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Want Sustainable Farming? Look To High-Tech Farms
The following article was initially published on March 31, 2019 via Forbes.
By Jenny Splitter
Beef seems to have had a rough year. A growing body of research suggests that consumers can help mitigate the impacts of climate change by eating less meat from ruminant animals like beef and lamb. Despite the raging debate about beef's impacts, the data shows red meat isn't going the way of the congealed salad anytime soon. Plenty of consumers in the west and growing numbers of people in the developing world want to eat beef, so it's critical to make beef production as sustainable as possible.
It may surprise consumers to learn that sustainable and high-tech farming can go hand in hand, as more growers and producers rely on data-gathering technology like sensors and robotic milking machines.
Barbara Jones is the director of the Southwest Regional Dairy Center at Tarleton University in Stephenville, Texas. She studies cow comfort in dairy farms and technology in dairy systems. "Precision technology is a really rapidly growing [area of technology] we can use to prevent disease and make really timely and informed on-farm decisions."
While it may seem like technology can create a disconnect between farmer and animal, Jones says often the opposite is true. "It's not really our fault but humans are just terrible at detecting disease within cattle" she explains, because cows are a prey animal who tend to hide the symptoms of their disease.
Brad Heins, who is an animal sciences researcher at University of Minnesota, says that technology can often improve animal welfare on farms. "Sometimes you'll notice that the computer will indicate something may be wrong before you see clinical signs in a cow or calf [but] you still need a person to actually go treat the cow…it can take a long time, especially if you have a larger farm, to look through all of your cows," so this helps ensure that a sick animal gets treatment faster.
More farms across different sectors are turning to data analytic software platforms to help farmers take those huge swaths of data and turn them into action. Land O'Lakes, for example, has developed a program for wheat and other commodity crop farms. Farmers Business Network also works to fill this niche, by providing farmers with a website for sharing information and recommendations within the farming community.
"We have all of this health information, all of this milk information all of this business information," she says of new technologies on farm like "FitBits for cows." "We're not really doing a great job of combining all of those," says Jones, of dairy farms, which she says tend to be walled off in their own data silos. "Having an analytical platform that could bring all that together would be so helpful."
Performance Livestock Analytics, a company based in Ames, Iowa, has created a cloud-based platform to help beef producers improve decision-making about nutrition and animal health. "It's challenging," says Dane Kuper, CEO of the company, describing the business of beef. "You have a whole industry that's being challenged more so than it's ever been challenged to provide that traceability and transparency and become far more effective in reducing our carbon footprint."
Kuper says the software provides the farmer with a recipe for what to feed each head of cattle, but also that the data is just the starting point. "It's so much more than just feeding the animal," he says. "It's the buying and selling decisions, and how they look at benchmarking themselves…as compared to other producers on our platform."
Large-scale farms often have an efficiency advantage over smaller operations, because they're able to look at larger animal population numbers and make decisions based on a larger pool of data. Often smaller operations don't have the bandwidth, whether literal or metaphorical, to connect with other farmers and get a sense of best practices for the industry. "For a small or midsize family farm, you may have an advisor or a consultant, but a lot of times they don't know how well they're doing compared to what they should be doing," says Kuper. That's the niche that PLA is aiming to fill.
"We're able to provide that intelligence better but also provide them an experience to where they can see their operation…and give them recommendations on where they're performing high, where they're performing low and…where they can [improve]," says Kuper. "This morning we had over a thousand cattle operations that woke up and looked at their cattle in real time."
For more articles on technology, farming and food, click here.
Corridor Intern2019-06-17T16:13:02-05:00April 1st, 2019|Ag Science, Ag Technology|


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European Cloud Initiative to give Europe a global lead in the data-driven economy
On 19th of April 2016, the European Commission presented its blueprint for cloud-based services and world-class data infrastructure to ensure science, business and public services reap benefits of big data revolution.
Below an extract form the press release. The full press release is available here.
Europe is the largest producer of scientific data in the world, but insufficient and fragmented infrastructure means this 'big data' is not being exploited to its full potential. By bolstering and interconnecting existing research infrastructure, the Commission plans to create a new European Open Science Cloud that will offer Europe's 1.7 million researchers and 70 million science and technology professionals a virtual environment to store, share and re-use their data across disciplines and borders. This will be underpinned by the European Data Infrastructure, deploying the high-bandwidth networks, large scale storage facilities and super-computer capacity necessary to effectively access and process large datasets stored in the cloud. This world-class infrastructure will ensure Europe participates in the global race for high performance computing in line with its economic and knowledge potential.
Focusing initially on the scientific community - in Europe and among its global partners -, the user base will over time be enlarged to the public sector and to industry. This initiative is part of a package of measures to strengthen Europe's position in data-driven innovation, to improve competitiveness and cohesion and to help create a Digital Single Market in Europe (press release).
Carlos Moedas, Commissioner for Research, Science and Innovation, said: "Our goal is to create a European Open Science Cloud to make science more efficient and productive and let millions of researchers share and analyse research data in a trusted environment across technologies, disciplines and borders. We listened to the scientific community's plea for an infrastructure for Open Science and with this comprehensive plan we can get down to work. The benefits of open data for Europe's science, economy and society will be enormous."
Günther H. Oettinger, Commissioner for the Digital Economy and Society, said:"The European Cloud Initiative will unlock the value of big data by providing world-class supercomputing capability, high-speed connectivity and leading-edge data and software services for science, industry and the public sector. With this initiative, our ambition is to be in the global top-three in high performance computing by 2020. We will also be looking into the potential of quantum technologies which hold the promise to solve computational problems beyond current supercomputers."
