Bankruptcy Leads Possible Plans for GM, Chrysler

"would use bankruptcy filings to purge the ailing companies of their biggest problems"

 

The GOP HAS BEEN SAYING THIS SINCE OCTOBER
 

Bankruptcy Leads Possible Plans for GM, Chrysler

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By JEFFREY MCCRACKEN, MONICA LANGLEY and JOHN D. STOLL

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President Obama, who announced the plans Monday with Treasury Secretary Geithner, said the U.S. would not let the auto industry "simply vanish."

WASHINGTON -- The Obama's administration's leading plan to fix General Motors Corp. and Chrysler LLC would use bankruptcy filings to purge the ailing companies of their biggest problems, including bondholder debt and retiree health-care costs, according to people familiar with the matter.

The move would in essence split both companies into their "good" and "bad" components. The government would like to see the "good" GM to be a standalone company, according to an administration official. The "good" Chrysler would be sold to Fiat SpA, assuming that deal is completed, this person said.

GM and Chrysler have had bankruptcy attorneys devising plans for such a move in recent months.

President Barack Obama's task force has told both companies that the administration prefers this route as a way to reorganize the two auto makers, rather than the prolonged out-of-court process that has thus far frustrated administration officials.

GM looks increasingly like it will be forced into filing for bankruptcy protection, sometime in mid-to-late May, in a plan where the automaker breaks into two companies, the surviving entity a "new GM" that maintains key brands such as Chevy and Cadillac and some international units, say several people familiar with the situation.

Stakes in this new GM could be given to creditors and UAW members. It is also possible the new company could be sold whole or in parts to investors.

The auto makers could avoid bankruptcy in the next two months. And there is some brinksmanship still going on in GM's high-level talks with bondholders, union members and creditors.

Detroit in Crisis

• U.S. Forces Out GM CEO Wagoner
• Wagoner Finally Hits a Dead End
• Michigan Gov.: Wagoner a 'Sacrificial Lamb'
• Veteran Fritz Henderson Takes Reins
• Deal Journal: Meet Fritz Henderson
• Wash Wire: Obama Sees Leadership Failure
• U.S. Sees Fiat as Chrysler's Best Hope
• Task Force Says GM Can Bounce Back
• U.S. to Guarantee GM, Chrysler Warranties
• Detroit in Crisis: News, analysis and more

Discuss

• Vote: Is Obama's action appropriate?
  Yes    |    No
• Discuss: Should Wagoner have resigned?

Statements and Documents

• U.S.'s Viability Memos: GM | Chrysler
• U.S. fact Sheet: 'New Path to Viability'
• Warranty Commitment Program
• Obama's remarks Monday on auto-industry restructuring
• GM CEO Wagoner's statement on his resignation
• GM's Fritz Henderson's statement on challenges ahead
• Nardelli's remarks on state of proposed Chrysler-Fiat alliance

A key ingredient is getting the UAW to agree to an entirely new labor contract, including major reductions in health-care benefits, according to several people involved in the matter. "That's the No.1 wildcard here," one of these people said Monday.

Under this plan, the "good" GM would not be expected to hold the tens of billions of dollars in retiree and health care obligations that hurt the auto maker in recent decades. Instead, those obligations would be transferred to an "old GM," made up of less-desirable brands like Hummer and Saturn, and underperforming plants and other assets. This part of GM would likely sit in bankruptcy much longer while a buyer is sought for the parts or it is wound down. Proceeds from the sale of old GM would go to pay claims to various creditors, including GM retirees.

"That is the plan, to the extent it comports with the bankruptcy laws," said one person familiar with the matter.

Some of the New GM-Old GM is laid out in the GM viability plan the company sent to the federal government last month. In it, GM estimates that it would shrink from 22% of the U.S. market to about 19%.

At Chrysler, bankruptcy would be used to force new labor contracts and rework debt deals with secured creditors. People working on Chrysler's behalf say the deal is risky, because the company is still not convinced that it could survive even a short-term bankruptcy. It could be done in order to meet the Obama administration's demand that Chrysler's creditors agree to huge reductions in their expected recoveries on Chrysler debt.

Also Monday, new GM Chief Executive Frederick "Fritz" Henderson told employees and dealers that the company will end up in bankruptcy court if it does not significantly accelerate its restructuring efforts in the next 60 days, according to a dealer who watched a broadcast of a meeting with Mr. Henderson.

Mr. Henderson said "we'll be in bankruptcy" if the company cannot meet the U.S. government's demands for faster progress on its turnaround plan, this dealer said.

Mr. Henderson told employees that the Obama administration was disappointed with the company's viability plan, feeling it didn't move fast enough or cut deeply enough into the company's debt.  GM was told it didn't leave enough money in the company's pockets to get it through a full business cycle, either, according to the dealer.

GM was also told in no uncertain terms that it must learn to make money on smaller cars–not just trucks and sport-utility vehicles, the dealer said.

Warning that they can't depend on unending taxpayer dollars, President Obama on Monday gave GM and Chrysler a brief window to craft plans that would justify fresh government loans.

"We cannot, we must not, and we will not let our auto industry simply vanish," President Obama said at the White House.

"What we are asking is difficult," he said. "It will require hard choices by companies. It will require unions and workers who have already made painful concessions to make even more. It will require creditors to recognize that they cannot hold out for the prospect of endless government bailouts."

The remarks came a day after the administration ousted GM Chief Executive Rick Wagoner and rejected the restructuring plans that GM and Chrysler had hoped would lead to another infusion of government cash. Instead, the White House is giving GM 60 days to come up with a strategy for viability. Chrysler has a month to wrap up a partnership with Italy's Fiat.

Under the revised terms of a proposed alliance between Chrysler and Fiat, the Italian company would take an initial 20% stake in the U.S. auto maker, down from a 35% stake under its January pact, a person familiar with the transaction said Monday.

Fiat has been in negotiations with the Obama administration's task force, and the government said on Monday that Fiat is viewed as the only route to survival for Chrysler.

"We believe we will arrive at a result that will establish a credible future for this crucial industrial sector," Fiat Chief Executive Officer Sergio Marchionne said in a statement.

