Explaining Southern California's economy

Man defies Newt Gingrich, installs gun rack in Chevy Volt

First, Newt Gingrich insisted while on the campaign trail that you can't put a gun rack in a Chevy Volt, the gas-electric hybrid vehicle that Newt referred to as an "Obama car." 

Then General Motors, the company that builds the Volt, took the high ground in a post titled "We Did Not Engineer the Volt to Be a Political Punching Bag." The company — famously bailed out by a combination of the Bush and Obama administrations, the pushed through bankruptcy before emerging as a serially profitable enterprise — pointed out that you can put a gun rack in a Volt, but asked why you would want to. It's a durn sedan, after all.

The chap above set out to prove Gingrich wrong, quote literally. What's impressive here is not just that you can install a gun rack in a Volt, but that you can install one in about half an hour using $7 in materials.

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The DeBord Report on 'America Now with Andy Dean'

I did my weekly Economy Report on "American Now with Andy Dean" a day early this week — Thursday rather than Friday. Andy very kindly informed me that the first step to leaving the liberal matrix is admitting that you have a problem, but I think I need to know what the other eleven steps are before I'm fully prepared to go down that road. In any case, we ran through the business news of the week, which included President Obama's budget; General Motors' record 2012 profit and Mitt Romney's view of the bailouts; the thorny question of whether "carried interest" income earned by folks in the financial sector should be taxed as regular income; and the whole dustup over Starbucks policy toward gun owners.

Listen in! It was a snappy discussion, as usual. I come in about halfway though.

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GM posts record 2011 profit, with most coming from toughest auto market

Matthew DeBord

Don't think cool cars can some in small packages? No so. The new Chevy Sonic is proof that General Motors can finally do a tiny ride that commands attention.

Good news today for General Motors: it generated its highest annual profit ever in 2011. That's $7.6 billion. And yes, you read that first sentence right: highest annual profit ever. Higher than when GM owned half the U.S. market. Higher than when it was the largest industrial concern on the planet.

This is remarkable for two reasons, one obvious, one not. First the obvious: three years ago, GM had to be bailed out by the taxpayer before entering bankruptcy. It was under fierce attack in North America from Toyota and others. The future looked, if not completely dim, then not exactly luminous.

Now the not-obvious. Most of GM's 2011 profit came from North America. Some analysts have pointed to this as a problem and highlighted GM's struggles with its main European division, Opel, which it decided to hold on to rather than sell, post-Chapter 11. (Other observers, notably Slate's Matt Yglesias, have complained that all the rah-rah around GM suggests that America is still too close to the auto-industrial business model that built the country in the 20th century.)

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The parallel universe of Mitt Romney's auto industry rescue

Republican presidential hopeful Mitt Rom

Emmanuel Dunand/AFP/Getty Images

Republican presidential hopeful Mitt Romney holds a Caucus election night at Red Rock Casino in Las Vegas, Nevada, February 4, 2012. AFP PHOTO/Emmanuel Dunand (Photo credit should read EMMANUEL DUNAND/AFP/Getty Images)

Mitt Romney is doubling-down on his negative view of the the 2009 bailouts and bankruptcies of General Motors and Chrysler. In late 2008, he argued in the New York Times that a bailout of Detroit would mean the end of the U.S. auto industry. Today, in the Detroit News, he refuses to back off from his earlier position, says that a "managed bankruptcy" of GM and Chrysler was what was needed all along, and that the Obama administration practiced:

"...crony capitalism on a grand scale. The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better.

And:

Before the companies were allowed to enter and exit bankruptcy, the U.S. government swept in with an $85 billion sweetheart deal disguised as a rescue plan.

By the spring of 2009, instead of the free market doing what it does best, we got a major taste of crony capitalism, Obama-style.

Thus, the outcome of the managed bankruptcy proceedings was dictated by the terms of the bailout. Chrysler's "secured creditors," who in the normal course of affairs should have been first in line for compensation, were given short shrift, while at the same time, the UAWs' union-boss-controlled trust fund received a 55 percent stake in the firm.

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You call that a mortgage settlement?

Mortgage settlement

Reuters/Gary Cameron

U.S. Attorney General Eric Holder and U.S. Housing and Urban Development Secretary Shaun Donovan announce that the government and 49 state attorneys general have reached a $25 billion settlement agreement with the five largest mortgage lenders to redress foreclosure abuses, in Washington, February 9, 2012.

UPDATE: California Attorney General Kamala Harris wasted no time in leaping ahead to a provision of the deal that could up the settlement to $45 billion, with California homeowners getting $18 billion. The U.S. Department of Justice says $7 billion, and adds that "[s]ervicers that miss settlement targets and deadlines will be required to pay substantial additional cash amounts." Maybe she doesn't like the size of the stated number all that much, either?

We have a mortgage settlement at last between the big banks and the states. California and New York, the two staunchest holdouts, have signed on. But then there's the actual number: $25 billion (initially reported as $26 billion). It just isn't that much. And although the news of the settlement has been greeting positively, for the most part, it's far from clear that it will ultimately turn the housing market around.

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