The European Cloud Initiative will make it easier for researchers and innovators to access and re-use data, and will reduce the cost of data storage and high-performance analysis. Making research data openly available can help boost Europe's competitiveness by benefitting start-ups, SMEs and data-driven innovation, including in the fields of medicine and public health. It can even spur new industries, as demonstrated by the Human Genome Project.
The Commission will progressively put in place the European Cloud Initiative through a series of actions, including:
As of 2016: creating a European Open Science Cloud for European researchers and their global scientific collaborators by integrating and consolidating e-infrastructure platforms, federating existing scientific clouds and research infrastructures, and supporting the development of cloud-based services.
2017: opening up by default all scientific data produced by future projects under the €77 billion Horizon 2020 research and innovation programme, to ensure that the scientific community can re-use the enormous amount of data they generate.
2018: launching a flagship-type initiative to accelerate the nascent development of quantum technology, which is the basis for the next generation of supercomputers.
By 2020: developing and deploying a large scale European high performance computing, data storage and network infrastructure, including by acquiring two prototype next-generation supercomputers of which one would rank among the top three in the world, establishing a European big data centre, and upgrading the backbone network for research and innovation (GEANT).

redpajama_set_name: RedPajamaCommonCrawl


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Family: Bignoniaceae Juss.
Genus: Dolichandrone (Fenzl) Seem.
Dolichandrone atrovirens (Roth) K.Schum.
This species is accepted, and its native range is S. India.
Bignonia atrovirens Roth
Bignonia crispa Buch.-Ham. ex Roxb.
Dolichandrone crispa (Buch.-Ham. ex Roxb.) Seem.
Spathodea atrovirens (Roth) Spreng.
Spathodea crispa Wall.
Spathodea crispa G.Don
Has 6 Synonyms
Dolichandrone atrovirens (Roth) K.Schum. appears in other Kew resources:
First published in H.G.A.Engler & K.A.E.Prantl, Nat. Pflanzenfam. 4(3a): 240 (1894)
Gandhi, K.N. in Editorial Committee (2006). Bignoniaceae Checklist Plants of India.
Govaerts, R. (2000). World Checklist of Seed Plants Database in ACCESS D: 1-30141.
Chatterjee, D. (1948). A review of Bignoniaceae of India and Burma Bulletin of the Botanical Society of Bengal 2: 62-79.
Art and Illustrations in Digifolia
Digital Image © Board of Trustees, RBG Kew


Fall is the best time of the year! I love the changing leaves, the pumpkin spice lattes, sweaters, boots, and crisp air.
You can pay online or when you get to the gate. We paid at the gate. It's $10 per person this season and it comes with a hay ride and a free cute little pumpkin.
How cute is this sign?
There is a bee house that sells honey and shows you a bee house with all the bees inside.
They have a few cute rustic southern elements around this place. It reminds me so much of old south before all the new construction.
There were 4 areas for the kids to jump around. Zahara had fun jumping but she wasn't too excited about the the slide. They also had a hay maze.
Growing up, I always remembered doing the hayride! I was excited to take the girls on the tractor.


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» Building Science Digests
» BSD-138: Moisture and Materials
BSD-138: Moisture and Materials
Moisture is involved in most building problems. The most serious tend to be structural damage due to wood decay, unhealthy fungal growth, corrosion, freeze-thaw, and damage to moisture sensitive interior finishes. Avoiding these problems requires an understanding of moisture, the nature of materials, and how it interacts with materials. This digest deals with these fundamentals.
It is common to classify materials in different ways. For example, organic materials are based on carbon and hydrogen molecules, whereas mineral-based materials are based on molecules with silicates and calcites. Another useful distinction is porous or non-porous materials; many materials are porous, and if the pores are microscopic (e.g., on the order of thousandths of an inch) they will have very large internal surface areas. For example, the interior surface area is about 0.2 m2/gram (50 ft2/ounce) for gypsum board, 20 m2/gram (5000 ft2/ounce) for cement paste and even more for wood or cellulose. Materials such as glass, steel and most plastics have essentially no porosity. Since these types of materials have no pores, they have no internal surface area and hence neither allow any significant water absorption nor moisture transmission.
The Water Molecule and its States
Water, like most materials, exists in liquid, solid, vapor and adsorbed states or phases. Unlike most materials, we experience water in all of its states during our daily lives. Iron and gasoline also exist in all of the states shown in Figure 1, but only at temperatures outside our normal range of experience. Of the states, the adsorbed state is the least understood, and will be described in more detail later.
Moisture, in all its states, is a molecule with two positively charged hydrogen atoms, and one negatively charged oxygen atom (H2O). The molecule is only about 0.3 nanometers in diameter: one billion laid end to end would be about one foot long.
Figure 1: Moisture States and Phase Change Processes
Notice in Figure 2 that the centroid of the two positive charges is not coincident with the centroid of the two negative charges. This spatially-unbalanced distribution of charges means that H20 is a polar molecule that behaves like a tiny magnet, i.e., the hydrogen end is permanently positive and the oxygen end is permanently negative.
Figure 2: The Water (H20) Molecule
Water's Interaction with Materials
The polar water molecule "magnet" is attracted to many materials in both the vapor and liquid state. For example, water drops will cling to your skin and to the mirror after a shower. Liquid water is actually sucked into the very small tubes (termed capillaries) present in porous materials: the smaller the tube the greater this capillary suction. The suction (or wicking) of interconnected capillaries explains how water is drawn up into celery, into brick, and to the top of tall trees. A few materials, like silicone, oils, and some plastics repulse water, and this repulsion causes water to bead up (e.g., rain on oil-soaked concrete, or water on wax paper).
