TUESDAY,  DECEMBER 9,  2008

NO SURE THING - AT 11:31 P.M. ET:  From The Washington Times:  The White House and senior congressional Democrats reached an agreement on the outlines of a $15 billion taxpayer bailout plan for troubled Detroit automakers General Motors Corp. and Chrysler LLC, though the bill to implement the rescue package still faces an uncertain reception on Capitol Hill.

COMMENT:  Uncertain is right.  Many Republicans are raising principled objections to the plan, and demonstrating that the party will not blindly back anything wanted by "big business."  The GOP is tougher on the car executives than are the Democrats. 

ACCOUNTABILITY

Posted at 8:20 p.m. ET:

There were some Congressional hearings today, focusing on fixing blame for the economic mess.  It's important that we know the full story. 

The Wall Street Journal, certainly a free-enterprise paper, today ran a fine piece by Jonathan Macey of Yale, insisting that corporate executives and boards of directors take their share of the blame.  That is correct.  Free enterprise is the best economic system ever developed, but it requires wise stewardship and responsibility.  When trust is breached, we who favor the market system should be the first, not the last, to demand that those responsible be dealt with appropriately.  Macey:

The failure of the General Motors board of directors to fire CEO Richard Wagoner provides a rare glimpse into the inner-workings of big-time corporate boards of directors. The sight is not pretty.

When Mr. Wagoner took the helm eight years ago the stock was trading at around $60 per share. The stock had fallen to around $11 per share before the current financial crisis. It's now below $5 per share.

In 2007, Mr. Wagoner's compensation rose 64% to almost $16 million in a year when the company lost billions. The board has been a staunch backer of Mr. Wagoner despite consistent erosion of market share and losses of $10.4 billion in 2005 and $2 billion in 2006. In 2007 GM posted a loss of $68.45 a share, or $38.7 billion -- the biggest ever for any auto maker anywhere.

And we see this same pattern repeated everywhere.  In Hollywood they call it "failing upward."  No matter how many flops a Hollywood executive has, he gets more money at his next job because they think he's learned from his experience.

The average pay for chief executives of large public companies in the United States is now well over $10 million a year. Top corporate executives in the United States get about three times more than their counterparts in Japan and more than twice as much as their counterparts in Western Europe.

And the corporations don't often get their money's worth.  Weak, acquiescent boards of directors are part of the problem:

Like parents unable to view their children objectively, boards reject statistical reality and almost always view their firms as above average. Because directors participate in corporate decision-making, they inevitably take ownership of the strategies that the corporation pursues. In doing so, directors become incapable of evaluating management and strategies in a detached manner.

And...

Once an opinion, such as the opinion that a CEO is doing a good job, becomes ingrained in the minds of a board of directors, the possibility of altering those beliefs decreases substantially. All too often, it is only when an outsider takes an objective look does anybody realize the obvious: That the directors of a company are generally the last people to recognize management failure.

Finally...

Little if anything has changed at GM since dissident director H. Ross Perot dubbed his board colleagues "pet rocks" for their blind support of then CEO Roger Smith. The broader problem is that there are far too many pet rocks on the boards of other U.S. companies.

Criticism like this has been voiced many times over the last thirty years, especially when the auto industry was discussed.  But each time the corporate machine got by, protected by well-oiled PR operations.  Maybe this time the corporate sector will learn.  Or maybe not.

December 9, 2008.      Permalink          

GRAY LADY ON LIFE SUPPORT - AT 5:42 P.M. ET:  From Financial Times:  The New York Times is considering potential asset sales and is in discussions with lenders as it prepares for sharply curtailed advertising spending across the media sector in 2009.  Advertising revenue fell sharply at the paper in November as consumer confidence plunged. Entertainment, property and automotive advertising categories were among the worst hit.

COMMENT:  We've been critical of The Times here, but this is grim.  There are still many good people at the paper, and the future doesn't look good.

THE SILVER LINING - AT 5:35 P.M. ET:   From Financial Times:  Global oil demand will collapse next year and commodities will not return to the highs they reached this summer in the foreseeable future, two authoritative reports said on Tuesday as they forecast a long and painful worldwide recession.

COMMENT:  The lower oil price is good news for Americans, but other predictions are painful.  The story goes on, "The stark conclusions came as the World Bank’s chief economist predicted that the world faced “the worst recession since the Great Depression."

