"F. George McDuffee" wrote in message
...
On Fri, 5 Dec 2008 22:22:46 -0800, "John R. Carroll"
wrote:

It's time to move forward to Capitalism 2.0.
V1 is as dead as a door nail.

JC
-----------
That's why the last of the email is so important.

"It is also critical that a "Board of Inquiry" be established to
determine how, and by whom, the domestic automotive industry was
driven into the ground, so that legislation and regulation can be
implemented to prevent any reoccurrence in this and/or other
industrial/economic sectors, with criminal referrals as may be
appropriate. "

There haven't been any criminal acts George. Phill Graham saw to that.
Stupidity isn't a crime and neither is gaming the metrics.
The ratings agencies and their clients might be in trouble but those
investigations are underway.

Like I said, car companies that evolved into financial services players is
the problem.
Everyone is going to have to get back to their roots so to speak. Otherwise
a car company, like GM, can take on increasing and incredible levels of risk
on the one hand, while reporting stable and positive metrics on the other.

The way to keep Ford or GM on track is to keep GMAC and Ford Motor Credit in
the business of funding vehicle purchases and out of risk arbitrage.
Otherwise, and what's happened, is that car companies focus all of their
energy and resources creating the illusion that infinite risk can be assumed
and then properly managed to avoid any real downside manifestation. More
real money has been put at risk than a GM or Ford can afford to lose. This
is the result of keeping their nose pressed up against the metrics window
that increased confidence to 100 percent that failure wasn't just unlikely,
but impossible. Not only is that not the case, history is repleat with
examples of risk unexpectedly coming home to roost and upsetting the apple
cart. This is the one certainty if you think about it.

Greenspan, Bernanke and an army of 30 something analysts producing and then
gaming the metrics are the real "criminals" here.
They all denied the certainty that eventually, risk will materialize and
losses paid. They claimed to be able to predict the unpredictable.
That is pretty amazing in light of the fact that all of the people at the
top have no doubt read a little history. I mean really, how seriously should
people claiming to be God be taken?
This is blasphemous, not criminal.
LOL


Also the need to eliminate trying to nail "jelly to the tree" is
critical:
"Assuming that the audit/verification is favorable, and
additional funding is warranted, it will be critical to eliminate
the "weasel words" from the "rescue/restructuring plans" and
establish firm, measurable goals, objectives, and mileposts, with
funds released only as these goals, objectives, mileposts, etc.
are met."

What possible metric would you put in such an agreement to insure that GM
deleverages the now collosal financial risks that exist outside of their
auto manufacturing operations?

The deflationary cycle has already begun. It is upon us NOW.
The only sane and acceptable way for GM to free itself is through
bankruptcy.
Releasing productive assets back into the market is exactly the purpose and
intent behind our laws in these matters.


While the Reagan vision was appeling, and may have been optimal
for a simpler time [much earlier than his administration] it is
clear [to me at least] that with the proliferation of
transnational private organizations rivaling many countries in
wealth and influence, and the introduction/proliferation of novel
financial instruments such as CDOs and derivatives, ==an
entirely new socio-economic environment has been created== and
the old platitudes, shibboleths, rules-of-thumb, etc. are no
longer operational, and indeed these may well be
counter-productive on a macro basis.

The old "platitudes, shibboleths, rules-of-thumb, etc" still apply George.
The difference is in their velocity, on the one hand, and the degree to
which the world now interlocks on the other.


As I indicated he
"It is critical that the actual financial condition of the
automotive companies be established and the
feasibility/plausibility of their projections and assumptions be
evaluated using GAAS/FASB accounting standards and accepted
forecasting techniques, during this 30 to 90 day "grace period,"
purchased at great taxpayer expense. This verified data could
then be used for a data driven decision on a company-by-company
basis in a calmer and less emergency/crisis environment. A joint
taskforce composed of qualified and senior personnel from the
GAO, IRS, SEC, and outside specialists as required, is
suggested."

A task force that will be doing an autopsy, not the triage intended.
Events are moving much too quickly for this to be productive and none of
these task forces will adress the issue of high school dropouts being hired
for top wage and benefit positions by management. Thirty eight year old
employees without an education is what has killed ther car companies George
and neither have done our educational system much good either. The incentive
to get an education has been severely degraded.


The actual financial condition of the Detroit big three is highly
questionable, particularly when their "off the books" obligations
and ties to other companies are considered, and what they
submitted is more than likely the absolute best possible
case/spin, but until a full audit/review is done by the
GAO/IRS/SEC etc, we won't know for sure.

There isn't any real question at all in this regard. With the possible
exception of Ford, the others are dead.
Dead, Dead, Dead......
Freeing the market of Cerberus and GM through bankruptcy/consolidation will
provide the opportunity and resources required for the remaining players to
have a chance at survival and possible prosperity in the future. It's the
only way.
You might as well write a five year plan otherwise George.


Even if (as seems likely for GM) these are zombie [or more
precisely vampire] corporations, it is still better to verify
this, put *SOME* money in, and wind up their operations in an
orderly/structured manner than have a Lehman style "black hole
implosion" over a weekend. [My guess would be during the
Xmas/New Year holiday week w/o some governmental funding].

My special concern is that *ALL* the major corporations are
facades and stage sets, and that the Detroit three, far from
being unique, are simply the first.

The first of what, exactly?
I'd say Drexel was the first, or one of the first. Enron and Worldcom were
Generation II products and what we are now experiencing is the failure to
apply the lessons learned from that history.

This is particularly true
where there was any significant involvement with the "new
finance."

"New Finance" aside, it isn't true at all. The truth is as old as mankind.
Greed is in fact good but only in moderation. When greed isn't bounded by
common sense, the avaricious and greedy have no real reason to protect the
underlying source of their gain - their flock - beyond the time required to
accumulate a huge wad of cashand then get out, leaving the risk behind for
others to deal with.
You can't solve a behavioral economics problem with a metric driven model.

JC