The manner in which water molecules interact with other water molecules is also due to their polar nature. The hydrogen of one molecule attracts the oxygen of another and causes the water to group together. Hence, liquid water tends to exist in large clusters. As the temperature increases, the clusters gain more energy and break up into smaller clusters. When liquid water is evaporated, the molecules gain so much energy that they act individually as lone vapor molecules. The difference in size between the liquid water molecule clumps and the lone vapor molecule helps explain how materials such as Gore-Tex™ and Tyvek™ can simultaneously be watertight and highly vapor permeable.
Moisture Storage and Material Response
Many surfaces in contact with water vapor molecules have the tendency to capture and hold water molecules because of the polar nature of the water molecule; this process is called adsorption. These materials are called hydrophilic, whereas materials that repel water are called hydrophobic. Most building materials are hydrophilic. As water vapor molecules in the air adsorb to the internal surfaces of these materials, the materials' water content increases significantly. Such materials are described as hygroscopic. Materials such as glass, plastic, and steel do not have internal pores and therefore are not hygroscopic — they do not pick up moisture from water vapor in the air. (Desiccants are a special type of hygroscopic material. They can absorb a very large amount of moisture, typically several times their dry weight at high relative humidities).
When a material has adsorbed all the moisture it can, further moisture will be stored in the pores and cracks within the material by capillary suction, or by absorption. For example, wood will adsorb vapor from the air up to approximately 25 or 30% moisture content at 98% relative humidity, but fully capillary saturated wood wetted by liquid water may hold two to four times this amount of moisture. Once a material is capillary saturated it will generally not be able to store any more moisture. When this moisture content is exceeded, a material is called over-saturated, and no more water can be wicked into the material and drainage mechanisms, if available, will begin to remove the excess moisture.
In summary, liquid water is absorbed into capillary pores, and significant amounts of water vapour can be adsorbed to the surface of pore walls.
Moisture Storage Regimes
The figure below shows the three different regimes of moisture storage: the sorption or hygroscopic regime (Regions A-C), the capillary regime (D) and the over-saturated regime (E). It is very important to recognize that the moisture content varies primarily with relative humidity, not with absolute humidity.
In the hygroscopic regime, water vapor adsorbs to the pore walls. As RH increases, more layers adhere, although the first few layers are more strongly attached (Regions A and B). In Region C, the layers grow to such a size that they begin to interact and interconnect and the surface tension of water causes meniscuses to form within the smallest pores. At the highest relative humidities, all but the largest pores are filled with water. The capillary regime (Region D) is somewhat arbitrarily designated as that part of the moisture storage function above the critical moisture content. Physically, it is presumed that a continuous liquid phase forms. Finally, in the supersaturated state, the RH is always 100% and no more water will wick into a material – external forces (like gravity and air) must force it in.
Figure 3: Regimes of Moisture Storage in a Hygroscopic Porous Material
Materials such a wood, mortar, gypsum, and concrete begin life with all of their pores filled with water. As the material dries, the water content in the pores drops and adsorbed water will try to leave the surface of the pores. However, the strength of the bond between water molecules that make up the adsorbed layers results in tension forces as drying progresses. It is these internal tension forces that cause drying shrinkage stresses and the consequent cracking in wood, clay, concrete, and plaster.
Figure 4: Sorption Isotherms for Many Building Materials
Conversely, brick begins life in a high temperature oven: completely dry. When water vapor subsequently enters the pores, compressive forces are developed as water molecules force themselves close to the brick material and other adsorbed water molecules. This internal compressive force causes the initial expansion of brick, and the wetting expansion of other porous materials like clay and wood.
Hence, wetting and drying due to adsorption will cause expansion and contraction in many materials. This explains why wooden doors tend to be tight in the humid summer and loose-fitting in the dry winter. Differential moisture-related expansion and contraction also explains cupping in woods and slab curl in concrete.
Figure 5: The moisture content versus RH and shrinkage versus MC of a typical wood
In the upper portion of the hygroscopic regime (typically once the relative humidity exceeds about 80%), the adsorbed water vapor is attached so loosely that it may be available for fungal growth and corrosion. However, for dangerous levels of corrosion and mould growth, much higher humidities and even liquid water may be needed.
Time, temperature and relative humidity are the most important environmental variables affecting durability. (The moisture content can be related to the relative humidity by the sorption isotherm). Fungal growth can begin on most surfaces when the stored moisture results in a local relative humidity of over about 80% after many months. Corrosion and decay require higher levels of humidity (well over 90%) and temperatures over 60 F (15 C) for months, to proceed at dangerous rates. It is for these reasons that the RH around a material should be controlled, NOT the moisture content. Freeze-thaw damage and dissolution (of, for example, gypsum) require the material to be at or near capillary saturation (100%RH).
To dry out a material previously wetted, one must reduce the relative humidity within the materials as quickly as possible. It should be clear that drainage is not sufficient for this purpose since it will leave a large amount of saturated (100%RH) material. Capillary and adsorbed moisture can only be dried by evaporation followed by diffusion.
Summary and Conclusions
Water is a unique and fascinating molecule. Understanding how and why moisture interacts with materials is critical to the design, construction, and operation of healthy, durable, and energy efficient buildings.
Building Science Digests are information articles intended for professionals. The author and the publisher of this article have used their best efforts to provide accurate and authoritative information in regard to the subject matter covered. The author and publisher make no warranty of any kind, expressed or implied, with regard to the information contained in this article.
BASF Center for Building Excellence
DuPont™ Building Knowledge Center
RR-0001: The Vancouver Test Hut Project
BSI-027: Material View of Mold
BSI-011: Capillarity—Small Sacrifices
BSI-004: Drainage, Holes and Moderation
BSI-049: Confusion About Diffusion
BSI-058: Parthenon, Eh?