More Video

• Obama Gives Auto Makers an Ultimatum

GM on Monday said it will address "the tough issues to improve the long-term viability of the company," including the restructuring of its financial obligations, as it responded to Washington's calls for stronger plans to stay afloat.

The administration says a "surgical" structured bankruptcy may be the only way forward for GM and Chrysler, and President Obama held out that prospect Monday.

"I know that when people even hear the word 'bankruptcy,' it can be a bit unsettling, so let me explain what I mean," he said. "What I am talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so they can get back on their feet and onto a path to success; a tool that we can use, even as workers are staying on the job building cars that are being sold."

GM said it prefers to complete its restructuring out of court, saying it would complete a more accelerated and aggressive restructuring to put the company on sound long-term financial footing.

"We have significant challenges ahead of us, and a very tight timeline," said new GM CEO, Mr. Henderson. "I am confident that the GM team will succeed and that a stronger, healthier GM will play an important role in revitalizing America's economy and re-establishing its technology leadership and energy independence."

The auto makers, hobbled by the economic downturn and years of reliance on sport-utility vehicles, will receive an unspecified amount of working capital from the government while they hone their new plans.

Without a Fiat deal, the administration said Chrysler won't receive any more taxpayer dollars. The administration expressed confidence GM can survive with more drastic action.

GM and Chrysler received a total of $17.4 billion in government loans in December and have requested roughly another $22 billion to keep them going through this year. President Obama's auto task force combed through the firms' restructuring plans to judge if they merit the additional funds. The verdict released Sunday is that in their current form, the plans don't justify any new taxpayer resources.

If Fiat and Chrysler reach a definitive alliance agreement, the government would consider investing as much as $6 billion more in Chrysler.

Despite the grim view of Chrysler, the administration's task force said it had no intention of replacing CEO Robert Nardelli. Unlike Mr. Wagoner, who had been at the helm of GM since 2000, Mr. Nardelli is considered an auto-industry outsider who has only been in charge at Chrysler since the company was acquired by Cerberus Capital Management LP in 2007.

In addition to pushing out Mr. Wagoner, the task force said GM is in the process of replacing the majority of its directors. Kent Kresa, a longtime director, will serve as interim chairman. Mr. Wagoner will be replaced as CEO by Mr. Henderson, who has been serving as chief operating officer.

Administration officials on Sunday made it clear that an expedited and heavily supervised bankruptcy reorganization was still very much a possibility for both companies. One official, speaking of GM, compared such a proceeding with a "quick rinse" that could rid the company of much of its debt and contractual obligations.

The clearest losers appear to be the thousands of bondholders and lenders to both GM and Chrysler. In both cases, administration officials said that the companies were burdened by inordinate amounts of debt that would have to be scrubbed. Chrysler's survival, the administration said, would require "extinguishing the vast majority" of the company's secured debt and all of its unsecured debt and equity.

To assure consumers reluctant to buy GM or Chrysler cars, the government plans to take the unusual step of guaranteeing all warrantees on new cars from either company. These guarantees would lapse back to the companies once they return to health.

Mr. Wagoner had managed GM through some of its most difficult moments. The company hasn't logged a profit since 2004, reporting losses since then of $82 billion. It nearly ran out of money at the end of 2008 before the Treasury Department provided emergency loans. GM's stock was trading above $70 when Mr. Wagoner took over as CEO in June of 2000. The shares closed last week at $3.62, placing the company's market capitalization at $2.21 billion. In Monday trading on the New York Stock Exchange, GM shares were down 76 cents, or 21%, to $2.86.

Crisis in Motown

The Rise and Fall of American Icon General Motors

Corbis

1998: Rick Wagoner, shown here in Detroit, was then president and chief operating officer at General Motors. He would manage the company through some of its most difficult moments.

Oct. 5, 1998: G. Richard Wagoner Jr. becomes president of GM.

June 1, 2000: Wagoner adds chief executive to his title.

Associated Press

2000: Wagoner, just picked as next chief, with GM Vice Chairman Harry Pearce, left, and Chairman Jack Smith.

Sept. 19, 2001: GM unveils 0% financing on new cars and trucks after the Sept. 11 terrorist attacks to "Keep America Rolling."

Oct. 28: GM agrees to sell its Hughes Electronics satellite unit to EchoStar Communications, ending GM's two-decade foray into nonautomotive businesses.

May 1, 2003: Wagoner becomes chairman of the GM board of directors

April 4, 2005: Wagoner takes control of GM's unprofitable North America auto unit

April 14: Wagoner tells The Wall Street Journal that the "one specific issue that has reached crisis proportions…(is) the health-care cost issue. It's clearly outrunning our ability to hold it off with other cost cuts."

Oct. 3: GM reports a sales drop of 24% in September 2005, compared with the same month a year ago, as sales of Detroit's trucks stall amid spiking gas prices and a consumer shift away from SUVs.

Oct. 17: GM reports a net loss of $1.63 billion. Even after a partial overhaul of retiree health-care benefits through union concessions, GM still faces a $51 billion obligation to union members.

Getty Images

2007: Wagoner, left, and UAW President Ron Gettelfinger, at the opening of contract negotiations.

Sept. 26, 2007: GM and the United Auto Workers union agree to a new four-year contract, ending a two-day nationwide strike and creating a new trust fund for retiree health care.

Getty Images

2008: Gasoline prices topped $4 a gallon, as displayed at a Chevron station in Mill Valley, Calif.

Week of June 9, 2008: Average price of gas in U.S. crests above $4; U.S. consumers abandon SUVs and pickup trucks in droves.

Aug. 1: GM reports a $15.5 billion net loss for the second quarter of the year, the third-biggest in GM's history, as analysts question whether Wagoner can keep his job.

Nov. 7: GM warns that without federal assistance, it might not have enough cash to operate its business past the middle of 2009.

Associated Press

2008: GM CEO Rick Wagoner, Chrysler CEO Robert Nardelli and Ford CEO Alan Mulally testify before a Senate panel on Nov. 18.

Nov. 18: The chief executives of Detroit's Big Three auto makers, including Wagoner, appeal for U.S. taxpayers to help their industry.

Dec. 2: Auto makers return to Congress, this time with turnaround plans in hand. GM says it needs $4 billion to stay afloat until the end of the year. In total, the company says it needs $18 billion in loans -- $6 billion more than it said it would need just two weeks before.