ORWELLIAN

Posted at 8:15 a.m. ET

This'll give you the creeps.  Gideon Rachman, in the Financial Times, predicts a push for a world government.  We'd better wake up before the push comes to shove:

I have never believed that there is a secret United Nations plot to take over the US. I have never seen black helicopters hovering in the sky above Montana. But, for the first time in my life, I think the formation of some sort of world government is plausible.

When does the next space rocket leave?

The European Union has already set up a continental government for 27 countries, which could be a model. The EU has a supreme court, a currency, thousands of pages of law, a large civil service and the ability to deploy military force.

So could the European model go global? There are three reasons for thinking that it might. 

First, it is increasingly clear that the most difficult issues facing national governments are international in nature...

...Second, it could be done. The transport and communications revolutions have shrunk the world so that, as Geoffrey Blainey, an eminent Australian historian, has written: “For the first time in human history, world government of some sort is now possible.”

But – the third point – a change in the political atmosphere suggests that “global governance” could come much sooner than that. The financial crisis and climate change are pushing national governments towards global solutions, even in countries such as China and the US that are traditionally fierce guardians of national sovereignty.

But there is hope for us yet:

But let us not get carried away. While it seems feasible that some sort of world government might emerge over the next century, any push for “global governance” in the here and now will be a painful, slow process.

There are good and bad reasons for this. The bad reason is a lack of will and determination on the part of national, political leaders who – while they might like to talk about “a planet in peril” – are ultimately still much more focused on their next election, at home.

But this “problem” also hints at a more welcome reason why making progress on global governance will be slow sledding. Even in the EU – the heartland of law-based international government – the idea remains unpopular.

And here's the money quote:

International governance tends to be effective, only when it is anti-democratic.

Yes, and that's the heart of the problem.  Do we really want to be run by the "freedom-loving" countries in the UN?

Finally...

The world’s most pressing political problems may indeed be international in nature, but the average citizen’s political identity remains stubbornly local. Until somebody cracks this problem, that plan for world government may have to stay locked away in a safe at the UN.

And, knowing the UN, they'll lose the combination.  Which is good luck for us.

We, as Americans, had better stay on top of this.  We're weakened in this financial crisis, and vulnerable to all kinds of schemes. 

December 9, 2008.      Permalink          

ET TU SONY?  - AT 7:36 A.M. ET:  Dec. 9 (Bloomberg) -- Sony Corp., the world’s second-biggest consumer-electronics maker, plans to eliminate 16,000 jobs in the largest reduction announced by a Japanese company since the credit crunch drove the world into recession.

COMMENT:  Sony faces serious problems because the company has lost a chunk of its customer appeal.  While the Play Station is a winner, its TVs no longer have the edge they once did, and Sony doesn't have a market-defining product like the Walkman.  Apple's iPod is king. 

TV RATINGS REPORT - AT 7:16 A.M. ET:  From The Washington Times:  Viewership for President-elect Barack Obama's weekly YouTube "fireside chats" has tanked, dropping more than 50 percent since his initial video three weeks ago.  "I've heard a lot of puffed-up rhetoric about how this is going to change the face of politics and how it's going to be FDR's fireside chats. The data doesn't back it up," said David Burch, marketing manager for TubeMogul, which tracks YouTube video views.

COMMENT:  If this were Hollywood, they'd just hire a new president-elect.

ALREADY?

Posted at 7:06 a.m. ET

Well, it didn't take long:

WASHINGTON (AP) - The first sign of cracks in President-elect Barack Obama's foreign policy team of rivals emerged on Monday as his choices for secretary of state and U.S. ambassador to the United Nations visited the State Department.

As Secretary of State-pick Hillary Rodham Clinton and U.N. envoy-choice Susan Rice separately visited the diplomatic agency's headquarters in Washington's Foggy Bottom neighborhood, persons familiar with the transition said that Rice wants to install her own transition team inside the department.

Such a move by an incoming U.N. ambassador is rare, if not unprecedented, because the job is based at the United Nations in New York, where Rice already has a small transition staff, the sources familiar with the incoming administration.

Watch Obama on this one.  He must immediately step in, inform Rice that the secretary of state is senior, and that Rice should go arrange the furniture in the posh apartment that our UN ambassadors have at the Waldorf.  Bad move by Rice.  Looks pushy, with some sour grapes on top.

