Executive Greed Will Sink Chrysler Financial

Executives at Chrysler Financial are just plain greedy. So just why did we bail them out? It's okay for the taxpayers to pony up money but they won't accept pay cuts. That's the exact reason these government bailouts are a joke. We're putting the taxpayer at risk and those who ran the company into the ground don't want to shoulder any.

But Chrysler Financial's maneuvers aren't so unique. General Motors (GM) finance arm, GMAC, was given a free pass to convert to a bank holding company. So did American Express (AXP). But those conversions were done before the pay cap rules were passed so they didn't need to rein in corporate excess.

And that's just fine. Chrysler Financial was looking for another handout, though. $750 million worth, and their execs didn't want a pay cut. Seems to me they're not so bad off if the bosses don't think they need to reduce their pay to save the company. And if they're not so bad off then they shouldn't get the money. Nor should they have gotten the TARP money to begin with. 

So they've lined up private financing they say and can make do without the government's assistance. That's as it should be. But it also points out just how greedy these people really are and why they should have been allowed to fail if it came to that. Greed will ultimately sink Chrysler Financial.

I have no financial position in any of the companies mentioned in this article.

Separating the Good Debt From the Toxic

Separate the good debt from the toxic.

Why didn't we just realize this before? All it apparently takes to solve our current economic malaise is just to separate the "good" parts of a company from the "bad," the stuff we like from that which we don't. Like a good farmer, all we have to do is separate the wheat from the chaff.

Bank of America (BAC)  looking weak? Separate its "good" assets from the bad "toxic" debt! American Internatonal Group (AIG) invest in risky mortgages? Separate the "good" investments from the "bad."General Motors (GM) on the brink of bankruptcy? Yep! Separate the "good" car companies parts from the "bad!"

This is the thinking that is now in vogue in Washington. President Obama and Treasury Secretary Tim Geithner have decided that all we gotta do is just get rid of the "bad stuff" from our companies and we can return our economy to health. Of course, like waste from a nuclear reactor, no one really wants to talk about what we do with all this toxic stuff. Where are we going to bury it?

Of course we hear that we'll just package it up and sell it off to investors, or whatever doesn't find any takers, we'll "wind it down." Oh, is that all? Gee, why didn't Goldman Sachs (GS), Citigroup (C), or Ford (F), for that matter, think of it? If it's really all so simple as just removing a decade (or more) of bad decisions from the balance sheet -- while still leaving those who made the bad decisions in the first place in their positions -- don't you think the companies would have done that themselves?

We wouldn't have had to bailout out AIG three times or more; Citibank wouldn't have been suckling at the taxpayer's teat, and the President wouldn't have had to fire Rick Wagoner and dirty up his hands. 

This seemingly "simple" solution will do only one thing: saddle taxpayers with even more debt to pay off while exposing us to runaway losses. If private enterprise was unable to find a willing buyer, what makes the government think it will do any better? The only way that can happen is if they remove the risk associated with it and that can only happen if the taxpayer shoulders more of the burden. 

This is just a wildfire ready to burn, but only waiting for the right tinder to set it off. It will be our children and grandchildren who will be stuck sweeping up the ashes and paying the bill.

Disclosure: I have no financial interest in any of the companies listed in this article. 

Republicans to GM: Drop Dead!

Republicans to GM: Drop Dead! It's bankruptcy for you!

Top Republicans, including former presidential candidate Sen. John McCain, say General Motors (GM) should file Chapter 11 sooner rather than later, reorganize its business, and come out ready to sell cars.

"I think the best thing that could probably happen to General Motors, in my view, is they go into Chapter 11, they reorganize, they renegotiate ... the union-management contracts and come out of it a stronger, better, leaner, more competitive automotive industry," McCain told "FOX News Sunday.

House Republican leader John Boehner says they've whistled past the graveyard long enough and giving them any more money -- GM, which lost $31 billion last year, says it needs $30 billion in total to stay afloat -- would amount to "throwing good money after bad."

Although bankruptcy may be a hard decision to make, it probably is the best one. But just like propping up Citibank (C), American International Group (AIG), and all the other financial institutions (not to mention the automakers themselves), having politicians meddle in the decision is the wrong one.

The best retort GM could give as it filed its Chapter 11 paperwork would be to say, "Washington, drop dead!"