Dec. 7: Wagoner comes under increasing pressure from outside the company to resign as part of any broad bailout.

Dec. 11: Effort in Senate to aid auto makers collapses amid partisan disputes.

Dec. 19: White House agrees to $17.4 billion in bailout loans.

Dec. 31: GM receives first $4 billion in loans.

Feb. 26, 2009: GM announces a $9.6 billion loss in the fourth quarter of 2008, bringing its loss for the year to $30.9 billion and raising new concern about its viability.

March 27: U.S. asks Wagoner to resign as part of an agreement to receive new package of federal aid.

Mr. Wagoner's tenure came amid challenges that weren't entirely of his own making--including costly retiree benefits and union contracts that predate him, and the recent deep recession. Yet GM by most measures performed worse than other auto companies. Among the key decisions that hurt the company: a huge bet on trucks and SUVs that piled up on dealers' lots unsold as high gasoline prices drove Americans to look for more fuel economy offered by rival companies.

Mr. Wagoner was asked to step down on Friday by Steven Rattner, the investment banker picked last month by the administration to lead the Treasury Department's auto-industry task force. Mr. Rattner broke the news to Mr. Wagoner in person at his office at the Treasury, according to an administration official. Afterward, Mr. Rattner met one-on-one with Mr. Henderson, who will fill in as GM's CEO.

"On Friday I was in Washington for a meeting with administration officials," Mr. Wagoner said in a statement released by GM. "In the course of that meeting, they requested that I 'step aside' as CEO of GM, and so I have."

GM spokesman Steve Harris declined to comment.

In a statement released by GM Sunday night, Mr. Kresa said: "The Board has recognized for some time that the Company's restructuring will likely cause a significant change in the stockholders of the Company and create the need for new directors with additional skills and experience."

Mr. Wagoner's removal shows that the sacrifices could cut deep. The departure of the company's top executive promises to further shake up a company that has already been through considerable change over the past six months. The 56-year-old executive had been scrambling to craft a strategy aimed at maintaining leadership in the global sales chase with Toyota Motor Corp. and making big profits in emerging markets.

But Mr. Wagoner's plans came crashing down in the second half of 2008 as the company ran short of cash and was forced to ask the government for billions of dollars in aid. At the same time, his executive team started dismantling several parts of the company, including a plan to shed several brands, slow the pace of new-product introductions and sell stakes in international operations.

Industry's Outlook

The president's auto task force has spent more than a month digging into the restructuring plans that GM and Chrysler submitted last month. The team has struggled to make two determinations: when will the steep plunge in car sales end and what will the market look like once it revives.

GM has based its revival plans on the U.S. market rebounding to sales of 14.3 million vehicles a year in 2011, up from a rate of about nine million vehicles so far this year. Many analysts now consider GM's short-term forecasts to be overly optimistic.

Of the $21.6 billion in additional funding that the auto makers have requested, GM is seeking $16.6 billion more, while Chrysler has asked for $5 billion more.

Among challenges the administration faced leading up to this weekend's decision, foremost were the efforts to draw steep concessions from the United Auto Workers union and from the bondholders.

Attempts to solidify deals with the UAW and bondholders were slowed by disagreements by both parties over how exactly the other party needed to budge. The UAW, for instance, insists it already made health-care concessions in 2005 and 2007, and argues that the bondholders have never been asked to concede anything.

"I don't see how the UAW will do anything until they see what the bondholders will give up," one person involved in the negotiations on behalf of the UAW said Sunday.

Bondholder Factor

The bondholders have said that they are willing to make concessions, but they have wanted to see the union make further cuts. The fact GM raised most of the unsecured debt to fund union health-care and pension costs is also seen as a reason why the union needs to take bigger steps.

With Mr. Obama potentially holding off on new loans until concessions are made, analysts said GM likely has enough cash on hand to weather at least another month before its need for more government aid becomes urgent. Chrysler may need another infusion of cash sooner. Ford Motor Co. hasn't sought federal assistance.

Both GM and Chrysler are negotiating with the UAW to accept a range of cost-cutting measures, including greatly reduced work forces, lower wages and a revamped health-care fund for retirees.

The U.S. auto industry has been reeling from a plunge in car sales over the last six months. Sales in February were down about 40% over the same month last year. The drop has sent shock waves through the hundreds of smaller parts companies that supply the big auto makers. To keep the sector afloat, the administration recently announced a $5 billion financing facility to help suppliers cover their expenses.

The original December loans were given under the agreement that all sides would strike a compromise deal by March 31, but the administration is taking advantage of a clause allowing all sides another month to negotiate. "It was unrealistic to renegotiate a new labor agreement and the unsecured debt in so short a time," said Sean McAlinden, chief economist with the Center for Automotive Research, in Ann Arbor, Mich. "That has never happened before."

GM and Chrysler are meant to submit by Tuesday assessments of where their restructuring efforts are heading. In February, both companies put forward plans for paring their operations, reducing their work forces and eliminating vehicle models.

GM and representatives for its bondholders remained in talks over the weekend about a deal that would force these investors to turn in at least two-thirds of the value of the debt they hold in exchange for equity and new debt.

This arrangement would force GM to issue significantly more stock than what is currently being traded in the market. In addition, the government is being asked to guarantee the new debt with federal default insurance in order to entice bondholders who otherwise wouldn't be interested in participating in the swap.

If GM can't eventually forge a deal with the ad hoc committee representing the bondholders, the company may be forced to issue a debt-for-equity swap without the blessing of some of its biggest and most influential unsecured investors. This would heighten the possibility of the company eventually needing to file for Chapter 11 bankruptcy protection.

The group representing GM bondholders was reviewing the White House documents and plans to make a formal response later Monday, according to a person familiar with the situation.

—Neil King Jr. and Henry Pulizzi contributed to this article.

Makes me want to vomit up breakfast
 

Obama team drops "war on terror" rhetoric

Mon Mar 30, 2009 7:46pm EDT

 

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THE HAGUE (Reuters) - U.S. Secretary of State Hillary Clinton said on Monday the Obama administration had dropped "war on terror" from its lexicon, rhetoric former President George W. Bush used to justify many of his actions.