During the presidential campaign, some Clinton aides saw Rice's early decision to back Obama as a betrayal because of her previous role as a high State Department official during President Bill Clinton's administration. Rice's desire to place her own team in Washington could fuel speculation that those tensions will carry into the new administration.

Well, I guess Rice figures she'll stake her claim early, because Hillary will certainly be staking hers.  This could get very juicy.

Technically, the job of U.N. envoy falls under the authority of the secretary of state, although some previous U.N. ambassadors have held cabinet rank. The last U.N. ambassador to be part of the president's cabinet was Richard Holbrooke, who had a famously icy relationship with then-Secretary of State Madeleine Albright during the Clinton administration.

Albright, who was President Clinton's first ambassador to the United Nations, was a mentor to Rice. But the two had a falling out when Albright, America's first female secretary of state, lined up behind Hillary Clinton for the Democratic presidential nomination and Rice backed Obama.

Lots of falling out with Ms. Rice.  The sound you hear is the knife sharpener sharpening the Clinton arsenal.

Also Monday, Clinton was to meet privately with Sen. John Kerry, D-Mass. and the incoming chairman of the Senate Foreign Relations Committee, according to a Democratic official. Kerry, once a contender for the secretary of state job, will oversee Clinton's confirmation. Kerry has pledged to hold "swift and fair" confirmation hearings.

A meeting between Clinton and Kerry.  Which one curtsies first?

And so a new era begins.  So much change.  All harmony, no conflict.

December 9, 2008.      Permalink          

MONDAY,  DECEMBER 8,  2008

TV PROGRAMMING NOTE - AT 8:07 p.m. ET:  From AP:  NEW YORK (AP) - A terrible fall season at NBC is forcing the network to consider scaling back the number of hours it airs programming, Chief Executive Jeff Zucker told an investor conference Monday.  While NBC will continue to fund the creation of pilots, Zucker told analysts at a media investor conference sponsored by UBS that NBC is considering cutting the number of hours or perhaps even the number of nights it provides programming.

COMMENT:  Maybe if they'd occasionally try to appeal to adults, this wouldn't be happening.

ANGRY LEFTISTS

Posted at 7:58 p.m ET

Angry leftists?  Yes, I know.  As Mark Twain said, "I repeat myself." 

And now the anger is growing...at Barack Obama.  It seems the political left is disappointed that he isn't behaving like a trained seal.  He isn't following the line.  Both The The New York Times and the Politico have pieces today on how crushed the wine and Brie crowd is by the performance of the president elect thus far.  They were expecting, maybe, Lenin?

One problem with pieces like this is that they refer to these battalions as liberals, or, sometimes, progressives.  But terms like that have lost their meaning.  The typical "liberal" of today is far to the left of where typical liberals were in the Jack Kennedy days.  As far as "progressive" is concerned, when you see Katrina vanden Heuvel referred to that way, you know the word has disappeared from any respectable dictionary.  The Politico:

Liberals are growing increasingly nervous – and some just flat-out angry – that President-elect Barack Obama seems to be stiffing them on Cabinet jobs and policy choices...

...“He has confirmed what our suspicions were by surrounding himself with a centrist to right cabinet. But we do hope that before it's all over we can get at least one authentic progressive appointment,” said Tim Carpenter, national director of the Progressive Democrats of America.

Whoops.  There's the "P" word.  I'd love to know if this crowd thinks we should ever buy any tanks.

The central premise of the left’s criticism is direct – don’t bite the hand that feeds, Mr. President-elect. The Internet that helped him so much during the election is lighting up with irritation and critiques.

At least The Politico refers to "the left."  That's progress.  As to the criticism, when will the left understand that it never elected Obama?  Obama was elected because he appealed, honestly or not, to the broad middle, which is where elections are won.  Senator McCain got 46 percent of the vote.  Without the middle, Obama would have been toast. 

“Why isn’t there a single member of Obama’s cabinet who will be advising him from the left?” asked Chris Bowers on his site, OpenLeft .com. Kevin Drum, writing on the Web site of the liberal magazine Mother Jones, echoed that sentiment: “I mean, that is why most of us voted for him, right?”

Yeah, man, hey, you know.  Well, let's see, Obama has Tom Daschle in his cabinet, and that well-known right winger, Hillary Clinton.  His attorney general designate, Eric Holder, has not been known to read neo-con manuals by candlelight.  In fact, Obama will get advice from the left, but it may not be the far, Stalin-was-misunderstood left.  There's the rub.

