Monday, December 22, 2008

Bailout Nation (Continued)

U.S. taxpayers have bailed out AIG, Citigroup, JP Morgan Chase, BoA, Goldman Sachs and other financial firms to the tune of at least $700 billion dollars while these firms continue to hand out dividends to their shareholders and Christmas bonus money to their executives.

At the same time, these financial firms refuse to say what else they have been doing with the bailout money other than hand out dividends and bonuses.

They say it's none of our business.

Are they lending any? Are they packing it under the mattress?

Who knows - the government certainly doesn't because these financial firms don't have to tell regulators anything at all.

U.S. taxpayers have also bailed out U.S. automakers to the tune of $17.4 billion, although that dough has been handed out with express instructions on how it must be spent and when it must be repaid:

According to a Fact Sheet issued by the White House, the automakers must provide the government with "warrants for non-voting stock," and agree to such conditions as "limits on executive compensation," the elimination of "perks such as corporate jets," and grant the government the power to "block any large transactions" over $100 million.

A series of "targets" are also listed, though it doesn't appear that they're mandatory. These include eliminating the controversial "jobs bank" that allows laid-off auto workers to continue receiving a portion of their salaries, and enacting both "work rules" and wages "that are competitive with those of transplant auto manufacturers by 12/31/09."

Ironic that the union workers who make cars have to take pay cuts in order for the government to help the car companies with bailout money while banks can borrow money at will, never say what they're doing with it and never have to pay it back.

Guess which industry has more juice (i.e., payoff money in the form of campaign contributions and cushy post-politics jobs for retired politicians) - U.S. automakers (and the union workers who make those cars) or the financial industry?

Now the Wall Street Journal reports that commercial real estate developers are about to go belly up from overleveraging and overbuilding and they too want bailout money from taxpayers:

With a record amount of commercial real-estate debt coming due, some of the country's biggest property developers have become the latest to go hat-in-hand to the government for assistance.

They're warning policymakers that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies. The reason: according to research firm Foresight Analytics LCC, $530 billion of commercial mortgages will be coming due for refinancing in the next three years -- with about $160 billion maturing in the next year. Credit, meanwhile, is practically nonexistent and cash flows from commercial property are siphoning off.


To head off some of the impending pain, the industry is asking to be included in a new $200 billion loan program initially created by the government to salvage the market for car loans, student loans and credit-card debt. This money is intended to go directly to help investors finance purchases of securities backed by these assets. If commercial real estate is included, banks might have an incentive to make more loans to developers since they'd be able to repackage and sell them more easily to investors with the assurance of government backing.

As part of their lobbying efforts, some industry representatives have asked lawmakers to explore the idea of setting up a separate program aimed at boosting lending to commercial real estate only.

"We've been urging Washington to put this as one of the top priorities in dealing with the economy," says Steven Spinola, president of the Real Estate Board of New York, underscoring the need for the government to help spur commercial property lending either directly or indirectly.

I wonder if the same lawmakers happy to hand out the cash to their banking buddies but only grudgingly handing out money to the car companies after UAW workers agree to work for non-union wages and give up their health and pension benefits will suddenly revert to a "How Much Do You Need?" philosophy when it comes time to help the commercial real estate industry?

I guess it will come down to whether the CRE industry can take care of Washington lawmakers with campaign contributions and cushy post-politics jobs.
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