"The (Obama) administration has stopped using the phrase and I think that speaks for itself. Obviously," Clinton told reporters traveling with her to The Hague for a conference on Afghanistan, which Bush called part of his "global war on terror."

The term "war on terror" was coined after the September 11, 2001 attacks against the United States, which were planned in Afghanistan by the militant group al Qaeda.

The phrase was strongly criticized by human rights groups who said it was used to justify many actions, such as the opening of the Guantanamo Bay prison for detainees held without trial at the U.S. Naval base in Cuba.

Internationally, the phrase was seen by critics as a "with-us-or-against-us" philosophy, overly dependent on military force and what many Muslims decried as an attack on Islam.

Since taking office on January 20, Obama has moved swiftly to reverse some of Bush's practices, ordering the closure of Guantanamo within a year and an end to harsh interrogation of terrorism suspects.

"I have not heard it used. I have not gotten any directive about using it or not using it. It is just not being used," said Clinton when asked whether the term had been officially dropped by the Obama administration.

Clinton has said one of her main roles as top U.S. diplomat is to improve the U.S. image abroad, particularly after the U.S. invasion of Iraq in 2003.

She has embarked on aggressive public diplomacy during her visits to Europe, the Middle East and Asia, seeking to reach out to ordinary people.

(Editing by Jon Boyle)

(Reporting by Sue Pleming; 1-202 422 1008)

 

UAW ENDORSED COMRAD OBL THEY KNOW STATE Workers say Obama treated autos worse than Wall St

Workers say Obama treated autos worse than Wall St

Workers say Obama treated autos worse than Wall St

Autoworkers say Obama's 'tough love' more tough than love, they get worse treatment than banks

• Jeff Karoub, AP Business Writer
• Monday March 30, 2009, 8:17 pm EDT

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• American International Group, Inc.
• , Delphi Corp.
• , General Motors Corporation

DETROIT (AP) -- Many assembly line autoworkers reacted with skepticism and anger Monday to the Obama administration's tough tactics, which stoked long-simmering feelings that the people who put the country on wheels get treated differently than the wizards of Wall Street.

Related Quotes

Symbol	Price	Change
AIG	0.95	0.00
DPHIQ.PK	0.0580	0.0000
GM	2.70	0.00

{"s" : "aig,dphiq.pk,gm","k" : "c10,l10,p20,t10","o" : "","j" : ""}

"It's the age-old Wall Street vs. Main Street smackdown again," said Brian Fredline, president of UAW Local 602 at a plant near Lansing. "You have all kinds of funding available to banks that are apparently too big to fail, but they're also too big to be responsible."

"But when it comes to auto manufacturing and middle-class jobs and people that don't matter on Wall Street, there are certainly different standards that we have to meet -- higher standards -- than the financials. That is a double standard that exists and it's unfair," Fredline said.

Many workers -- not generally known for their affection toward executives -- even sympathized with Rick Wagoner, who was forced to step down as chief executive of General Motors Corp. He was by turns called a "sacrificial lamb," "scapegoat" and "fall guy."

"We knew someone was going to have to take the proverbial `bullet,' and it would have made it a lot easier to accept that had the CEOs of the banks also been required to give up their jobs," said Jim Graham, president of a union local in Lordstown, Ohio, where GM produces the Cobalt and Pontiac G5 fuel-efficient cars.

While CEO oustings haven't been widespread among the banking industry, the government did in September reserve the right to remove senior management at American International Group Inc. as part of its agreement to give the insurer $85 billion in emergency aid. AIG Chief Executive Robert Willumstad stepped down as part of that company's bailout package, and the government hand-picked his successor.

Also, banks don't have the union and legacy costs that the automakers do, which make their products more costly versus foreign rivals.

President Barack Obama said he was "absolutely committed" to the survival of a domestic auto industry that can compete internationally. He raised the possibility of controlled bankruptcy for one or both of the troubled automakers.

Obama said the administration will offer GM "adequate working capital" during the next 60 days to produce an acceptable reorganization plan. The government gave Chrysler LLC 30 days to overcome hurdles to a merger with Fiat SpA, the Italian automaker.

Many workers say the government hasn't dictated such terms to insurance giant AIG or the banks in which it's taken an ownership stake. Obama's actions come amid public outrage over bonuses paid to business leaders and AIG executives.

"To see the very people that drove this economy into the ground be rewarded through bonuses while receiving tax dollars is just galling," said Dan Maloney, a machine repairman at auto supplier Delphi Corp.'s plant in Rochester, N.Y., and a union local president. "In light of that, the administration is taking it out, I believe, on the automotive sector."

Michigan Gov. Jennifer Granholm called Obama's moves "a bit of tough love," yet recognized a disconnect between the financial and auto industries.

"Yes, I do think that there has been a different look at those who manufacture than those who make money by flipping paper and I'm hopeful that the financial industry gets as tough a scrutiny as the auto industry has," she told reporters after an event Monday in Macomb Township, about 20 miles northeast of Detroit.

Despite Granholm's criticism and what many workers saw as the president's unduly harsh treatment, Obama's actions might not have a lasting effect on voters.

"It will be accepted, grudgingly perhaps, but accepted by anybody and everybody with a brain in their heads," said Bill Ballenger, editor of a Michigan political newsletter and a former Republican state lawmaker.

Still, Bill Rustem of Public Sector Consultants, a Lansing-based nonpartisan think tank, said Obama's actions carry some risk.

"I think this could have some impact four years from now if the state's economy doesn't begin to turn around," he said. Michigan's unemployment rate rose to 12 percent in February, marking the eighth straight monthly increase.

Workers watched Obama on large-screen TVs in the lobby bar of a hotel in Detroit's Renaissance Center, home to GM's headquarters. Several wearing GM badges declined to comment afterward, but one man whose fortunes are nearly as tied to GM as its employees expressed hope for the future of the company and industry.

"It's definitely a move in the right direction," said Tony Keros, who owns a restaurant and real estate development firm in the building. "Something has to happen."

In Ohio, Graham agreed that Washington just might get it right -- if only because the stakes are too high to fail.

"They understand that there are literally millions of people who depend on the auto industry -- whether directly or indirectly -- and a ripple effect of eliminating a General Motors, Chrysler or Ford would be devastating to an economy that's already been devastated over the past eight years," he said.