In an opinion article for The Washington Post on Sunday, David Corn, the Washington bureau chief for Mother Jones, wrote that “progressives are — depending on whom you ask — disappointed, irritated or fit to be tied.” But he added that “there’s no rebellion yet at hand” and “I’m not yet reaching for a pitchfork” because the left still is hoping that Mr. Obama will hijack the establishment to advance liberal causes.

As FDR liked to say, I love it, I love it, I love it.  Don't you just love phrases like "hijack the establishment"?  Welcome back to the sixties.

“We assume that there will be a philosophical balance when we’re all through with this,” said Representative Lynn Woolsey of California.

Wooly Woolsey, as she's sometimes called, is one of the doctrinaire "progressives" of the California delegation, and we hope she's wrong.

By the way, the New York Times piece on the same subject is here.

December 8, 2008.      Permalink          

DOW WOW - AT 4:13 P.M. ET - The Dow closed up about 299. 

WILL AUTO GUYS GET THE CASH? - AT 4:05 P.M. ET:   From The Washington Post:  The White House said it was "very likely" to reach agreement today with congressional Democrats on a package of emergency assistance for the Big Three Detroit automakers, as lawmakers continued work on a plan to extend $15 billion in emergency loans in return for close federal oversight of the industry.

COMMENT:  Caution.  This does not guarantee congressional passage.  Also, the story notes that the public, which has been polled, is still against a bailout of Detroit, a fact that might well influence members of Congress.

BULLETIN AT 3:50 P.M. ET:  From The New York Times:  The Tribune Company filed for bankruptcy protection in a federal court in Delaware on Monday, as the owner of The Los Angeles Times, The Chicago Tribune and the Chicago Cubs baseball team struggled to cope with rising debt and falling ad revenue.

COMMENT:  This may be the first of many in the newspaper business.  There are many factors at work here, but the failure of some news organizations to respond to public dissatisfaction with their product is key.  You can't sell a "vitally important" product if people no longer feel it's vitally important.

GM GOES RELIGIOUS

Posted at 1:06 p.m. ET

Well, I guess it's never too late for confession, or even redemption.  But GM's new print ad can either lead to Detroit finding the True Way, or it can give divinity a bad name.  Consider:

DETROIT (Reuters) - General Motors Corp on Monday unveiled an unusually frank advertisement acknowledging it had "disappointed" and sometimes even "betrayed" American consumers as it lobbies to clinch the federal aid it needs to stay afloat into next month.

Might have felt a bit more sincere had they done this when they didn't have their hand in our pocket.

"While we're still the U.S. sales leader, we acknowledge we have disappointed you," the ad said. "At times we violated your trust by letting our quality fall below industry standards and our designs became lackluster."

Say it, Brother General, say it!

"We have proliferated our brands and dealer network to the point where we lost adequate focus on the core U.S. market," the ad said. "We also biased our product mix toward pick-up trucks and SUVs."

Sinners!  Sinners!

"Despite moving quickly to reduce our planned spending by over $20 billion, GM finds itself precariously and frighteningly close to running out of cash," the ad says.

Punishment!  Deserved punishment!

GM spokesman Greg Martin said the ad was an attempt by the automaker to present "a pledge directly to the public."

"We believe we need to deliver this commitment unfiltered since quite a bit of media commentary has not kept pace with our actual progress to transform the company," Martin said.

We'll check back in two years, guys.  In the meantime, tell us more of the things you've done.  It's good for the soul.

December 8, 2008.      Permalink          

BUMPING 9000 - AT 11:09 A.M. ET:  The Dow is up 328, at 8963.  Getting close to 9000.  I guess the wreckage of the newspaper industry, as reported below and yesterday, doesn't interest investors.

FOREGONE CONCLUSION - AT 10:44 A.M. ET:  From AP:  WASHINGTON – The Supreme Court has turned down an emergency appeal from a New Jersey man who says President-elect Barack Obama is ineligible to be president because he was a British subject at birth.

COMMENT:  Obama could have been born on Mars, and the Court would have decided the same way.  These issues are settled elsewhere.  The Court is not about to reverse a presidential election.

AND ANOTHER ONE - AT 10:18 A.M. ET:  From the International Herald-Tribune:  The New York Times Company plans to borrow up to $225 million against its mid-Manhattan headquarters building, to ease a potential cash flow squeeze as the company grapples with tighter credit and shrinking profits.

