seems to be growing.  ... 1:25 A.M.

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Who's Chooching Whom

Partly because half of what used to be Mexico now lies north of the border, Mexicans underestimate the ability of the United States to bumble.

You can say that Martinez shows no desire to restore Mexico's historic claim, and you'd be right (though he seems slightly annoyed). You can say there's no significant popular movement in that direction, and you'd be right. What you can't say is that the relationship of Mexico and Mexican immigrants to the Unites States is the same as the relationship of, say, Italians and Italian immigrants to the United States, or Koreans and Korean immigrants., etc.. When Italians came here they weren't coming into land that used to be "half of" Italy. ... 2:55 A.M.

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"Mr. Rattner, It's Time to Go" "New York's $122 Billion Quagmire" Shockingly, the New York Times editorial board fails to call for auto czarito Steven Rattner's resignation in light of his involvement in the "widening" pension "pay for play" scandal. After all, the problem is so much larger than one man!

Mr. Rattner showed some bad judgment in the "Chooch" deal, and the public has a right to expect more of him in his new, highly sensitive position.

But in the end, Mr. Rattner played a minute role in the Albany mess.

Also the Albuquerque mess!  And New York City mess! ... Shouldn't the Times ed board have disclosed that Rattner is one of Times Publisher Arthur Sulzberger, Jr.'s best friends? ... 2:39 A.M.

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The Awl Debuts: First day verdict: Too much Gawk, not enough Balk! But it's getting better already. ... P.S.: The site's co-founder Choire Sicha, who says "we just don't really want any stupid people reading it," once wrote a crap defense of the LAT's attempt to stop its bloggers from commenting on the developing John Edwards scandal. It would be petty of me to remember something like that. ... 2:37 A.M.

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