Associated Press writers Ben Leubsdorf in Clinton Township, Tim Martin in Delta Township, Ben Dobbin in Rochester, N.Y., and Thomas J. Sheeran in Cleveland contributed to this report.

 

Obama Asks Volcker to Lead Panel on Tax-Code Overhaul (Update4

The new code will read if you have beieve in america you will be tax at 90%. If you believe that terroroist are good people and that terrorist pose no harm to this great nation you will never had to pay taxes.

 

Obama Asks Volcker to Lead Panel on Tax-Code Overhaul (Update4)

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By Roger Runningen and Ryan J. Donmoyer

March 25 (Bloomberg) -- President Barack Obama is putting former Federal Reserve Chairman Paul Volcker in charge of a tax-code review aimed at closing loopholes, streamlining the law and generating revenue, budget Director Peter Orszag said.

Volcker, 81, who heads the president's Economic Recovery Advisory Board, is being asked to take a look at the laws in an effort to rebalance the tax system.

Orszag said the review, given a deadline of Dec. 4, is being ordered to make recommendations on steps to simplify the code, built over the last 96 years, in ways that would reduce tax evasion and what he called "corporate welfare."

"There are hundreds of billions of dollars in uncollected taxes each year," Orszag said in a conference call. The Volcker board "will be examining ways of being even more aggressive on reducing the tax gap."

The tax gap is the difference between the amount of taxes owed by taxpayers and companies and the amount collected. Orszag cited academic studies suggesting that the difference is $300 billion or more. That is " a lot of money," he said, adding that the administration is going to be "as aggressive as possible" in reducing it.

Obama made a tax overhaul part of his platform during the presidential campaign. One goal is to close loopholes that he said reward companies that move jobs overseas.

Task Force

Austan Goolsbee, a senior economic adviser to the president, will be named staff director of the task force, which will report back to Volcker, Orszag said. Members of the panel will include Harvard University's Martin Feldstein, former chief economic adviser to President Ronald Reagan; Laura D'Andrea Tyson, a professor of economics at the University of California at Berkeley and former economic adviser to President Bill Clinton; Roger Ferguson, chief executive officer of Teachers Insurance & Annuity Association and a former vice chairman of the Federal Reserve; and William Donaldson, a former chairman of the Securities and Exchange Commission.

Orszag said "the only constraint" on the task force review is that there be no tax increases during 2009 and 2010, and that the proposals shouldn't raise taxes on families earning less than $250,000 a year.

Past Attempts

Those constraints were reminiscent of several imposed by former President George W. Bush when he convened a national commission to consider tax reform in 2005 that was headed by former Senators Connie Mack, a Florida Republican, and John Breaux, a Louisiana Democrat. The panel unanimously agreed after 10 months to recommend scrapping or restructuring many popular deductions, saying the tax code was rife with "gimmicks."

Many of its proposals, including cutting back tax incentives for homeownership for high-income people and the abolition of the state and local tax deduction, drew immediate opposition, and Bush never acted on the group's recommendations.

The current task force is "open to consider any options of any sort that it sees fit," Orszag said in the conference call. He said there was no revenue "target." One of the goals is to do "a better job of collecting taxes that are owed."

Obama plans to ask Volcker, Goolsbee and the panel for a package of recommendations to be on his desk Dec. 4. That would leave enough time for decisions to be made and included as proposals in the White House budget for fiscal 2011, to be submitted to Congress in February 2010.

Need for Overhaul

Mark Bloomfield, president of the Washington-based American Council for Capital Formation who worked on tax-reform bills in the 1970s and 1980s, said something needs to be done.

"Our current tax system cannot sustain the political and economic policy demands of today," Bloomfield said. "It's a 19th century buggy whip tax structure incapable of dealing with a 21st century economy and politics."

Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said the tax reform panel should "outline core principles" and leave to lawmakers the task of drafting a tax code overhaul. "We're the Congress," he said.

The top Republican on the tax-writing House Ways and Means Committee, Representative David Camp of Michigan, said the panel's review "could be a positive -- there are a lot of inequities in the tax code."

Restrictions

Camp said he was concerned that Obama placed restrictions on the group's work, particularly shunning anything that would raise taxes on Americans earning under $250,000. While Camp said he isn't in favor of tax increases, any advisory panel should be encouraged to consider a wide range of ideas. "If you've gathered a panel of experts, I want to hear what the panel says."

Camp said a Dec. 4 deadline wouldn't give Congress time to deal with the 2010 expiration of lower rates enacted in 2001. "I'd like to get it sooner than that."

Obama has previously proposed raising additional revenue by taxing profit shares earned by private equity executives as ordinary income rather than at lower capital gains rates. In his budget last month, he also said he'd raise $200 billion over the next decade by increasing enforcement of tax laws on a company's international income and by altering their ability to defer tax on foreign profits.

Budget Opposition

The tax-review plan comes as Obama faces opposition from his own party as he pushes for approval of a $3.6 trillion budget that Republican critics say would pile a mountain of debt on taxpayers for years to come.

The president scheduled a meeting with Senate Democrats on Capitol Hill today to persuade them to back his long-range plans for an overhaul of health care, energy programs and education to revive the U.S. economy.

House and Senate lawmakers are working on the president's fiscal 2010 spending blueprint, with the economy in recession and the federal budget deficit widening. Lawmakers are already looking to trim some of Obama's domestic programs.

Senator Kent Conrad, a North Dakota Democrat who heads the Budget Committee, has drafted a spending plan to generate a smaller deficit than Obama's proposal, with next year's shortfall totaling $1.2 trillion. Obama's budget would generate a $1.4 trillion deficit next year, according to the nonpartisan Congressional Budget Office.

Conrad's plan deletes an Obama budget proposal that called for $250 billion to aid the banking industry. His plan pledges to reduce the deficit from a forecast $1.7 trillion this year to $508 billion in 2014.

