General Motors Files for Bankruptcy Protection
By U.S. News & World Report
With time running out on its June 1st restructuring deadline, GM expected to file for bankruptcy today. ABC World News reported last night it is a "foregone conclusion" that GM "will file for bankruptcy" Monday, "all in an effort to survive." One "estimate of best case scenarios predicts that GM and Chrysler's bankruptcies together will cost individuals more than $13 billion. Local governments, more than $5 billion."
NBC Nightly News reported "all the pieces are in place for General Motors to go bankrupt" after "54% of those holding $27 billion in GM bonds agreed to swap that debt for a stake in the new GM, clearing the path for a potentially smoother, quicker GM bankruptcy." The Detroit Free Press also reports that "a deal with bondholders not to oppose GM's bankruptcy plan was seen as an important step to helping speed GM's bankruptcy process." According to USA Today, "the U.S. government will invest an additional $30.1 billion in General Motors (GM) to finance its bankruptcy reorganization to be filed Monday, President Obama's auto task force said in a statement."
In a front-page story, the Washington Post says the restructuring plans call for "about 60 percent of the new GM" to "be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company's current bondholders would get 10 percent." Although GM "now joins Chrysler as the bankrupt duo of Detroit's once-formidable Big Three," the Los Angeles Times points out that "the Obama administration is touting the bankruptcy filing as the beginning of a new era for GM, a painful but necessary court-supervised restructuring that will make the company profitable again and a leader in producing fuel-efficient vehicles."
The New York Times profiles 31-year-old Brian Deese, "a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry." Yet, "according to those who joined him in the middle of his crash course about the automakers' downward spiral, he has emerged as one of the most influential voices in what may become President Obama's biggest experiment yet in federal economic intervention."
Meanwhile, the New York Times notes on the front page of its business Day section, "With General Motors about to follow Chrysler into bankruptcy, the nation's ability to bounce back from the steep recession is being hobbled."
Chrysler Could Exit Bankruptcy As Early As Monday The Wall Street Journal reports on its website, "Chrysler LLC could exit bankruptcy reorganization as soon as Monday, after barely a month in Chapter 11 protection," as "Judge Arthur Gonzalez of the U.S. Bankruptcy Court in Manahattan is expected to approve the sale of most of Chrysler's assets on Monday to its alliance partner, Fiat SpA."
Million, billion, trillion. What’s the difference?
Photo: MashGet, Flickr
What’s a trillion dollars? In the past couple of months we’ve heard the number tossed around like we are shopping for used cars.
“This ‘02 Windstar is $850 billion, but this ‘06 Fusion is $1.1 trillion.”
Here’s some examples from some recent news stories:
The federal budget deficit will hit an unparalleled $1.2 trillion for the 2009 budget year and the U.S. economy will likely contract by more than 2 percent, according to a new Congressional Budget Office report. [Source: MSNBC]
The testimony is another reminder to Wall Street that Washington has been the biggest force tugging at the market in recent weeks. That was the case Tuesday as investors showed their frustration with what they saw as a lack of details from Treasury Secretary Timothy Geithner on how the government plans to direct more than $1 trillion in public and private aid to support the ailing financial system. [Source: MSNBC]
Million, billion, trillion…what’s the difference?
I was interested in how much difference there is between these numbers, so I did a quick google search and found a site called “Thought You Should Know”, which promises “to bring readers information and opinions about current affairs
that have been overlooked or ignored by the mainstream "news" purveyors.”
TYSKnews had the following illustration that really helped put the numbers into perspective for me:
A million seconds is 12 days.
A billion seconds is 31 years.
A trillion seconds is 31,688 years.
A million minutes ago was – 1 year, 329 days, 10 hours and 40 minutes ago.
A billion minutes ago was just after the time of Christ.
A million hours ago was in 1885.
A billion hours ago man had not yet walked on earth.
A million dollars ago was five (5) seconds ago at the U.S. Treasury.
A billion dollars ago was late yesterday afternoon at the U.S. Treasury.
[Source: http://www.tysknews.com/Depts/Taxes/million.htm]
So, there you have it. The difference between a billion seconds and a trillion seconds is 31, 657 years! Remember that comparison the next time you hear a politician throwing these numbers around like lose change.
Chuckle for the Day
I enjoyed this, thought you might too. :) Not sure of the source.
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Cliff Notes for the Financial Meltdown
Do you find yourself completely intrigued by the historic economic meltdown confronting the USA and the world? Do you find yourself completely lost in a sea of economic jargon, and as a result, struggling to understand how this could happen? After all, how many of us can understand terms like “credit default swaps” or even “sub-prime mortgage backed securities”? And what do these have to do with AIG going bankrupt? Isn’t AIG an insurance company? Why would an insurance company go bankrupt if some poor family in California defaults on their mortgage?
