ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Wednesday, November 12, 2008

The Aristocracy of Pull

One of my favorite phrases from Ayn Rand's Atlas Shrugged is "The Aristocracy of Pull." It was a phrase used by Dagny Taggart to describe what the world had become - where business and its leaders advanced not through merit or providing value to their customers, but by their political connections. Those without connections (or who refused to call in their favors) simply couldn't compete. And while those who made the back room deals thought they were setting themselves up for the future, in reality they were just delaying the inevitable decline - since there will always be someone else with greater influence who can undermine you with a sweeter deal.

I've had increasing opportunity to use it over the past year and it would seem that I'll continue to use the phrase for quite some time. This story in the New York Times only proves the point:

November 12, 2008
Lobbyists Swarm the Treasury for Piece of Bailout Pie
By MARK LANDLER and DAVID D. KIRKPATRICK

WASHINGTON — When the government said it would spend $700 billion to rescue the nation’s financial industry, it seemed to be an ocean of money. But after one of the biggest lobbying free-for-alls in memory, it suddenly looks like a dwindling pool.

Many new supplicants are lining up for an infusion of capital as billions of dollars are channeled to other beneficiaries like the American International Group, and possibly soon American Express.

Of the initial $350 billion that Congress freed up [...] the Treasury Department has committed all but $60 billion. The shrinking pie — and the growing uncertainty over who qualifies — has thrown Washington’s legal and lobbying establishment into a mad scramble.
When free money is available and when the gravy train gets started, everyone lines up at the station.

This is news?!?
The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers — [...]

The lobbying frenzy worries many traditional bankers — the original targets of the rescue program — who fear that it could blur, or even undermine, the government’s effort to stabilize the financial system after its worst crisis since the 1930s.

[...]

“By the time they get to the community banks, there may not be enough money left,” said Edward L. Yingling, the president of the American Bankers Association. “The marketplace is looking at this so rapidly that those who have the money first may have some advantage.”
It would seem that the "pull" of community banks and their lobbyists in the ABA isn't as great as the "pull" of AIG, AmEx, GM, Ford, Chrysler, et al. Get in the back of the line!!!
[...]
Meanwhile, the list of candidates for a piece of the bailout keeps growing.

On Monday, the Treasury announced it would inject an additional $40 billion into A.I.G., amid signs that the government’s original bailout plan was putting too much strain on the company. American Express won approval Monday to transform itself into a bank holding company, making the giant marketer of credit cards eligible for an infusion.

Then there is the National Marine Manufacturers Association, which is asking whether boat financing companies might be eligible for aid to ensure that dealers have access to credit to stock their showrooms with boats — costs have gone up as the credit markets have calcified. Using much the same rationale, the National Automobile Dealers Association is pleading that car dealers get consideration, too.
So, the bailout may now be going to support pleasure boat dealers?!?!?!

Perhaps they didn't get the memo, but it's unlikely that people will be spending a boatload (pun intended) on luxury items like pleasure boats, yachts, etc.
“Unfortunately, I don’t have a lot of good news for them individually,” said Jeb Mason, who as the Treasury’s liaison to the business community is the first port-of-call for lobbyists. “The government shouldn’t be in the business of picking winners and losers among industries.”
I'm sure Mr. Mason's replacement (hand-picked by Barry, no doubt) will be able to provide some good news for everyone.
Mr. Mason, 32, a lanky Texan in black cowboy boots who once worked in the White House for Karl Rove, shook his head over the dozens of phone calls and e-mail messages he gets every week. “I was telling a friend, ‘this must have been how the Politburo felt,’ ” he said.
First, it's critical that Mason used to work for Rove... wouldn't want to leave that important tidbit out. (It's hilarious to see ARC's 1st Law at work in the MSM.)

Second, yes... this is exactly how a politburo apparatchik would've felt. Welcome to the United Socialist States of America, komrade! Where is the line for toilet paper again?
[...] Under the terms of the $250 billion capital purchase program announced last month, cash infusions are available to “qualifying U.S. banks, savings associations, and certain bank and savings and loan holding companies, engaged only in financial activities.”

That definition has grown to include private banks and insurers like Allstate and MetLife, which own savings and loans. It may also encompass industrial lenders like GE Capital and GMAC, the financing arm of General Motors, provided they win approval to reclassify themselves as a bank or savings and loan holding company.

[...]