Tax credits, under the "Making Work Pay" program, which lead to $400 tax cuts for most workers and $800 for couples, would expire at the end of 2010.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net

Last Updated: March 25, 2009 16:23 EDT 

 

USMC Credo:To Catch Us, You Have To Be FastTo Find Us, You Have To Be SmartTo Beat Us, You Have To Be KIDDING! "Do you understand the difference between dying for something and dying for nothing" Jack Bawuer http://keepthechangepalin2012.blogspot.com/

Senate reviewing how college football picks No. 1

This is the reason why I cant hold office. I would be fired for doing the job the people elected me for what sham

 

WASHINGTON (AP) — Everyone from President Barack Obama on down to fans has criticized how college football determines its top team. Now senators are getting off the sidelines to examine antitrust issues involving the Bowl Champion Series.

The current system "leaves nearly half of all the teams in college football at a competitive disadvantage when it comes to qualifying for the millions of dollars paid out every year," the Senate Judiciary's subcommittee on antitrust, competition policy and consumer rights said in a statement Wednesday announcing the hearings.

Under the BCS, some conferences get automatic bids to participate in series, while others do not.

Obama and some members of Congress favor a playoff-type system to determine the national champion. The BCS features a championship game between the two top teams in the BCS standings, based on two polls and six computer ratings.

Behind the push for the hearings is the subcommittee's top Republican, Sen. Orrin Hatch of Utah. People there were furious that Utah was bypassed for the national championship despite going undefeated in the regular season.

The title game pitted No. 1 Florida (12-1) against No. 2 Oklahoma (12-1); Florida won 24-14 and claimed the title.

The subcommittee's statement said Hatch would introduce legislation "to rectify this situation." No details were offered and Hatch's office declined to provide any.

Hatch said in a statement that the BCS system "has proven itself to be inadequate, not only for those of us who are fans of college football, but for anyone who believes that competition and fair play should have a role in collegiate sports."

In the House, Rep. Joe Barton of Texas, the top Republican on the Energy and Commerce Committee, has sponsored legislation that would prevent the NCAA from calling a football game a "national championship" unless the game culminates from a playoff system.

Copyright © 2009 The Associated Press. All rights reserved.

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White House Open to Global Currency?

White House Open to Global Currency?

Last night, President Barack Obama expressed confidence in the dollar and declared: "I don't believe that there's a need for a global currency." Normally, that would settle the issue. But in the past 24 hours two of Obama's top economic advisers have signaled an openness to such a new global currency -- in one form or another. What's going on? Politico's Ben Smith reports that Treasury Secretary Timothy Geithner said this morning that he was open to a new global currency to replace the dollar, as proposed by a Chinese central banker. Geithner, according to Smith, said that the proposal -- which he has not yet read -- is less transformative that headlines have suggested. "We're actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union," Geithner said. Later, the moderator, per Smith "apparently sensing a gaffe," asked Geithner to clarify his remarks. Geithner walked back his earlier comments and said he does not see the dollar being sidelined by a new currency. But Geithner wasn't the only top Obama adviser who refused to rule out a transition to a global currency. White House economic adviser Austan Goolsbee said much the same thing yesterday afternoon in an interview with CNN's Wolf Blitzer. Although he characterized such a change as "unlikely," Goolsbee twice declined to rule out such a global currency despite being pressed by Blitzer. "I haven't seen the details of the proposal," Goolsbee said. The entire exchange follows: BLITZER: The Chinese suggesting today, this dollar, U.S. dollar, should be replaced as international currency, because they are beginning to have concerns that you are printing, the U.S. government is simply printing too many of these dollars and will lose its value as an international currency. What's your reaction? GOOLSBEE: It strikes me as probably unlikely. Different people have in the past argued for world currencies or new -- new currencies before. I believe the U.S. at this point is the safest place to invest in the world. And it's likely to remain that the dollar is a critical currency in the years ahead. BLITZER: So, you -- you don't like some new international currency that some Chinese are proposing? GOOLSBEE: Well, look... BLITZER: I assume that's right, right? GOOLSBEE: I haven't seen the details of what they are proposing. I mean, the dollar is the dollar. If people don't want to buy it, they don't buy it. But I think you have seen sort of a flight to the dollar in -- in times of trouble. I don't know enough about monetary policy and currency to analyze the potential benefits and drawbacks of such a change, though several people I've spoken to believe it's an idea that's as undesirable as it is unworkable. But as a matter of instilling confidence in the U.S. economy at a time when such confidence is critical, it seems that Obama's answer was much better than the mixed messages coming from his top economic advisers. Posted

Pic of Totus

Why does a high educated Muslin need a teleprompter to direct him what to say and when to say it. Someone who went to Havard should be able to speak. Someone that direct the law review should be so smart he should speak on his feet.

iS IT satan

 The Media stated that Bush was stupid looking. What is that?

Sen. Gregg says Obama budget will bankrupt US

AIN'T THIS CHANGE GREAT

WASHINGTON – The top Republican on the Senate Budget Committee says the Obama administration is on the right course to save the nation's financial system.

But Sen. Judd Gregg of New Hampshire also says President Barack Obama's massive budget proposal will bankrupt the country.

Gregg says he has no regrets in withdrawing his nomination to become commerce secretary. He pulled out after deciding he could not fully back the administration's economic policies.

The senator said Obama's spending plan in the midst of a prolonged recession would leave the next generation with a country too expensive to live in.

Gregg appeared Sunday on CNN's "State of the Union

Obama makes a Video

So what was to become of his little video? Was he thinking that all of Iran would suddenly fall in love with him also?

Or is this a carefully orchastrated video to let Iran know, they can attack soon? Really weird he makes a video, like they do, like Osama, and all those freaks.

Is there some underlying message, behind this video, like, don't worry Khomeini every things going as planned, they will be bankrupt, and demoralized to the point, you and Russia can walk right in.
why else does he use the full name of Iran? Crazy thoughts in my mind, will not go away till this bone head is gone.

Remember Hitler went after the mentally challenged, as Obama makes his comments on John Leno, but also the way Rahm and Obama want to do away with government health care for our soldiers. And of course, Rahms big idea, that all people between 18 and 26 should come spend time being brainwashed by our government.

And Pelosi saying it's un- American for our border patrol to do their job? Crazy Goverment you picked America, We don't know about the bonuses being paid out.
Yep, it just keeps coming at us daily, the mistake we all made in our choices.

Sorry, pelosi, send the mexicans home, let some guy out of work, do the job of carpentry, painting, roofing, electrician, and so on.
Shoot, as I see it, many of those lawn care jobs are good for high school kids and college kids.