BSD-111: Flood and Hurricane Resistant Buildings
BSI-029: Stucco Woes—The Perfect Storm
BSI-039: Five Things
BSD-146: EIFS - Problems and Solutions
BSI-066: Holes and Leaks
BSI-037: Mold in Alligator Alley
BSI-013: Face Lift for Old Buildings
CP-0702: Monitored Indoor Moisture and Temperature Conditions in Hot-Humid US Residences
BA-1501: Monitoring Double-Stud Wall Moisture Conditions in the Northeast


Watch The Jungle Bunch: To the Rescue Season 2 full episodes online cartoons.
Synopsis: In the heart of the jungle lives a team of amazing animals. The team embodies justice in a world in which other animals are subjected to threats, dangers, or insurmountable problems. Almost every day someone calls for the Jungle Bunch… to the rescue! Oomee Tube.


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This article is more than 1 year old
Schitt's Creek motel for sale – minus the 'Rosebud' sign
First the Rose family's former mansion hit the real estate lists – now it's the 10-room motel they called home
The Rose family in front of the Rosebud Motel in Schitt's Creek. The real-life Hockley Motel is up for sale
Stephanie Convery
@gingerandhoney
Sun 28 Mar 2021 21.13 EDT Last modified on Tue 30 Mar 2021 00.08 EDT
The motel home of the Rose family in the Emmy-sweeping Canadian TV series Schitt's Creek is up for sale for C$2m.
The Hockley Motel in the Canadian town of Mono, Ontario, was a key filming location throughout the six seasons of the hit CBC sitcom.
Written by and starring Dan Levy and his father, Eugene, along with Annie Murphy and Catherine O'Hara, the series followed the wealthy Rose family as they were stripped of their riches and forced to start a new life in the rural town of Schitt's Creek, a property that father Johnny Rose bought for his son David as a joke.
The sale of the actual motel comes less than two months after the other main locale in the series, the mansion that featured as the Rose's repossessed home in the opening scenes of the first episode, was also put up for sale.
Schitt's Creek mansion put up for sale for $15m
That property – a glamorous building in the ritzy St Andrews-Windfields neighbourhood of Toronto, featuring 12 bedrooms and 16 bathrooms, marble stairs, Sistine Chapel-inspired frescoes, and a carved limestone exterior – was initially listed for C$14.98m, later revised to C$19.98m.
Unlike the mansion, the motel's real estate listing makes no secret of its fame, noting that it was the filming location for Schitt's Creek but was also featured in an episode of the Netflix superhero TV series The Umbrella Academy.
Fans may be slightly startled by the sight of the building on that real estate listing, which seems very bare without the giant "Rosebud Motel" sign from the popular series.
The 10-room motel sits on 2.7 ha (6.7 acres) of land along Hockley Road, about 90 minutes' drive from Toronto, with the building covering 400 sq m (4,300 square feet). It also has a two-storey "manager's suite" and separate cottage.
Surrounded by forest, the property backs on to the Nottawasaga River, which is known for its rainbow trout.
The motel is now closed, although it has been a favourite tourist destination for fans of the show.


D&S lawyer-in-residence Rebecca Wexler describes the intersection of automated technologies, trade secrets, and the criminal justice system.
For-profit companies dominate the criminal justice technologies industry and produce computer programs that are widespread throughout the justice system. These automated programs deploy cops, analyze forensic evidence, and assess the risk levels of inmates. But these technological advances may be making the system less fair, and without access to the source code, it's impossible to hold computers to account.


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Posts tagged 'Chrysler'
I Would Really Like to Get Elizabeth Warren and Other Progressives On the Record Right Now About Sub-Prime Auto
To me, the sub-prime auto loan market looks exactly like the home mortgage market in about 2006.
Back before 2009, Progressives were pushing like crazy to get banks to write mortgages to low-income borrowers with bad credit. Banks that refused to do so would face the wrath of the banking regulators and lawsuits over redlining and ever other thing the Left could think of. Seriously, if you had tried to stop sub-prime lending in 2006 the Progressives would have excoriated you as being racist, hating the poor, etc. When the whole mess inevitably collapsed, the Progressives suddenly were there blaming this lending to low income people on the banks, accusing them of predatory lending practices.
OK, so now it is 2006 in the consumer credit market, and specifically in auto loans. Banks are making crap loans to no-credit individuals on cars and getting them off the books by securitization. So let's get Elizabeth Warren on the record right now. Should banks stop lending to these no-credit low-income people? My bet is that she would support this lending, doubly so because the Obama Administration feels on the hook still for their GM and Chrysler bailouts and would rather not see these companies tank (which they would if sub-prime credit suddenly dried up). So, before she can piously accuse banks of predatory practices 3 years hence when it all collapses, I want to know what Elizabeth Warren thinks of all this right now.
Update: Well, good news and bad news. Good news is that Elizabeth Warren has criticized sub-prime auto. Bad news is she appears to be totally on the wrong track with causes, talking not about the fact the loans should not be written at all but about the fact that she thinks dealers are reaping huge profits marking up the loans. It would be interesting to see what the Obama Administration would think about a clamp-down on sub-prime auto. Methinks they might freak out at that, knowing sub-prime loans are all that is keeping US automakers out of a new recession.