Law and lobbying firms that specialize in government contracting fired off dispatches to clients and potential clients explaining opportunities in the new program. Capitalizing on the surge of interest, several large firms, including Patton Boggs; Akin Gump; P & L Gates; Fried, Frank, Harris, Shriver & Jacobson; and Alston & Bird, have set up financial rescue shops.
Urgent Memo: Would you like billions in free government money? Contact your representative at Patton Boggs immediately. For a small lobbying fee, you too could benefit from this important government program, regardless of need!!
Alston & Bird, for example, highlights its two biggest stars — former Senator Bob Dole and former Senator Tom Daschle. Mr. Dole “knows Hank Paulson very well” and has been “very helpful” with the financial rescue groups, said David E. Brown, an Alston & Bird partner involved in its effort.

“And of course, Senator Daschle is national co-chair of the Obama campaign,” Mr. Brown added, noting that because Mr. Daschle is not a registered lobbyist, his involvement is limited to “high level advisory and strategic advice.”

Not that there's any real difference between lobbying and high level advisory & strategic advice (aka back channel communications), but we have to say that, okay?
Ambac Financial Group [...] never needed lobbyists before, said Diana Adams, a managing director. But its clients persuaded the company to hire two Washington veterans — Edward Kutler and John T. O’Rourke — who helped arrange a recent meeting with Phillip L. Swagel, an assistant Treasury secretary. “We haven’t really asked for much in the past,” Ms. Adams said.
Well, Ms. Adams - Time to get your lobbying team staffed, because it will become the most strategic asset for your company over the next four years.
Initially, the banks reacted coolly to the prospect of the government taking direct stakes in them.
[...]

“The biggest surprise was how quickly it went from ‘I don’t need this,’ to ‘How do I get in?’ ” said Michele A. Davis, the head of public affairs at the Treasury, who is Mr. Mason’s boss.
If your competitors are getting free money, you pretty quickly realize that you'd better get your slice of the pie before you find yourself out of business.
Underscoring the many ways companies can take part in the rescue fund, the Hispanic Chamber of Commerce and other Hispanic business groups met with Mr. Paulson to push for minority contracts in asset management, legal, accounting, mortgage services and maintenance jobs, like plumbing and masonry.
[...]
Ah, yes... we must not leave out the other, tangential stakeholders who will all use their influence to get their little payout.
As the automakers have pushed for federal help, the trade groups for car dealerships and even boat dealerships are pressing their own cases. They argue that showrooms are feeling a squeeze between higher borrowing costs to finance their inventory and slowing consumer sales to move it out the door.

“We have been encouraged by reports that Secretary Paulson is looking to broaden the program,” said Mathew Dunn, head of government relations for the National Marine Manufacturers Association.

Translation: We've been lobbying hard and want to put a good spin on our conversations with Hank, just in case he's still on the fence. Pull and influence is so hard to gauge, you know?

On Friday, the automobile dealers sent Mr. Paulson a letter urging him to keep them in mind.

“A well-capitalized, financially sound dealer network is essential to the success of every automobile manufacturer,” wrote Annette Sykora, a car dealer in Slaton, Tex., and the chairwoman of the National Automobile Dealers Association. “Any government intervention should include provisions to preserve the viability of dealers.”
Actually, I would argue that the dealer network is an outdated relic that impairs the ability of automakers to directly control the quality of the distribution chain of their products. Compare the way people feel about going to a Best Buy to buy a flat panel TV for several thousand vs. going to a car dealership. I don't think the car dealers will get too many positive ratings.

But, we fear change, so the dealer network continues - and may soon be subsidized by the US taxpayer.

In other news, Best Buy, TJ Maxx, and Macy's are all future prospects for a government bailout.

Because no one - absolutely no one - should suffer in these economic times. (Unless you're a current or future taxpayer, of course.)

***UPDATE***
Yet more evidence of the Aristocracy of Pull (H/T Instapundit).

A car czar... just what we need! I just hope he has a Russian, Eastern European, or German accent... might as well get the full effect, right???

Your Co-Conspirator,
ARC: St Wendeler

US Auto Industry, the UAW, and Washington

The US Auto Industry provides a simple demonstration of exactly what happens when major corporations, socialist labor leaders, and regulators (in the form of D.C.) get in bed together.

The socialist labor leaders lobby for (and get) uncompetitive wages.
Washington imposes regulations on fuel standards, but limit the companies' ability to meet them with cars already produced overseas.

