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Web Letter

"The Editors" say: "Don't exhaust the Treasury to keep insolvent financial giants alive. Liquidate failed banks, sell off the assets and let shareholders eat the dust."

I totally agree, and the exact same logic applies to the Detroit Three, who are about to ask for more, more and yet more. Let the shareholders, workers, UAW, bondholders, etc. sort it out in bankuptcy.

Meanwhile, the UAW walked out of talks with GM and Chrysler, making company liquidations rather more likely.

Web Letter

What's been missed in the Obama-mania is that no person can get elected president here without the express consent and approval of Wall Street--the ultimate source of wealth that must be tapped in order for a campaign to raise whatever is required at each election cycle.

Mr. Clinton had to sign up to the program before he was approved by Wall Street, and likewise did Mr. Obama. Liquidating banks and shareholders? Nope--not going to happen. Not now, not next year, not next term. There is no mystery surrounding Summers and Rubin sitting on the president's shoulders like twin vultures. They are the enforcers, and they are not going anywhere.

Mr. Obama will simply discover an intellectual cover for whatever plan they dictate. The plutocracy is going down without a fight.

Web Letter

The solution is the "Good Bank Plan."

The current trajectory of the Obama Administration will take us to a massive failure of the economy. Obama has already warned about the "lost decade" of Japan where zombie banks sucked their economy dry for over a decade, but that's exactly where we are headed!

The trouble with even considering the Japanese example is that we are not Japan. What do I mean? Well, Japan had a huge trade surplus to bring capital back home, a high savings rate, much higher than ours, and a policy of almost guaranteed employment that was sustained by their export economy. Japan, despite these deflationary troubles, had an unemployment rate below 4 percent. Should we use the Japanese model, our base unemployment rate would skyrocket to 15 percent and our under-employment rate 25 percent.

How do we reconcile the insolvent banks? That's structurally easy, but politically almost impossible--at least for the moment. It is called the "Good Bank Plan."

The Good Bank Plan would split the bank, giving the share- and bondholders the "assets" and the FDIC the operations and the depositors. The FDIC would then make the bank solvent and sell the bank when the economy settled down. The share- and bondholders would manage their "assets" in a holding company with the goal of liquidation at the highest price possible.

With the Good Bank Plan, insolvent banks are made solvent while the famous "toxic" assets are given to the previous owners to value for themselves in the market. And that's how we get out of the Zombie Bank syndrome that crippled Japan for over a decade and that will seriously damage our economy and employment for ten to fifteen years to come.

Web Letter

According to BNET (Charles Yengst),

"Caterpillar alone accounts for over half of the market. Deere is second and pulls down over 30% and Komatsu holds about 10%. Deere is more oriented toward smaller horsepower machines, while Cat and Komatsu offer dozers throughout a wide horsepower spectrum. Komatsu still has the biggest machine available rated at 1150 hp. That's a lot of bull.

"One of the interesting aspects of the dozer business is where these machines come from. In 2005, over 40% of all sales came from machines imported from somewhere else in the world outside of North America. In 2002, when the market was somewhat smaller than last year, imports accounted for 49% of the total. Caterpillar imports a large portion of its dozers from its joint venture, SCM, in Japan, along with some from its plant in Grenoble, France, and a small portion from its plant in Piracicaba, Brazil. Most of Deere's dozers come from good old Dubuque, Iowa, with the two highest hp models being made by Liebherr in Austria. As for Komatsu, all of its machines are produced in Japan, except for a limited number of units coming from its factory in Sao Paulo, Brazil and a trickle from its affiliate in Poland."

It isn't any wonder that they are lobbying against the present stimulus bill.