We are screwed. 

 

USMC Credo:To Catch Us, You Have To Be FastTo Find Us, You Have To Be SmartTo Beat Us, You Have To Be KIDDING! "Do you understand the difference between dying for something and dying for nothing" Jack Bawuer http://keepthechangepalin2012.blogspot.com/

Obama Received a $101,332 Bonus from AIG

March 17, 3:01 PM · 575 comments

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AP Photo/Ron Edmonds

Senator Barack Obama received a $101,332 bonus from American International Group in the form of political contributions according to Opensecrets.org. The two biggest Congressional recipients of bonuses from the A.I.G. are - Senators Chris Dodd and Senator Barack Obama. 

The A.I.G. Financial Products affiliate of A.I.G. gave out $136,928, the most of any AIG affiliate, in the 2008 cycle.  I would note that A.I.G.'s financial products division is the unit that wrote trillions of dollars' worth of credit-default swaps and "misjudged" the risk.

The Washington Post reports a "mob effect" at A.I.G financial products division:

A tidal wave of public outrage over bonus payments swamped American International Group yesterday. Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn't show up at all.

With the anger and rage that is being exhibited against A.I.G., perhaps the bonuses Obama received from A.I.G. explain Obama's A.I.G crocodile tears.

Now that the Wall street Journal has revealed that A.I.G. paid bonuses of $1 million or more to 73 employees, it's time to ask if recipients of A.I.G. "bonuses," including President Obama, will give what now ought to be taxpayer money back?

 

Fw: Be Positive

 

--- On Mon, 3/16/09, Date: Monday, March 16, 2009, 11:44 AM HOW TO START EACH DAY WITH A POSITIVE OUTLOOK 1. Open a new file in your computer. 2. Name it 'Barack Obama'. 3. Send it to the Recycle Bin. 4. Empty the Recycle Bin. 5. Your PC will ask you: 'Do you really want to get rid of 'Barack Obama?' 6. Firmly Click 'Yes.' 7. Feel better? GOOD! - Tomorrow we'll do Nancy Pelosi -

 

The American Legion Strongly Opposed to President's Plan to Charge Wounded Heroes for Treatment

To: POLITICAL EDITORS

Contact: Craig Roberts of The American Legion, +1-202-263-2982 Office, +1-202-406-0887 Cell

 

WASHINGTON, March 16 /PRNewswire-USNewswire/ -- The leader of the nation's largest veterans organization says he is "deeply disappointed and concerned" after a meeting with President Obama today to discuss a proposal to force private insurance companies to pay for the treatment of military veterans who have suffered service-connected disabilities and injuries. The Obama administration recently revealed a plan to require private insurance carriers to reimburse the Department of Veterans Affairs (VA) in such cases.

 

"It became apparent during our discussion today that the President intends to move forward with this unreasonable plan," said Commander David K. Rehbein of The American Legion. "He says he is looking to generate $540-million by this method, but refused to hear arguments about the moral and government-avowed obligations that would be compromised by it."

 

The Commander, clearly angered as he emerged from the session said, "This reimbursement plan would be inconsistent with the mandate ' to care for him who shall have borne the battle' given that the United States government sent members of the armed forces into harm's way, and not private insurance companies. I say again that The American Legion does not and will not support any plan that seeks to bill a veteran for treatment of a service connected disability at the very agency that was created to treat the unique need of America's veterans!"

 

Commander Rehbein was among a group of senior officials from veterans service organizations joining the President, White House Chief of Staff Rahm Emmanuel, Secretary of Veterans Affairs Eric Shinseki and Steven Kosiak, the overseer of defense spending at the Office of Management and Budget (OMB). The group's early afternoon conversation at The White House was precipitated by a letter of protest presented to the President earlier this month. The letter, co-signed by Commander Rehbein and the heads of ten colleague organizations, read, in part, " There is simply no logical explanation for billing a veteran's personal insurance for care that the VA has a responsibility to provide. While we understand the fiscal difficulties this country faces right now, placing the burden of those fiscal problems on the men and women who have already sacrificed a great deal for this country is unconscionable."

 

Commander Rehbein reiterated points made last week in testimony to both House and Senate Veterans' Affairs Committees. It was stated then that The American Legion believes that the reimbursement plan would be inconsistent with the mandate that VA treat service-connected injuries and disabilities given that the United States government sends members of the armed forces into harm's way, and not private insurance companies. The proposed requirement for these companies to reimburse the VA would not only be unfair, says the Legion, but would have an adverse impact on service-connected disabled veterans and their families. The Legion argues that, depending on the severity of the medical conditions involved, maximum insurance coverage limits could be reached through treatment of the veteran's condition alone. That would leave the rest of the family without health care benefits. The Legion also points out that many health insurance companies require deductibles to be paid before any benefits are covered. Additionally, the Legion is concerned that private insurance premiums would be elevated to cover service-connected disabled veterans and their families, especially if the veterans are self-employed or employed in small businesses unable to negotiate more favorable across-the-board insurance policy pricing. The American Legion also believes that some employers, especially small businesses, would be reluctant to hire veterans with service-connected disabilities due to the negative impact their employment might have on obtaining and financing company health care benefits.

"I got the distinct impression that the only hope of this plan not being enacted," said Commander Rehbein, "is for an alternative plan to be developed that would generate the desired $540-million in revenue. The American Legion has long advocated for Medicare reimbursement to VA for the treatment of veterans. This, we believe, would more easily meet the President's financial goal. We will present that idea in an anticipated conference call with White House Chief of Staff Rahm Emmanuel in the near future.

"I only hope the administration will really listen to us then. This matter has far more serious ramifications than the President is imagining," concluded the Commander.

SOURCE The American Legion

 

"Do you understand the difference between dying for something and dying for nothing" Jack Bawuer http://keepthechangepalin2012.blogspot.com/

On Africa trip, pope says condoms won't solve AIDS

Mr Nazi Guard thats what you did many years ago. Saying they wont prevent aids is true. But if you tell undereducated people that then there will be more problems. Condoms are part of the solution is what you should have stated.  But what do I know after all

By VICTOR L. SIMPSON, Associated Press Writer Victor L. Simpson, Associated Press Writer – 46 mins ago

AP – Pope Benedict XVI gestures from the airplane before leaving from Rome's Leonardo da Vinci airport for …

ABOARD THE PAPAL PLANE – Pope Benedict XVI said on his way to Africa Tuesday that condoms were not the answer in the continent's fight against HIV, his first explicit statement on an issue that has divided even clergy working with AIDS patients.

