Chrysler to File Bankruptcy

According to people "familiar with the talks," several of Chrysler's bondholders have rejected the government's deal, which amounted to paying them off a little more than 30 cents on the dollar.  So that means it's probably Chapter 11 time.  Blecch.  I hope the holdouts all end up getting less from the judge than they would have gotten from Obama.

Like everyone else, I was amused when Texas Governor Rick Perry, a Republican, requested help from the CDC with swine flu medication just a week or so after he said that the "federal government has become oppressive" and that if Texans started considering seceding from the union, "who knows what might come out of that." Perry didn't seem to realize that throwing off the yoke of the federal government would mean no more help when the going got tough.

Today comes news that Perry has issued a disaster declaration for the state of Texas, the first step in getting assistance from federal agencies like FEMA, DHS, and HHS. I decided to take a look at how many times the federal government has bailed Texas out during Perry's tenure. The results are pretty incredible.

Bankruptcy and Chrysler

If the Times's sources are correct, it looks like we're going to see a bankruptcy filling from Chrysler later today. A few debtors have balked at the Treasury Department's offer of 33 cents on the dollar:

To win over several hedge funds, which have been holding out for better terms, the Treasury increased its cash offer to holders of Chrysler’s secured debt by $250 million, to $2.25 billion, these people said. If all of the secured holders would agree to the new deal, which would give them the cash in exchange for retiring about $6.9 billion of debt, Chrysler would still have a chance of restructuring out of bankruptcy court.

[...]

The four big banks that own 70 percent of Chrysler’s secured debt have already signed on to the Treasury’s plan and are trying to line up the other lenders in favor of the new terms.

If all 46 lenders do not agree to the new offer, and a bankruptcy filing occurs, the lenders will be forced to accept the $2 billion they were originally offered or fight in court for a higher amount.

This conjures two questions in my head: Why do these holdouts think they can get better terms? Do they really think the bankruptcy courts are going to be more amiable to them, especially after considering the debtors who hold a vast majority of Chrysler's liabilities have accepted the Treasury's terms? The Treasury's deal would leave about $675 million for the holdouts. I say take the money and swallow your losses on the bad investment; the deal doesn't look like it will get much sweeter.

UPDATE: The Obama administration has confirmed Chrysler will indeed for bankruptcy today.

Swine Flu Update

It turns out the swine flu outbreak may be a little bit less deadly than we thought.  Here's the latest from the Los Angeles Times:

As the World Health Organization raised its infectious disease alert level Wednesday and health officials confirmed the first death linked to swine flu inside U.S. borders, scientists studying the virus are coming to the consensus that this hybrid strain of influenza — at least in its current form — isn't shaping up to be as fatal as the strains that caused some previous pandemics.

....When the current virus was first identified, the similarities between it and the 1918 flu seemed ominous.

Both arose in the spring at the tail end of the flu season. Both seemed to strike people who were young and healthy instead of the elderly and infants. Both were H1N1 strains, so called because they had the same types of two key proteins that are largely responsible for a virus' ability to infect and spread.

Richard Webby, an influenza virologist at St. Jude Children's Research Hospital in Memphis, told the Times, "This virus doesn't have anywhere near the capacity to kill like the 1918 virus," which claimed an estimated 50 million victims worldwide.

Among those 50 million were my grandmother's two sisters.  So this is good to hear.  But wash your hands anyway, OK?

You Gonna Jump or Jerk Off?

If you're like me, you think the Patrick Swayze-Keanu Reeves vehicle Point Break is one of the better things to happen to 1991. And if you're like me, you have a suspicion that the production could somehow be even better were it performed live by young, yelly guys who never, ever put shirts on and a totally unpracticed Johnny Utah lead who is chosen from the audience and reads his lines off cue cards. Well, you're right on both accounts.

Point Break Live! debuted in Seattle in 2003, but two cities in California are lucky enough to be hosting its current runs. The LA show opened for what was supposed to be a couple of months in 2007 and is still going due to popular demand; San Francisco has brought the show back after a successful go last year. It's been to New York and Minneapolis and Las Vegas, and according to coproducer Thomas Blake, Nightline is soon to run a segment about how PBL! could change the face of theater. Let's hope that's true. Take, for example, this conversation I had with one of the actors after the show: 
 

Obama on Torture

Interesting comment from Obama right now about why he opposes waterboarding:

Not because there might not have been information that was yielded by these various detainees who were subjected to this treatment, but because we could have gotten this information in other ways.

Obama has obviously seen all the internal reports by now, and he's carefully not saying that waterboarding didn't work.  This suggests that it may indeed have produced useful information.

Now there's a followup question directly asking whether waterboarding produced anything useful.  He's dodging a little bit (reports are classified, can't discuss it, etc. etc.), but making it sound as if it probably did.  On the other hand, after a bit of throat clearing toward the end of his answer, he says he's seen nothing that "would make me second-guess the decision that I've made" to ban waterboarding.  Which might suggest either that waterboarding produced only moderate amounts of useful information, or that he's convinced we could have gotten the same information with other methods.

Not sure what to make of all that, or even if I'm interpreting it correctly.  Just passing it along.

Calling All Campus Hellraisers

Today's fearless feats of student activism go far beyond the rallies, protests and marches of yesteryear—here's your chance to spread the word about your favorites.

Mother Jones and Campus Progress proudly introduce the Hellraisers, our first annual student activism awards.

Here's how it works: You tell us about your favorite activism antics. Selected nominees will be featured in the September/October 2009 issue of Mother Jones.

Anyone can nominate any current student activists (and we're not just talking college here! High schoolers, grad students, kindergartners—all okay).

Nominating is quick and easy. Do it here.

 

 

Volcker on Stimulus

Most liberal economists seem to think that we need a much bigger stimulus package than the one we passed in February.  However, most liberal economists also seem to think that Barack Obama ought to listen to Paul Volcker more than he does.  So now what do they think?

The U.S. economy is "leveling off at a low level" and doesn't need a second fiscal stimulus package, said former Federal Reserve Chairman Paul Volcker, one of President Barack Obama’s top economic advisers.

Volcker, head of Obama's Economic Recovery Advisory Board, said the 6.1 percent decline in first-quarter gross domestic product reported by the government today was "expected." More recent data show the contraction in housing, business spending and inventories has slowed, and stimulus spending is only just beginning to hit the economy, he said.

That's from Bloomberg Television's "Conversations with Judy Woodruff," which will air this weekend. There was also this about regulatory reform:

Volcker said he and National Economic Council Chairman Lawrence Summers have disagreed about how heavily regulated the financial industry should be.

"We've had a little talk about this," Volcker said. "I'm sure he'll recognize the wisdom of my views sooner or later."

That's a conversation it would be interesting to hear more about, wouldn't it?

Are Canadian Banks the Answer?

David Leonhardt's interview with President Obama includes a fair amount of conversation about the economy, including a question about whether big banks need to be split up:

THE PRESIDENT: You know, I’ve looked at the evidence so far that indicates that other countries that have not seen some of the problems in their financial markets that we have nevertheless don’t separate between investment banks and commercial banks, for example. They have a “supermarket” model that they’ve got strong regulation of.

Like Canada?

THE PRESIDENT: Canada being a good example....So — that doesn’t mean that, for example, an insurance company like A.I.G. grafting a hedge fund on top of it is something that is optimal....And in that sense I think you can make an argument that there may be a breaking point in which functions are so different that you don’t want a single company doing everything.

But when it comes to something like investment banking versus commercial banking, the experience in a country like Canada would indicate that good, strong regulation that focuses less on the legal form of the institution and more on the functions that they’re carrying out is probably the right approach to take.

I'm sort of waffly on the whole question of limiting bank size, but this isn't an especially persuasive answer.  The experience of Canada is, I suppose, an existence proof that big banks can be regulated effectively, but when Obama says "other countries" he sure seems to be suggesting more than just Canada.  And frankly, I think he'd run out of examples pretty quickly.  After all, big banks Europe are in pretty bad shape.  Ditto for big banks in Japan following their property crash.  And big banks in Russia.  And big banks in Asia following their 1997 meltdown.

In some sense, I guess this comes down to a belt and suspenders issue.  I suspect Obama is basically right: regulating leverage is more crucial than regulating bank size.  A big bank with reasonable gearing is pretty safe.  But if you really want to be safe, you'll have a fallback: not only will you regulate leverage, but you'll limit bank size and complexity as well, so that even if a bank manages to evade the leverage rules it still can't do too much damage.  It can only do that if it manages to evade two separate sets of rules.

More to the point, though, I wish Leonhardt hadn't let Obama off the hook by feeding him the Canada example.  I would have have been curious to hear what Obama had to say without prompting.  Does he really think the banking system in the rest of the world is doing well because it's better regulated than ours?  I'm not sure the evidence supports that.

Swine Flu Deja Vu--and SNAFU

The more we learn about the current swine flu outbreak, the more it all begins to sound like what happened in 2005, when the world faced a possible pandemic of avian flu. But with the exception of stocking up on Tamiflu, most governments seem to have taken little meaningful action in response to the bird flu scare, and learned few lessons.

In certain ways, the world’s experience with Avian flu may actually have rendered it less, rather than more prepared for a new outbreak. The Daily Telegraph (UK) reported earlier this week on a meeting of scientists held in Austria back in February, before the swine flu had surfaced. There, Harvard professor Thomas Monath warned that because so much attention had been focused on bird flu, if another strain popped up, “we would be screwed.” The Telegraph’s medical editor writes:

He warned vaccine manufacturing capacity is insufficient, meaning that if a pandemic strain of flu emerged now it would be impossible to make enough for the world’s population in time.

The scientific community had become “complacent” about a new flu pandemic because the avian influenza strain H5N1 has been around for 13 years without spreading around the world.

Prof Monath said: “If it’s a new strain of flu it will be nine months to a year before we have got really good geared up vaccine production. We will rely on antiviral drugs first and then it is a crash effort to make a vaccine. In the meantime there will be clearly an emerging uncontained problem,” he said.

A second unlearned lesson has to do with the way we treat our livestock. Here, again, explicit warnings have been ignored. In an excellent piece on Huffington Post, David Kirby outlines the links among the virulent new flu strains and “confined animal feeding operations” (CAFOs), otherwise known as factory farms, where tens of thousands of animals live packed together in poorly ventilated sheds, standing (and breathing) in their own excrement.