If you want a clear, easy-to-understand explanation of what is happening behind the scenes of the economic meltdown, you must listen to Chicago Public Radio’s This American Life’s episode of “Another Frightening Show About the Economic.” Alex Blumberg and Adam Davidson take 60 minutes to explain in simple English what is happening and why it has 30-year Wall Street veterans shaking in their boots. This is essential information for any American trying to understand what in the world is going on with the financial markets.
Episode 365: “Another Frightening Show About the Economy”
History in the Making
Last week, for the first time, the media started making vast comparisons between September 2008 and October 1929. The words “historic” and “depression” were clearly a part of the conversation.
Money and Markets does a good job of summarizing the historic week:
If you didn't have a chance to keep up with how things played out from day to day, let me do a quick and dirty recap:
Sunday: The Federal Reserve pumped a bunch of money into the system, increased the amount it will provide in its lending facilities and further liberalized the collateral it will except in exchange for loans.
Monday: Lehman Brothers declared bankruptcy. Bank of America took control of Merrill Lynch. And AIG's fate hung in the balance.
Tuesday: The Federal Reserve denied the markets a much anticipated interest rate cut. Instead, it followed with a two-year, $85 billion loan to bail out AIG.
Wednesday: The Treasury announced a finance program where it would auction off Treasuries, separate from what it already offers. The proceeds will go to the Federal Reserve to use for "initiatives."
Thursday: Central banks around the globe decided to join the party. They declared efforts to pump nearly $250 billion into the global system to avert a financial train wreck.
Henry Paulson spearheads a new $1.2 TRILLION bailout initiative.
Friday: We learned of a new initiative, spearheaded by Treasury Secretary Henry Paulson, to put together $800 billion in a new-fangled institution and $400 billion more at the FDIC. The money will be used to take crappy assets off troubled balance sheets and grease up money markets.
Prior to this week, steps taken to stabilize the market were considered ineffective. By the looks of it, though, this week's actions tell me these guys don't want to fail in their efforts to restore order ... again. But the condition of credit markets is far from cured.
(Source: http://www.moneyandmarkets.com/Issues.aspx?The-Moral-Hazards-of-This-Weeks-Events-2287)
Current Headlines
Look at some the recent headlines generated by last week’s implosion:
Meet the Press
Here is a portion of the conversation on NBC’s “Meet the Press” from Sunday, Sept. 21, 2008 between Tom Brokaw, Erin Burnett from CNBC, Steve Liesman from CNBC, and Steven Pearlstein from The Washington Post:
MR. BROKAW: Let's go around the table, if we can. Steve, let's begin with you. There's a good possibility that the credit markets will get stabilized as a result of this. But what about the overall economy? Is it going to get worse before it gets better?
MR. PEARLSTEIN: Yes. We've only seen the financial part of this, Tom. We have seen very little economic impact of this so far, and that's till to come. And, by the way, that's going to be the phase. We're going to have--the credit crunch is going to impinge on the real economy, and then the real economy is going to impinge back on the financial crisis. So we're going to have a rebound effect on smaller and regional, regional banks and medium-sized banks which haven't been caught up in this yet. They will get it when the economy goes down. So this thing is going to ping-pong back and forth between the financial economy and the real economy for at least two years.
MR. LIESMAN: I, I don't think so. If I could just say, Tom, what is amazing to me is however many days we are before the election, how marginalized the candidates have become. What's more important now is what the current administration is saying. I think both of these campaigns are beside themselves with how--behind the scenes, how unimportant they are. I got an angry note from one of McCain's people saying, "McCain came out with this big plan on Friday to solve the problem." Like, who cares? What I care right now is what's going on behind closed doors across town here at Capitol Hill.
MS. BURNETT: ...McCain had come out with something actually very similar to what was proposed by the Treasury secretary. But it, but it does seem, when you think about it, Newsweek's cover, "King Henry," was, was the most appropriate, Tom. And we, we--every morning I come on television, we say, "Live from the financial capital of the world." Well, today we are live from the financial capital of the world. I mean, it truly is an experiment--some people say "socialism," some people say taxpayers will get the upside. The center of the world right now is in Washington--the Washington of today, and, and Hank Paulson is the CEO of, of the United States.
MR. LIESMAN: A friend of mine said he was on his way back from Washington to Wall Street, and he said which is now the People's Republic of Wall Street.
Political Cartoons
Sometimes, it is the political cartoons that best capture the mood:
