TARP audit on dealer shutdowns: Ethnic, gender issues trumped economics

(via Hotair)
The difference between private-sector decisions on business consolidation and those under government supervision gets exposed in a portion of Neil Barofsky’s audit of the government-driven closures of GM auto dealerships during the $62 billion bailout. There may be a question of whether the automakers needed to consolidate in order to shed poorly performing dealerships at all, but we’ll get back to that. The plan to consolidate dealerships that resulted from the push by the car czar and TARP used rational, objective measures to select the target outlets. In practice, those often got ignored in favor of politics, according to the audit:

GM determined that dealerships with a DPS Score of 100 were average performers; those below 70 were considered poor performers and would not be retained. SIGTARP noted, however, that GM did not uniformly apply the phase one criteria to the entire network. For example, our analysis found that two of the wind-down dealers did not meet either criterion. Furthermore, we found that, of the dealerships that met only one of the two criteria:

GM retained 355 (or approximately 41 percent) of the 858 dealerships that had a DPS score below 70.16
GM retained 9 of the 394 dealerships that sold fewer than 50 new vehicles in 2008.17
An additional 10 dealerships with a DPS score below 70 were in phase two wind-downs.
GM officials attributed these inconsistencies primarily to a desire to maintain coverage in certain rural areas where they have a competitive advantage over import auto companies that are not typically located in rural areas, although ultimately close to half of all of the GM dealerships identified for termination were in rural areas. Other dealerships were retained because they were recently appointed, were key wholesale parts dealers, or were minority- or woman-owned dealerships (emphasis mine).
On June 1, 2009, GM filed for bankruptcy. As indicated earlier in this report, bankruptcy would permit GM to accelerate the process without the restriction of state franchise laws. Bankruptcy laws supersede various state franchise laws, which could have required litigation or arbitration. GM management had also determined that the company would need to wind down more dealerships than those designated in phase one to get close enough to the “ideal network size” of 3,380 dealerships.

A couple of points should be made clear on this. Nothing in the report says that the Obama administration forced GM into these specific decisions, and apparently this didn’t happen with Chrysler’s closures. Nevertheless, it seems certain that GM would have been particularly sensitive to political considerations after begging for an receiving tens of billions of dollars to unwind its collapsing finances. If the point was saving money through the closures, GM didn’t act as if they had so much need for that to trump political considerations.


There’s a reason for that, too. The American Thinker points out that Barofsky actually found that closing dealerships wouldn’t save the automakers all that much money, anyway. A Chrysler exec told the Special Inspector General for TARP that at best it each closure would save less than $46,000, although GM put the savings at $1.1 million. But the issue was scalable, as lower performing dealerships ate up less resources anyway. One GM exec said closures weren’t going to make much difference at all:

GM would usually save ‘not one damn cent’ by closing any particular dealership. … Furthermore, a GM official stated that removing a dealership from the network does not save money for GM — it might even cost GM money — and that savings cannot be attributed or assigned to any one dealership.
 
So why close them if doing so would not save any real money? After all, both automakers need a substantial retail network to maintain their sales output. Michelle Malikin explains why politics trumped business concerns:
 
In search of the rationale for Team Obama’s bizarre, job-killing exercise of power over thousands of small car dealerships, the TARP inspector general may have stumbled onto the truth from Bloom. On page 33 of its report, Barofsky writes that “no one from Treasury, the manufacturers or from anywhere else indicated that implementing a smaller or more gradual dealership termination plan would have resulted in the cataclysmic scenario spelled out in Treasury’s response; indeed, when asked explicitly whether the Auto Team could have left the dealerships out of the restructurings, Mr. Bloom, the current head of the Auto Team, confirmed that the Auto Team ‘could have left any one component (of the restructuring plan) alone,’ but that doing so would have been inconsistent with the President’s mandate for ‘shared sacrifice.’”
 
In other words,we destroyed tens of thousands of jobs in the private sector for a soundbite about sacrifice. In doing so, we weakened the economy and handicapped the automakers’ ability to push sales through their network of dealerships. A board that made those kinds of decisions in the private sector would get sacked by its shareholders — which is why those decisions should have stayed in the private sector in the first place, and taxpayers shouldn’t have had to shoulder the risk.
 
I swear I'm getting that Ayn Rand "social goodness" vibe.....

Paul Ryan: A Time for Choosing

Young Gun Rep. Paul Ryan (R-WI) is extremely bright and informed. He is also and an excellent communicator.Recently he appeared on CNBC to discuss his Roadmap For America’s Future.


Via GatewayPundit :
Are we going to reclaim the American idea?
An entrepreneurial economy where you make the most of your life, you can maximize your potential; reinvigorate the principles of liberty, freedom, free enterprise – and defend its morality – or – are we going to abandon the American idea, and become a stagnant European-style cradle-to-grave welfare state, where we drain people of their incentive and will to make the most of their lives, and become more dependent on the government? The President and the people that run Congress are dedicated progressives. They believe that we ought to have the government so much more involved in our lives, with the government – not ourselves – as the determining factor of our destiny. The country must answer the question: do we want an entrepreneurial society that gets the prosperity turned back on in the 21st century, where individual merit and entrepreneurial activity defines the American economy – or – are we going to have more and more people dependent on the government for their livelihoods? That is the fork in the road – and the urgency of the time for choosing is being precipitated by the current direction of our government and the looming debt crisis, driven by the explosion in entitlement spending. We must decide what kind of a country we are going to be in the 21st century.