The companies accept these "short-term" impositions because

  1. they understand that regulation in reality shields them from other small-fry competitors that may try to unseat them; and
  2. they think that the increased and uncompetitive labor costs won't impact them in the short term and, by the time they do snowball, the company will be so profitable that it won't have any impact
This excellent OpEd in the Wall Street Journal explains why Obama may run into difficulty before he's even sworn in.
Obama's Car Puzzle
By HOLMAN W. JENKINS, JR.

You have in GM's Volt a perfect car of the Age of Obama -- or at least the Honeymoon of Obama, before the reality principle kicks in.

Even as GM teeters toward bankruptcy and wheedles for billions in public aid, its forthcoming plug-in hybrid continues to absorb a big chunk of the company's product development budget. This is a car that, by GM's own admission, won't make money. It's a car that can't possibly provide a buyer with value commensurate with the resources and labor needed to build it. It's a car that will be unsalable without multiple handouts from government.

The first subsidy has already been written into law, with a $7,500 tax handout for every buyer. Another subsidy is in the works, in the form of a mileage rating of 100 mpg -- allowing GM to make and sell that many more low-mileage SUVs under the cockamamie "fleet average" mileage rules.

Even so, the Volt will still lose money for GM, which expects to price the car at up to $40,000.


We're talking about a headache of a car that will have to be recharged for six hours to give 40 miles of gasoline-free driving. What if you park on the street or in a public garage? Tough luck. The Volt also will have a small gas engine onboard to recharge the battery for trips of more than 40 miles. Don't believe press blather that it will get 50 mpg in this mode. Submarines and locomotives have operated on the same principle for a century. If it were so efficient in cars, they'd clog the roads by now. (That GM allows the 50 mpg myth to persist in the press, and even abets it, only testifies to the company's desperation.)

[...]

The media have been terrible in explaining how the homegrown car companies landed in their present fix, when other U.S. manufacturers (Boeing, GE, Caterpillar) manage to survive and thrive in global competition. Critics beat up Detroit for building SUVs and pickups (which earn profits) and scrimping on fuel-sippers (which don't). They call for management's head (fine -- but irrelevant).

[...]

Barack Obama and Nancy Pelosi now want to bail out Detroit once more, while mandating that the Big Three build "green" cars. If consumers really wanted green cars, no mandate would be necessary. Washington here is just marching Detroit deeper into an unsustainable business model, requiring ever more interventions in the future.

The Detroit Three will not bounce back until they're free to buy labor in a competitive marketplace as their rivals do. In the meantime, private money, even in bankruptcy, almost certainly will not be available to refloat GM and colleagues. Nationalization, with or without a Chapter 11 filing, is probably inevitable -- but still won't make them competitive.

[...]

[Obama] ran a brilliant campaign, but his programmatic prescriptions amounted to handwaving designed to capture the presidency rather than tell voters what really to expect. This may have been a virtue in campaigning but it becomes a handicap in governing. The public now has no idea what to expect -- except miracles, reconciling all opposites, turning all hard choices into gauzy win-wins. Thanks to Detroit, his honeymoon is about to end before it begins.

That the MSM has allowed Obama to offer unicorns, change, and hope without getting him to lay out any specific details - at least details which are realistic - is a shame.

We've had several posts how the US auto industry has been crippled by big labor and its own incompetence, from labor's demands to continue the use of Rubber Rooms to the faux strikes that it holds to keep its workers in line to the lack of innovation (scroll down).

This chart from Carpe Diem blog is illustrates how it is impossible for our auto manufacturers to be competitive in this global economy. (This chart does not include management personnel for the Big Three or Toyota.)



***UPDATE***
Tom Friedman weighs in on the subject in today's New York Times. He lays the blame primarily on the automaker management (for everything from lack of innovation (agree) and caving in to union demands (agree, but where's the blame for the unions?).

Anyway, his analysis is good, until we get to an idiotic recommendation (originated by a reporter for the Wall Street Journal) on how to fix the mess:
[...]
O.K., now that I have all that off my chest, what do we do? I am as terrified as anyone of the domino effect on industry and workers if G.M. were to collapse. But if we are going to use taxpayer money to rescue Detroit, then it should be done along the lines proposed in The Wall Street Journal on Monday by Paul Ingrassia, a former Detroit bureau chief for that paper.