Tags: banks, cars, Chrysler, Elizabeth Warren, GM, lawsuits, Obama Administration
Wow -- Two Obama Administration Economists Write Paper Saying Obama Administration Policy Was Great
I followed a link the other day to this academic paper purporting to show that the bailout of GM and Chrysler was a success. I was flabbergasted to see that the authors are Austan D. Goolsbee and Alan B. Krueger. WTF? These folks were part of the Obama Administration. This is their own policy they are passing historical judgement on. This is roughly equivalent to a economics journal seeking a paper on the success or failure of Obamacare and having Valerie Jarrett write it. How does this kind of conflict of interest pass any kind of muster?
I only skimmed the paper. I know these are two smart guys but it seems to include exactly the sort of facile analysis you would expect from a political hack, not two smart economists. I can't believe these guys would have accepted many of the assumptions they make here had they not been directly involved. Just to pick two things at random:
They seem to stick with the assumption that millions of jobs would have simply gone *poof* had the government not intervened. Yes, this happened at Solyndra, but in most cases industries operate almost seamlessly in bankruptcy. The odds are, for example, that you have flown on an airline in Chapter 11 and didn't even know it. They make a specific argument that somehow it would be bad to have both in bankruptcy at the same time, but I can remember several times when there were multiple major airlines in bankruptcy. In fact, if both went bankrupt at the same time, one could argue it would lessen their market share loss since a major competitor was in the same boat. To the extent that the companies would have continued to operate under Chapter 11, which is 99.9% likely, then all the government did was insert itself into the bankruptcy process to overrule laws about who gets what in a bankruptcy to redirect spoils to their favored constituencies
Yes, GM and Chrysler are doing OK now, but they usually do OK at the top of a business cycle. To my eye though, nothing fundamentally changed about how they are managed and operate. The same structural and cultural problems that existed before exist today. The same under-utilization of talented workers and valuable assets that existed before exists today. No real reckoning occurred -- in fact the bailout looked to me at the time as an exercise to use taxpayer money to avoid a true housecleaning. These companies have done OK, but what would they have done with a more thorough housecleaning?
Tags: bankruptcy, Chrysler, GM, Obama Administration, Obamacare, Valerie Jarrett, WTF
Category: Economics, The Corporate State | 16 Comments
Update on Steve Rattner, Friend of Investors (as long as they are rich or voted for Obama)
Last week, I noted a piece by Steve Rattner who was horrified that individual investors, empowered by companies like Kickstarter, might one day be able to invest in startups without paying a fee to Goldman Sachs.
I noted that Mr. Rattner's concern for investors seemed to be coming rather late, given that "he was the primary architect of the extra-legal screwing of GM and Chrysler secured creditors in favor of the UAW and other Obama supporters."
A Detroit News piece by my Princeton classmate Henry Payne has more:
The administration has treated obstacles to its agenda with ruthless tactics. In April 2009, that agenda was to hand an outsized, 55 percent majority interest of embattled Chrysler to the United Auto Workers in a government-orchestrated bankruptcy. But by law secured creditors are first in line in bankruptcy, and bondholders — representing their working-class pension clients — refused to accept Obama's unfair deal for a measly 29 cents on their investment dollar.
Send in the muscle.
"One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight," said Tom Lauria, lawyer for Perella Weinberg investment firm, on Frank Beckmann's Detroit radio program. Lauria later said the brass knuckles belonged to White House Auto Task Force leader Steve Rattner. Lauria's account was disturbing, too, in revealing the confidence that the White House has in its press allies to aid Obama's agenda. Sure enough, Washington reporters quickly attacked the messenger. "(Lauria's) charge is completely untrue," White House deputy press secretary Bill Burton told ABC News' Jake Tapper, "and there's obviously no evidence to suggest that this happened in any way." Actually, there was plenty of evidence. Jim Carney of Business Insider corroborated Lauria's account, reporting that "sources familiar with the matter say that other firms felt they were threatened as well." The White House escalated the threats when Obama himself singled out creditors for obstruction, accusing them of being "speculators" preying on an American auto icon — bullying words from a man with the IRS and SEC at his disposal.
"The sources, who represent creditors to Chrysler, say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler," continued the Insider. "One person described the administration as the most shocking 'end justifies the means' group they have ever encountered."...
"The president's attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him," wrote Cliff Asness, a managing partner at AQR Capital Management. "Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power."
Tags: AQR, bankruptcy, Bill Burton, Chrysler, Cliff Asness, Frank Beckmann Detroit, Perella Weinberg, rich, Steve Rattner, White House
Let Them Eat Trinkets
Steven Rattner, investment banker and former member of the Obama Administration, is terrified that under a proposed law companies will be able to raise money without investment bankers.
Most troublesome is the legalization of "crowd funding," the ability of start-up companies to raise capital from small investors on the Internet. While such lightly regulated capital raising has existed for years, until now, "investors" could receive only trinkets and other items of small value, similar to the way public television raises funds. As soon as regulations required to implement the new rules are completed, people who invest money in start-ups through sites similar to Kickstarter will be able to receive a financial interest in the soliciting company, much like buying shares on the stock exchange. But the enterprises soliciting these funds will hardly be big corporations like Wal-Mart or Exxon; they will be small start-ups with no track records.
This is absolutely, classically representative of the technocratic arrogance of the Obama Administration and the investment bankers that inhabit it. I have three quick thoughts:
Rattner's concern for individual investors comes rather late. After all, he was the primary architect of the extra-legal screwing of GM and Chrysler secured creditors in favor of the UAW and other Obama supporters.
God forbid investors get actual, you know, ownership in a company for their capital rather than just trinkets. This is so bizarrely patronizing that I had to read it twice just to make sure I wasn't missing something. But no, he is explicitly preferring that you and I get trinkets rather than ownership (ownership, apparently, to be reserved for millionaire insiders like himself).