More from "Recovery Summer".....13 year low in Mortage applications

Thursday, the Associated Press reports that mortgage applications hit a 13-year low last week despite low mortgage rates. Even refinancing applications dropped significantly:

Demand for loans to purchase U.S. homes sank to a 13-year low last week, and refinancing demand also slid despite near record-low mortgage rates, the Mortgage Bankers Association said on Wednesday.

Requests for loans to buy homes dropped 3.1 percent in the week ended July 9, after adjusting for the Independence Day holiday, to the lowest level since December 1996, the industry group said.
Refinancing applications fell 2.9 percent, and the mortgage market index that reflects total loan demand also fell 2.9 percent.
Average 30-year mortgage rates edged up 0.01 percentage point to 4.69 percent, but were near the record low of 4.61 percent set in March 2009, based on MBA records dating back to 1990.

Now that the artificial stimuli have ended, most of those who intended to buy have already done so in order to take advantage of a useless taxpayer subsidy of the sales. There remains only a historically small demand among those who either didn’t qualify for the tax break or didn’t need it, or perhaps a cadre of buyers who think that Congress will create yet another subsidy for sales and are waiting them out.

Remember when the Obama administration announced its plan to spend billions of dollars to prevent foreclosures? Again, it’s the Associated Press informing people today that there will be more foreclosures in 2010 than there were in 2009, breaking records again:

More than 1 million American households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.

Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.
“That would be unprecedented,” said Rick Sharga, a senior vice president at RealtyTrac.
By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.

None of the stimuli and the rescue plans worked, because none of them addressed the core problem: joblessness. Without jobs, people lose their homes no matter how much the government intervenes to stop it. Until we get people back to work, these programs are simply futile. A homebuyer tax break doesn’t help someone without a job qualify as a buyer, and restructuring plans for existing mortgages can’t help an unemployed person make a mortgage payment. We need to shift gears quickly to reduce the massive uncertainties created by the radical Democratic agenda, reduce taxes and the regulatory burden, and get capital working in the US again so that we have employment at a level where foreclosures return to their normal level. Only then will housing markets stabilize.

It's Time to Choose

America, we are at a crossroads.


Not the first time we’ve reached a fork in the road and it will certainly not be the last, but it’s time to make a difficult choice. It’s one of sacrifice, where each and every citizen realizes that what they decide will affect future generations for decades, even centuries to come. Do we live in the present, spending for the purpose of social equality or live for the future, where we reduce our wants for the basic necessities? The decision ultimately falls upon you.

That being said, you should know that you are free. Free to speak of anything, believe in anything, and do anything that your heart desires. This freedom carries the heavy burden of responsibility. You are responsible for what you say and your actions and must face the consequences of those actions when the time comes. You are responsible for being knowledgeable about the happenings of the government in order to make the educated and important decision of picking qualified individuals into elected office every November. Nobody carries that burden but you and you alone and it’s time that we collectively realize that.

Our Constitution, for the most part, serves to protect those individual rights of every citizen providing that another individual’s rights aren’t diminished. President Obama was correct in making the accusation that the Constitution is a list of “negative” rights, but those restrictions rest solely upon the federal, state and local governments as a means to prevent abuse at the expense of our individual rights. In order to prevent a system of government that can trample on the ideas and beliefs that a person has, safeguards were put in place to protect the people from such abuse. Those rights should be defended at any cost, as one of the President’s duties; it should hold top priority over any issue as stated in the Presidential Oath.

In the last half-century, we’ve seen those rights being traded: relieving the burden of responsibility in exchange for security. We know of them as social programs, created in good intentions but whittling away at what made us…our collective independence. In the midst of this, there is a growing sense of entitlement due to these benefits that can develop into dependence on those that distribute such assistance, breeding corruption. We are pouring more money into a public education system that continues to lower standards and fails our children to the point where we’re sliding down the international scale in math and science. We’re extending the retirement age because the Social Security and Medicaid funding have been used as a slush fund, not forgetting that the system is a Ponzi scheme (illegal for private citizens to do). We have the USPS, DOT DMV, Public Railway system, etc as more examples of how convenience doesn’t necessarily the doesn’t necessarily mean efficiency. And yet, all of these programs increase the tax burden yearly and show little to no positive results in the long run.

Every time the budget is increased, we get our taxes raised, without our consent. Know this, as any government grows, taxes must be increased to order to sustain the system. Know that our tax system is based solely upon the income of the individuals that work in the private sector. That being said, every tax on business is paid by the individuals that work for the business, shareholders and /or consumers. Corporate taxes, business taxes, etc are other ways to tax the final purchaser of the products, which (for the most part) end up being the people politicians say they are trying to help. We’ve been economically enslaved by our elected officials.

For those of us that want to be free from the system, how do we obtain that freedom? The answer is simple really…arm yourselves. Not in the literal sense, but with knowledge. Become knowledgeable about our laws of the land, become aware of how those laws affect our economic system (from the corporations to the guy on main street), how our tax system works, how our economic system works, and how the individual (you) play a role in all of this. The most important thing that you must become a student of is the Constitution and our History. This may sound cliché, but knowledge is a very powerful tool. No politician can tell you what you want to hear, when you know the story behind their words.

My theory, corruption begins and ends within our governmental system. Once they are truly held accountable, then waste, fraud, abuse and the instability that results will be a thing of the past. We, the people, in order to control the system, must willingly take the responsibility of shouldering the burden in order to protect our individual rights and freedoms. The path of this nation is in our hands. No, the path of this nation is in your hands.