March 2009


GM will be asked to restructure in 60 days and president Obama fired GM CEO Rick Wagoner. Just imagine, a company that did not restructure in 60 years will do in 60 days with 6 billion, you got to be kidding me.

Now, what happens if this “restructuring fails”? Who will be fall guy then. I got it… Next CEO.

I think the Obama administration should have kept Rick Wagoner and made him the fall guy if the restructuring plan fails.

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Today the Boston Globe is reporting that the Pension benefit Guaranty Corporation( PBGC), a federal agency that insures the retirement fund of 44million people , has made probably the stupidest financial decision in recent history by a government organization. The federal agency changed strategy under the leadership of Charles Millard, a former Lehman exec, from 2007 till Bush term ended in January.

Mr Millard came up with a new investment strategy for the fund, he switched from the “conservative position” of keeping the fund in bonds to high risk stocks. The aim was to make more money to pay of some of the deficits of the fund. But now the risk appears to be bearing the opposite effects. The agency’s stock is down more than 25 percent since last September. But the analysts at Boston Globe say it could be more worse than expected. Professor Zvi Bodie, finance professor of  Boston university,  expects this problem to be a few hundred billion disaster. Things will go even more sour if automakers go bust or move into bankruptcy. Mr Millard however defends his move and says,” Ask me in 20 years. The question is whether policymakers will have the fortitude to stick with it.”

Hope this does not turn into another AIG.

For more on the story see the article on Boston Globe.

Obama administration has rejected the auto bailout for all the three companies saying the plans submitted by the companies are inadequate. The Obama Whitehouse has also asked the CEO of GM to step down in the process, rising eyebrows as to why make GM CEO Rick Wagoner the fall guy.

Nevertheless, the Obama Whitehouse has its own plan for the automakers. The Whitehouse will ask for 22 billion as restructuring costs for the three automakers GM, Ford and Chrysler. The plan also includes  sale of Chrysler to Fiat with the Whitehouse taking part in the process. Looks more like Obama whitehouse wants to run the automakers.

One should not be surprised if the people in new management are Democratic donors or heavily union friendly. Afterall , it was the unions that got him elected in Michigan in the first place.

It may be good for GM CEO to go, but I am not sure if the Obama whiteshouse should take over and try to run the Auto industry. Instead of this industry , they could have taken over the banks and cleaned them up, it would have fixed the economy faster.

More details are reported by McClatchy.

Obama administration today asked GM CEO Rick Wagoner to resign. May be this is good from one point , as there is much to say about Rick Wagoner’s management skills that have now turned out well for the company. GM has lost much ground in the auto sector and losing ground auto sector to the international competitors. May be with him going the company will move in the right direction faster.

But at the same time why just Rick Wagoner, why not Wall Street CEO’s who have taken in trillions, not few billions like GM. Why only GM CEO, what happened to Ford CEO or others. Will Obama administration ask CEO’s to resign who are not republicans?

There are always two sides to a story..  this is not looking very good to me.

More here on Bloomberg and politico.

A 300 year old giant egg measuring nearly 3 feet in diameter is on sale in London. The egg, is probably the biggest in the world and was laid by the Great elephant bird of Madagascar.

The egg with its owner John Sheperd of Kent.

‘big egg’ and ‘egg’

The Madagascar Elephant Bird was the only giant bird to exist with man who ultimately caused its extinction.

For more details, read the complete article here.

Thanks to Bloomberg news in advance.

Yesterday, treasury secretary Tim Geithner unveiled his trillion dollar plan to save the banks. It is buying of toxic assets from the banks using a private , public partnership where most of the matching for the dollar is provided by tax payer. The plan puts more pressure on tax payers and least exposure for the wall street guys. No wonder the wall street guys are cheering for it.

Four professors of economics presented there views in NY times.

Nobel prize winning economists, Krugman and Stiglitz are against it. Stiglitz goes further and says this plan is nothing but robbing the tax payers.
Now China has joined Russia in calling for a new global currency to replace the dollar, to avoid over exposure to any one single currency.

Update: Here is another well written piece on the plan by Martin wolf of financial times.

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