We have truly entered the corporate state when leftish opinion makers argue that large corporations like Exxon and Wal-Mart get preferential access to capital and that smaller startups that might compete with them be shut out of the market.
I predict that over that Internet entrepreneurs running such crowd-sourcing sites would develop reputation management and review tools for investors (similar to those at Amazon and eBay). Over time, it may be that these become far more trustworthy than current credit agency reports or investment bank recommendations. After all, which do you trust more -- a 5-star Amazon review with 35 responses or a Goldman Sachs "buy" recommendation on an IPO like Facebook or Groupon? Besides, it would take a very long time, like eternity, for fraud losses in a crowd-sourcing site to equal 1/100 of the investor losses to heavily regulated Bernie Madoff.
Tags: Bernie Madoff, Chrysler, fraud, IPO, management, Obama Administration, review, running, Steven Rattner, ups
The Silly Fact-Check Genre
I do not agree with Mitt Romney's implied protectionism in his ads, particularly when he says
Obama took GM and Chrysler into bankruptcy and sold Chrysler to Italians who are going to build Jeeps in China
The problem with Obama's intervention in the GM and Chrysler bankruptcies was cronyism -- the protection of favored insiders to the detriment of the operation of the rule of law -- rather than any accelerated globalization. The auto industry is a global business, deal with it. We should be thrilled that Chrysler is participating in the Chinese economy, an opportunity they would not have had a generation or two ago. This kind of populist BS is exactly why I voted Johnson, not Romney, this morning.
Anyway, this statement has been subject to a lot of "fact-checking." Chrysler head Sergio Marchionne wrote a letter in the Detroit News, and while he did not attempt to deny the part about Italians (though that would have been funny), he did write:
Chrysler Group's production plans for the Jeep brand have become the focus of public debate.
I feel obliged to unambiguously restate our position: Jeep production will not be moved from the United States to China.
OK, thanks for the clarification. But wait, the letter goes on. He spends a lot of time explaining how Chrysler is investing a lot in Jeep SUV development and production, and that many jobs are being added making Jeeps. In fact, Jeep SUV's seem to be the big bright spot in the Chrysler turnaround, which is funny because Obama's logic for handing Chrysler over to Fiat for about a dollar was that Fiat would turn Chrysler around with all of its great small car designs.
Anyway, the really interesting part comes late in the article, where he says in paragraph 9:
Together, we are working to establish a global enterprise and previously announced our intent to return Jeep production to China, the world's largest auto market, in order to satisfy local market demand, which would not otherwise be accessible.
So Chrysler ... is going to build Jeeps in China.
This is why the whole "fact check" genre is so stupid. We could fact-check this three ways, depending on what political axe we want to grind:
We could say that Romney's ad was exactly correct, that Chrysler's CEO says it is going to build Jeeps in China, just as Romeny said. Romney's statement is literally true as written, which one would think might be a good criteria for a fact-check.
We could say that Romney's ad was misleading, because the implication was meant to be that Chrysler is shifting North American production to China, and they are not (Politifact took this tack).
We could argue that Romney's entire premise is wrong, because what matters to long-term economic health and wealth creation in this country is that Chrysler is making the optimum production decisions, wherever the factories end up. And further, that making these decisions the subject of political discourse virtually guarantees they will be made for reasons other than optimizing efficiency. This is the fact-check I would make but you will not hear in mainstream media fact-checks, because the level of economic ignorance on trade in most of the media is simply astonishingly high.
Tags: CEO, Chrysler, Chrysler Group, Detroit News, GM, media, Mitt Romney, North American, So Chrysler, SUV
Cronyism and the GM/Chrysler Bailouts
Companies and assets don't go *poof* in a bankruptcy. In fact, if any of you are even somewhat of a frequent airline flyer, over the last 10 years you likely flew an airline in bankruptcy. Companies operate all the time, sometimes for years, out of Chapter 11. In fact, that is what chapter 11 is all about -- helping creditors get more value from a company by keeping it in operation (only in truly hopeless cases, like Solyndra, is liquidation a higher value outcome for creditors than continued operation).
As such, then, the Obama Administration did not "save" GM and Chrysler, it simply managed their bankruptcy to political ends, shifting the proceeds from those guaranteed them by the rule of law to cronies and political allies. In the process, they kept these companies on essentially the same path that led them to bankruptcy in the first place, only with a pile of taxpayer money to blow so they could hang around for a while.
To this end, the WSJ has a great editorial on the whole mess
In a true bankruptcy guided by the law rather than by a sympathetic, rule-bending political task force, GM and Chrysler would have more fully faced their competitive challenges, enjoyed more leverage to secure union concessions, and had the chance to divest money-losing operations like GM's moribund Opel unit. True bankruptcy would have lessened the chance that GM and Chrysler will stumble again, a very real possibility in the brutally competitive auto industry.
Certainly President Obama threw enough money at GM and Chrysler to create a short-term turnaround, but if the auto makers find themselves on hard times and return to Washington with hats in hand, his policy will have been no rescue at all.
I will refer the reader back to my editorial way back in 2005 why it was OK to let GM die
Tags: auto industry, bankruptcy, Certainly President Obama, Chrysler, GM, Obama Administration, President Obama, rule of law, WSJ
Why We May Be Bailing Out Chrysler Again
I work in a small, four-story suburban office building. I have seen our fire drills and can look out at our parking lot, and I would be surprised if there are 200 people in the building. A few months ago some division of Chrysler moved in and took a bunch of the space. A lot still remains empty (which is why I am here -- cheap!)