COMMENT:  This is the third story we've run in two days about a major newspaper company in trouble, and this company, of course, is the most famous of them all.  The Times desperately needs a change of management, but it's controlled by one family, and royal families don't normally give up the throne.

STOCKS RALLY - AT 9:45 A.M. ET:  The Dow is up 252 at the opening, apparently happy about President-elect Obama's endorsement of more government aid for business.  Give some of these "investors" a little socialism and they start to smile.

SEE THE USA IN YOUR...WHAT?

Posted at 9:08 a.m. ET

Did you ever think you'd see the day when Washington would control the auto industry, at one time the corporate symbol of America?  It seems to be coming, as The New York Times reports:

WASHINGTON — Congressional Democrats were drafting legislation Sunday for tight government control of the crippled American auto industry, including the possible creation of an oversight board made up of five cabinet secretaries and the head of the Environmental Protection Agency and led by an independent chairman or “car czar.”

Cabinet secretaries?  Does that mean Hillary?  Hillary will design the new Mustang?

The final legislation is also expected to impose stringent taxpayer protections, including stock warrants that would give the government an equity stake in the three companies, new limits on executive pay and a ban on stock dividends while the loans are outstanding.

The executive pay bit will prove very popular with the public.  Even firm believers in free enterprise - and that's us - have trouble with paying a guy ten million dollars a year to fail.

Senator Christopher J. Dodd, the chairman of the banking committee that is drafting the legislation, called for the dismissal or resignation of Rick Wagoner, the chief executive of G.M., which is the most imperiled automaker.

“I think you’ve got to consider new leadership,” Mr. Dodd said Sunday in an interview on “Face the Nation” on CBS. “If you’re going to really restructure this, you’ve got to bring in a new team to do this, in my view.”

Maybe they can bring in the guys who ran Dodd's presidential campaign.  Remember?

Congressional Democrats said that if any of the companies failed to meet government requirements by the end of March, the emergency loans could be called in for immediate repayment.

At the news conference in Chicago, Mr. Obama affirmed his position that it would be unacceptable to allow the auto industry to collapse. But using somewhat tougher language than he had before, he said it made “no sense for us to shovel more money into the problem” if the companies are unwilling to reorganize.

Okay, conservatives, how about demanding that Mr. Obama apply the same standards to federally supported school systems?  (Did you just see Democrats clear the room?)

There is great skepticism about the auto bailout, especially among Republicans, and the votes to pass are not necessarily there.

Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, on “Fox News Sunday” urged his Republican colleagues to filibuster a bailout bill. “I think this is a bridge loan to nowhere,” he said.

As lawmakers grappled with ways to aid the auto industry, Mr. Obama cautioned on “Meet the Press” that it was critical to think about both short- and long-term solutions to the nation’s economic woes. “Things are going to get worse before they get better,” Mr. Obama said.

That's right.  And remember that government can make them worse.

December 8, 2008.      Permalink          

PROGRESS (WE HOPE) IN PAKISTAN - AT 8:08 A.M. ET:  From The Washington Post:   ISLAMABAD, Pakistan -- Security forces overran a militant camp on the outskirts of Pakistani Kashmir's main city and seized an alleged mastermind of the Mumbai attacks, two officials said Monday.  Backed by a helicopter, the troops grabbed Zaki-ur-Rehman Lakhvi among at least 12 people taken Sunday in the raid on the riverbank camp run by the banned group Laskhar-e-Taiba in Pakistani Kashmir, the officials said. There was a brief gunfight in the camp near Muzaffarabad before the militants were subdued, the officials said.

COMMENT:  Always good news when Pakistan takes action.  We'll ask Renee Nielsen for her view of this.

ANOTHER PAPER IN TROUBLE - AT 8:01 A.M. ET:  From The New York Times:  The Tribune Company, the newspaper chain that owns The Chicago Tribune and The Los Angeles Times, is trying to negotiate new terms with its creditors and has hired advisers for a possible bankruptcy filing, according to people briefed on the matter.

COMMENT:  This comes shortly after the story broke that the Miami Herald may be put up for sale.  No matter what we think of the mainstream media, these are serious developments.  Remember that a newspaper can be bought by elements, including foreign elements, that do not have the public interest at heart.