From The Detroit News: ‘How The Treasury, GM Stock Deal Got Done’

Full post here.

‘Geithner has long wanted to exit GM soon, wanting to get out of the business of owning a large stake in an automaker. Some GM officials worried that after Geithner leaves in January, reaching a deal could have taken months, but Treasury officials disagreed.

Before the November election, the Obama administration had showed no interest in disposing of its 26.5 percent stake in GM — or 500 million shares — it had acquired in 2009 as part of GM’s bankruptcy restructuring.’

Over four years ago, when GM stock was selling at $2 a share and the debt-holders had been wiped out, this blog put up the video below.  Here’s a brief 2:00 min explanation by Bill Ackman of Pershing Square on why the GM bailout was likely a bad idea:


Certain people benefitted more than they would have otherwise, of course, like the UAW and it’s fair to say the Obama administration which needed the votes in Ohio to get reelected, but others, including investors who risked their own money, and the taxpayers, most of whom didn’t have a say beyond their votes, lost money.  Obama, as politicians are wont to do, pretty clearly waited until after the election to quietly make the sale.

ZeroHedge has more here, and has been following the process for awhile.

My guess is Obama will try and maneuver away from the coming tax and regulatory fallout upon ordinary taxpayers, small businesses, and consumers from Dodd-Frank and Obamacare as it all begins to rain down.

The money has to come from somewhere, and it’s coming from you and me, through inflation, higher taxes, higher prices with costs passed down to the consumer, for starters.

My non-economist two cents.

Addition:  David Harsanyi at Reason has more.  Non-union employees pensions got raided and taxpayers foot the bill, so that Obama and the UAW can maintain power.  Cronyism on the taxpayer dime at its finest.

Amartya Sen In The New York Review Of Books: Capitalism Beyond The Crisis

Full post here.

Sen starts off by asking three questions, the first of which highlights something of an ideological problem:

“First, do we really need some kind of “new capitalism” rather than an economic system that is not monolithic, draws on a variety of institutions chosen pragmatically, and is based on social values that we can defend ethically?”

Perhaps.  Perhaps old and new capitalists need to broaden their thinking.  This leads him to a second question:

“How do we assess what is taught and championed among academic economists as a guide to economic policy—including the revival of Keynesian thought in recent months as the crisis has grown fierce?”

Sen suggests that Keynes has limitations, and focuses on those limitations by contrasting him with Cecil Pigou , a Cambridge economist with whom Keynes disagreed.  Sen argues that what Pigou focused on that Keynes did not was how much human psychology effects the markets (pessimism creates a vicious circle), and the importance of  addressing the problems of the poor and disadvantaged:

“There is a critical need for paying special attention to the underdogs of society in planning a response to the current crisis, and in going beyond measures to produce general economic expansion”

If Sen means that we have a moral duty to focus on the poor and disadvantaged in pursuing economic policy decisions, then I would somewhat agree.  Few ideas can potentially preserve American dynamism, social mobility and egalitarianism (freeing it from grip of even the most righteous (E)galitarians).  However, few ideas could so easily become (and so often are) idealized, codified, and enforced by by those who know what’s better for us than we do.   I’m a little wary. 


Sen’s main focus though is on Adam Smith, and he argues that Smith understood the fact that free-markets don’t function in a vacuum; they require moral, legal, and other institutional support structures for their survival.  A system of laws and economic practice is required to maintain and enforce a basic level of ethical/moral activity in the markets, and was developing rapidly during Smith’s time:

“Investment in productive businesses could not flourish until the higher rewards from corruption had been moderated.”

Agreed.  This is deep, pragmatic wisdom.  

Sen also points out that the reaction to Smith’s Wealth of Nations was quick to come:

“While a number of socialist critics, most notably Karl Marx, influentially made a case for censuring and ultimately supplanting capitalism, the huge limitations of relying entirely on the market economy and the profit motive were also clear enough even to Adam Smith.”

I’d just offer that the Marxist/Communist worldview is still very much with us, influencing me, you, Sen, India, Europe…and some of those who perhaps cling too tightly to “capitalism” right now.  It’s not as urgent an issue as many zealots on the right here in America may claim…but it’s certainly there.  


So what to do?  Sen suggests we could try and solve the health-care situation (we are spending a lot of money on a rickety, ineffecient system) but even in doing so, we need:

“Third, in addition to working our way toward a better assessment of what long-term changes are needed, we have to think—and think fast—about how to get out of the present crisis with as little damage as possible.”

But how do we do as little damage as possible?

“What is also needed is a clearheaded perception of how different institutions actually work, and of how a variety of organizations—from the market to the institutions of the state—can go beyond short-term solutions and contribute to producing a more decent economic world..”

I’m still a little wary of that state part.

Obviously, I’m not an economist, so I’ve probably just stepped into a heated debate…one with differing schools of thought and competing influences.   One of Sen’s suggestions seems to be that we need to think more about having government in the picture, which is in line with much of the views that seem to have animated his life’s work.

Any thoughts and comments are welcome.

Addition:  This is a quite liberal, center left, but economically profound vision about which I harbor much doubt.  Does Sen’s thinking truly address America’s current issues with an understanding of its traditions?  See the above post.  

Related On This Site:  Is health care a right?  From If-Then Knots: Health Care Is Not A Right…But Then Neither Is Property?  Martha Nussbaum worked with Sen in India…Martha Nussbaum In Dissent–Violence On The Left: Nandigram And The Communists Of West Bengal

Also:  Robert Nozick anticipates arguments for distributive justice in his libertarian response to similar arguments:  A Few Thoughts On Robert Nozick’s “Anarchy, State and Utopia”

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From The American Interest Online: Niall Ferguson on ‘What Chimerica Hath Wrought’

Full article here.

China + America =’Chimerica’

We are living through a challenge to a phenomenon Moritz Schularick and I have christened “Chimerica.” In this view, the most important thing to understand about the world economy over the past decade has been the relationship between China and America.

So is America in decline?  Ferguson isn’t convinced that the current economic crisis is any indication:

“Power is always relative, and a crisis that hits the periphery of the global economy harder than the core must logically increase the power of the core. Nemesis, too, can be exported.”

See Also On This Site:    Fukuyama seems to think so, but maybe he’s still reeling from the Iraq war…From The New Perspectives Quarterly: Francis Fukuyama’s ‘Is America Ready for a Post-American World?’…Fareed Zakaria seems to think so too…Fareed Zakaria BBC Interview: America In Decline?…Richard Lieber’s not necessarily convinced:  Richard Lieber In The World Affairs Journal–Falling Upwards: Declinism, The Box Set