The Chrysler folks put a sign downstairs a few days ago saying that they would be hosting a luncheon for the building. Great, I thought, a free hot dog and some fruit salad. Imagine my shock when I saw this when I arrived today:
Chrysler sent three full semi-trailers, one of cars and two of convention-type booths and displays, plus a whole crew of people to set this up, all for a lunch in our building with less than 200 people. I thought maybe that we were just getting a preview of a larger public event, but I am looking out my window now and they are tearing down again. Crazy.
One thing that even many libertarians get wrong: Wasting money is not unique to government entities. Private and public entities can become senescent, and grow bureaucracies that lose focus on what they are supposed to be doing. The difference between the private and the pubic sphere, though, is that for private companies, markets eventually enforce discipline (either forcing change or killing off the bloated entity). There is no similar mechanism for state agencies short of perhaps absolute bankruptcy, and Greece is proving even that is not enough to force change.
Of course, when the government gives large private entities with political pull special protections and bailouts, then no such accountability is enforced. The same people are operating the company with the same false assumptions and unlearned lessons.
Tags: bailouts, bankruptcy, cars, Chrysler, Greece, hosting
The Fed and Crony Capitalism
I will leave aside the issue of the recently revealed massive loans from the Fed to various banks. It can be argued that being the provider of last resort for short-term liquidity in the banking system is a legal, even legitimate, role for the Fed.
But scan this list. Here are some of the "banks" that got close near-interest-free money from the Fed
I presume these loans were nominally for their financing arms, but what is the systematic-risk argument for backstopping manufacturer's credit operations?
When I was at McKinsey & Co, part of their relocation package was a $10,000 interest-free one year loan. I had any number of new recruits say they did not need the loan. I told them it was a business IQ test. If you turned down the loan, we revoked your job offer (just kidding, of course). I took the loan and dropped it into T-bills.
I wonder how many of these recipients really needed the money to survive or just got smart enough to claim dire need and took the money and just dropped it into something interest-bearing.
Tags: banks, Baxter International, Chrysler, Harley Davidson, IQ, liquidity, risk
James Taggart is Alive and Well
In my Forbes column this week, I publish an essay I wrote for an Americans for Prosperity event commemorating Milton Friedman's birthday. A brief excerpt:
Having once been successful through excellence, leading businesses typically get lazy and senescent, and become vulnerable to more innovative, lower-cost or more nimble new competitors. Sears lost its electronics sales to Circuit City, which in turn succumbed to Best Buy, which is now struggling to compete with Wal-Mart, who is being challenged by Amazon.com.
Unfortunately, businesses that were once successful can feel a sense of entitlement, believing that this new competition is somehow unfair, or that consumers are somehow misguided in taking their business elsewhere. When they have money or political connections, these businesses may run to Congress and beg for special protections against competition, or even new subsidies, mandates, stimulus projects, and bailouts.
Where is the threat to capitalism and individual liberty coming from today? Is it from some aggrieved proletariat, or is the threat from bailed out Wall Street firms, and AIG, and GM, and Chrysler, and ethanol manufacturers, and electric car makers, and windmill builders?
Tags: aig, bailouts, Best Buy, Chrysler, Circuit City, ethanol, Milton Friedman, stimulus, wal-mart, Wall Street
Auto Bailouts and the Rule of Law
Todd Zwicki has a great article on the auto bailouts. Here is a brief excerpt of a long and very comprehensive article.
Of the two proceedings, Chrysler's was clearly the more egregious. In the years leading up to the economic crisis, Chrysler had been unable to acquire routine financing and so had been forced to turn to so-called secured debt in order to fund its operations. Secured debt takes first priority in payment; it is also typically preserved during bankruptcy under what is referred to as the "absolute priority" rule — since the lender of secured debt offers a loan to a troubled borrower only because he is guaranteed first repayment when the loan is up. In the Chrysler case, however, creditors who held the company's secured bonds were steamrolled into accepting 29 cents on the dollar for their loans. Meanwhile, the underfunded pension plans of the United Auto Workers — unsecured creditors, but possessed of better political connections — received more than 40 cents on the dollar.
Moreover, in a typical bankruptcy case in which a secured creditor is not paid in full, he is entitled to a "deficiency claim" — the terms of which keep the bankrupt company liable for a portion of the unpaid debt. In both the Chrysler and GM bankruptcies, however, no deficiency claims were awarded to the wronged creditors. Were bankruptcy experts to comb through American history, they would be hard-pressed to identify any bankruptcy case with similar terms.
To make matters worse, both bankruptcies were orchestrated as so-called "section 363" sales. This meant that essentially all the assets of "old Chrysler" were sold to "new Chrysler" (and "old GM" to "new GM"), and were pushed through in a rush. These sales violated the longstanding bankruptcy principle that an asset sale should not be functionally equivalent to a plan of re-organization for an entire company — what bankruptcy lawyers call a "sub rosa plan." The reason is that the re-organization process offers all creditors the right to vote on the proposed plan as well as a chance to offer competing re-organization plans, while an asset sale can be carried out without such a vote.
In the cases of GM and Chrysler, however, the government essentially pushed through a re-organization disguised as a sale, and so denied the creditors their rights. As the University of Pennsylvania's David Skeel observed last year, "selling" an entire company of GM or Chrysler's size and complexity in this manner was unprecedented. Even on a smaller scale, it would have been highly irregular: While rush bankruptcy sales of much smaller companies were once common, the bankruptcy laws were overhauled in 1978 precisely to eliminate this practice.