“In return for any direct government aid,” he wrote, “the board and the management [of G.M.] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver — someone hard-nosed and nonpolitical — should have broad power to revamp G.M. with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company ... Giving G.M. a blank check — which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant — would be an enormous mistake.”
[...]

First, I should note that any "government-appointed receiver" will, by definition, be political.

And perhaps these people do not understand capitalism, but the whole point is that if you do not manage costs and provide sufficient innovation to address your customers' needs, you'll go out of business.

The truly free market response to the failure of GM, Chrysler, Ford to abide by free market principles (albeit with their hands tied behind their backs by the Feds and unions) is for those companies to cease to exist.

Instead of a government-appointed (and politicized) receiver taking over GM, it should be allowed to fail and then private industry could pick up the pieces and make the very difficult decisions which Friedman calls for with the goal of meeting consumer demand. Whether that's an entrepreneur in the US or in China, Japan, etc. is not something that the government can determine. It's for the American entrepreneur to determine.

And, let's assume that the government does assign a receiver with broad powers over decisions involving GM. Who in the hell do you think will be at his door every single day, attempting to influence this "non-political" receiver? Union bosses, shareholders, and government regulators... All will seek to influence any decision of this apparatchik.

Your Co-Conspirator,
ARC: St Wendeler

Monday, November 10, 2008

Andrew Sullivan Undeterred by Election Results

He continues to investigate Sarah Palin's hoo-hah.

It would appear that my statement that one silver lining of electing Obama was that Andrew Sullivan would lay off Sarah Palin's hoo-hah was incorrect.

Brian's prediction was spot on - Sullivan would continue to investigate, since that hoo-hah was out there, plotting.

He will leave no stone unturned!!!!!!! He is a serious journalist!!!!!

Andrew Sullivan continues to demand evidence to refute the moonbat conspiracy theory that Trig Palin is actually Bristol Palin's son.

From his absolutely terrible blog at The Atlantic:

The Odd Lies Of Sarah Palin XXI: "Correcting The Record"

Just to get back to her looniness. A classic quote from the KTUU interview:
A. Regarding information regarding my record, that is now out there, much of it that was based on misinformation was a very, very frustrating thing to have to go through when the record was never corrected. And we would try to correct the record and too many in the media chose not to make those corrections. I felt too often that we were a bit defenseless, with so many things reported wrongly that could have easily been corrected based on facts.

Q. What misinformation are you talking about?

A. Some of the goofy things like who was Trig's mom. Well, I'm Trig's mom (raises her hand) and do you want to see my medical records to prove that? And days would go by before the mainstream media would even correct that ... well you know it's proven that she is is Trig's mom.
Proven? Where? And where in the MSM did anyone report that Trig was not her biological son? All I did was ask questions - and never received any proof of anything. In fact, there was virtually no attempt to correct the record with Palin's series of increasingly unhinged lies about her own record during the campaign - of all the lies I chronicled, not one was rebutted with facts from the McCain campaign. On the Trig question, I tried for two months to get some kind of basic, evidentiary proof. I asked publicly; I asked privately; the McCain campaign simply refused to give any actual records and attacked the press merely for asking questions. The quote above is therefore another total lie.
What is wrong with you???

Andy - You weren't given any information because your line of questioning is absolutely batsh!t-crazy.

There is no evidence to suggest that Trig is Bristol's son, other than some musing of an internet crackpot who has some serious flaws in character (link is not Safe For Work... seriously).

Again, let me again explain to you how hoo-hahs work, since you understandably have no clue.

You can't give birth to a baby and then get pregnant again in a few days or weeks. The whole birthing process is a little, ummmm, "disruptive" to the whole biology down there.

Imagine passing a cantelope out of your rectum.

Back to Andy
Give us some records of the last pregnancy: maybe a record of the amniocentesis, or doctor visits clearly about a pregnancy, or an interview with the doctor who delivered Trig, Catherine Baldwin-Johnson. Palin has a press avail on Wednesday. Ask for the records, please. She just asked if we wanted them. We do!
"Gimme Gimme Gimme... I demand!!! I will not be deterred from finding out if Trig is really Bristol's son!!!!"

Why should they give you anything? Who the @#%# cares besides some two-bit hack writing for the The Atlantic?

What evidence do you have that gives you the right to demand medical records from Governor Palin?

Stop, jackass. We thought you'd give this up after your last display of idiocy.

Your Co-Conspirator,
ARC: St Wendeler