Benedict had never directly addressed condom use. He has said that the Roman Catholic Church is in the forefront of the battle against AIDS. The Vatican encourages sexual abstinence to fight the spread of the disease.

"You can't resolve it with the distribution of condoms," the pope told reporters aboard the Alitalia plane headed to Yaounde, Cameroon, where he will begin a seven-day pilgrimage on the continent. "On the contrary, it increases the problem."

Some priests and nuns working with those living with HIV/AIDS question the church's opposition to condoms amid the pandemic ravaging Africa.

"Do you understand the difference between dying for something and dying for nothing" Jack Bawuer http://keepthechangepalin2012.blogspot.com/

Fw: The cemetary story

 

This needs to be shared!   Tony    Cemetery Escort  Duty    I just wanted to get the day over with and go down to Smokey's.  Sneaking a look at my watch, I saw the time,  1655.  Five minutes to go before the cemetery gates are closed for the day.  Full dress was hot in the August sun.    Oklahoma  summertime was as bad as ever--the heat and humidity at the same level--both too high.    I saw the car  pull into the drive, '69 or '70 model Cadillac Deville, looked  factory-new.  It pulled into the parking lot at a snail's  pace.  An old woman got out so slow I thought she was paralyzed; she  had a cane and a sheaf of flowers--about four or five bunches as best I could  tell.    I couldn't  help myself  The thought came unwanted, and left a slightly bitter  taste:  'She's going to spend an hour, and for this old soldier, my  hip hurts like hell and I'm ready to get out of here right now!'  But for this day, my duty was to assist anyone coming  in.    Kevin would  lock the 'In' gate and if I could hurry the old biddy along, we might make it to Smokey's in time.      I broke post attention.  My hip made gritty noises when I took the first step and the pain went up a notch.  I must have made a real military sight:  middle-aged man with a small pot gut and half a limp, in marine full-dress uniform, which had lost its razor crease about thirty minutes after I began the watch at the cemetery.    I stopped in  front of her, halfway up the walk.  She looked up at me with an old woman's squint.    'Ma'am, may I assist you in any way?'      She took long enough to answer.    'Yes,  son.  Can you carry these flowers?  I seem to be moving a tad slow these days.'    'My pleasure, ma'am.'  Well, it wasn't too much of a lie.    She looked again.  'Marine, where were you stationed?'    ' Vietnam, ma'am.  Ground-pounder.  '69 to '71.'    She looked at me closer.  'Wounded in action, I see.  Well done,  Marine.  I'll be as quick as I can..'    I lied a little bigger:  'No hurry,  ma'am.'      She smiled and winked at  me.  'Son, I'm 85-years-old and I can tell a lie from a long way off. Let's get this done.  Might be the last time I can do this.  My name's Joanne Wieserman, and I've a few Marines I'd like to see one more time.'    'Yes, ma 'am.  At your service.'    She headed for  the World War I section, stopping at a stone.  She picked one of the  flowers out of my arm and laid it on top of the stone.  She murmured something I couldn't quite make out. The name on the marble was Donald S. Davidson, USMC: France 1918.    She turned away and made a straight line for the World War II section, stopping at one stone.  I saw a tear slowly tracking its way down her cheek.  She put a bunch on a stone; the name was  Stephen  X.Davidson, USMC, 1943.    She went up the row a ways and laid another bunch on a stone,  Stanley J. Wieserman, USMC, 1944..    She paused for a second.  'Two more, son, and we'll be  done'    I almost didn't say anything, but, 'Yes,  ma'am.  Take your time.'    She looked confused. 'Where's the  Vietnam section, son?  I seem to have lost my way.'    I pointed with my chin.  'That way,  ma'am.'      'Oh!' she chuckled quietly.  'Son, me and old age ain't too friendly'    She headed  down the walk I'd pointed at.  She stopped at a couple of stones before she found the ones she wanted.  She placed a bunch on  Larry Wieserman, USMC, 1968, and the last on Darrel Wieserman, USMC, 1970.  She stood there and murmured a few words I still couldn't make out.    'OK, son, I'm finished.  Get me back to my car and you can go home.'    Yes, ma'am.  If I may ask, were those your kinfolk?'      She paused. 'Yes, Donald Davidson was my father, Stephen was my uncle,  Stanley was my husband, Larry and Darrel were our sons.  All killed in action, all marines'    She stopped.  Whether she had finished, or couldn't finish, I don't know.  She made her way to her car, slowly and  painfully. I waited for a polite distance to come between us and  then double-timed it over to Kevin, waiting by the car. 'Get to the  'Out' gate quick.  I have something I've got to do.'    Kevin started  to say something, but saw the look I gave him.  He broke the rules to get us there down the service road.  We beat her.  She hadn't made it around the rotunda yet.      'Kevin, stand  at attention next to the gatepost.  Follow my lead.'  I humped it across the drive to the other post.    When the  Cadillac came puttering around from the hedges and began the short straight traverse to the gate, I called in my best gunny's  voice:  'TehenHut!  Present Haaaarms!'    I have to hand it to Kevin; he never blinked an eye--full dress attention and a salute that  would make his DI proud.   She drove through that gate with two old worn-out soldiers giving her a send-off she deserved, for service rendered to her country, and for knowing duty, honor and sacrifice.      I am not sure, but I think I saw a salute returned from that Cadillac.    Instead of  'The  End', just think of 'Taps.'    As a final  thought on my part, let me share a favorite prayer:  'Lord, keep our servicemen and women safe,  whether they serve at home or overseas.  Hold them in your loving  hands and protect them as they protect us.'    Let's all keep those currently serving and those who have gone before in our thoughts. They are the reason for the many freedoms we enjoy.    'In God We Trust.'      Sorry about your monitor; it made mine blurry  too!    If we ever forget that we're one nation under God, then we will be a nation gone  under! You are required to pass this on  NOW!!!