At first, the fact that the companies' creditors (and especially Chrysler's creditors, who were so badly mistreated) put up with such terms and waived their property rights seems astonishing. But it becomes less so — and sheds more light on how this entire process imperils the rule of law — when one considers the enormous leverage the federal government had over most of these creditors. Many of Chrysler's secured-bond holders were large financial institutions — several of which had previously been saved from failure by TARP. Though there is no explicit evidence that support from TARP funds bought these bond holders' acquiescence in the Chrysler case, their silence in the face of a massive financial haircut is otherwise very difficult to explain.
Indeed, those secured-bond holders who were not supported by TARP did not go nearly as quietly.
Tags: bailouts, bankruptcy, Chrysler, debt, GM, rule of law, sub, tarp, Todd Zwicki, United Auto Workers
Ethanol of the Entertainment Industry
Great post from SM Oliva via Tom Kirkendal at Houston Clear Thinkers. They both make a point I have been making for years -- that the large growth of major sports team revenues and player salaries is attributable, in large part, to enormous public subsidies
The NFL encapsulates, perhaps better than any other single business entity, the popular conceptions -- and misconceptions -- about capitalism and the nature of markets. The league is the epitome of statist "crony" capitalism. Its franchise operators demand huge government subsidies for stadiums while jealously guarding its prerogatives as a "private" business. Governments (and their media enablers) largely go along with this because they've been led to believe the NFL's popularity is so immense that no respectable city can go without a franchise.
Professional football is the ethanol of the entertainment industry. Since 1990, nearly every NFL franchise has either opened a new stadium, made substantial renovations to existing stadiums, or is currently in the process of obtaining a new stadium. Over this 20-year period the league's franchises obtained over $7 billion in taxpayer subsidies raging from direct taxes to publicly backed bonds. Ten stadiums are 100% government-financed, while another 19 are at least 75% government-financed. Every single franchise receives some amount of government subsidies.
Here is a great way to think about it -- many new NFL stadiums cost in the one billion dollar range. That is a billion dollars for a building that is used 3 hours per day for 10 days a year (8 regular season and 2 preseason games). A billion dollars for a building with 0.3% occupancy. How can a private entity afford such an investment and still pay multi-million dollar salaries to their employees? They can't. Which is why you and I as taxpayers are so often on the hook for the costs.
Heck, here in the Phoenix area, we are hundreds of millions of dollars in the tank for a for-god-sakes hockey team, and about to spend hundreds of millions of more to support it.
Update: This reminds me of my Forbes article on triumphalism and large building projects
Mark Thornton of the Mises Institute wrote a few years ago about the "skyscraper index," a correlation first studied by economist Andrew Lawrence, which purports to connect downturns in the business cycle with the construction of the world's largest skyscraper. Thornton did not suggest the "skyscraper index" was an infallible predictor of economic downturns, but there was ample empirical evidence to suggest "the cause of skyscrapers reaching new heights and severe business cycles are related to instability in debt financing and that the institutions that regulate debt financing should be reevaluated, if not replaced with more efficient and stabilizing institutions."
Cowboys Stadium may prove to be the NFL's version of the Chrysler Building, where the groundbreaking occurred a month before the stock market crash of 1929. By most accounts "Jerry World" is the most opulent, luxurious stadium ever built for an NFL team. Not surprisingly, it is also a debt-ridden project that exists only because Jerry Jones had easy access to a government-backed credit card.
Tags: Andrew Lawrence, Chrysler, Chrysler Building, Cowboys Stadium, debt, Jerry Jones, Jerry World, media, nfl, SM
Another Union Bailout by Obama
After famously throwing out 200 years of bankruptcy law to hose secured creditors in favor of uni0ns at GM and Chrysler, the Obama Administration is again bailing out the unions that helped get him elected
Barely 15 percent of all construction-industry workers in the United States are union members, while the remaining 85 percent are nonunion, according to the U.S. Department of Labor's Bureau of Labor Statistics. So why has President Obama signed Executive Order 13502 directing federal agencies taking bids for government construction projects to accept only those from contractors who agree in advance to a project labor agreement that requires a union work force? Obama's new order applies to all federal construction projects with price tags of $25 million or more, and it means all such contracts will only be awarded to companies with unionized work forces.
The costs of this to the public are pretty obvious, not only in terms of fairness but in increased costs and reduced competition.
Another factor helps explain Obama's willingness to sign an executive order that will put millions more tax dollars in union coffers. Mix points out that unions under PLAs typically exact agreements that include requiring contractors to make payments to union pension funds. This is an increasingly urgent issue, as the Washington Examiner's Mark Hemingway has recently detailed in these pages. According to Labor Department filings, the average union pension has only enough money on hand to cover 62 percent of the benefits it has promised to union members. Pension plans with 80 percent funding are considered "endangered" by federal auditors, while those with less than 65 percent funding are put on the "critical" list. With this latest executive order, it's clear that Obama intends to give unions on the critical list a massive dose of federal tax dollars to cure what ails them.
I'll keep saying it - this is right from the playbook of the European-style corporate state.
Tags: bankruptcy, Chrysler, corporate state, Executive Order, GM, Labor Department, Obama Administration, President Obama, unions, United States
Perils of Populism
One of the perils of being a populist, as John McCain is finding out, is that the public is allowed to change its mind, but politicians who attempt to follow them end up looking bad.
the four-term senator says he was misled by then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. McCain said the pair assured him that the $700 billion Troubled Asset Relief Program would focus on what was seen as the cause of the financial crisis, the housing meltdown.
"Obviously, that didn't happen," McCain said in a meeting Thursday with The [Arizona] Republic's Editorial Board, recounting his decision-making during the critical initial days of the fiscal crisis. "They decided to stabilize the Wall Street institutions, bail out (insurance giant) AIG, bail out Chrysler, bail out General Motors.... What they figured was that if they stabilized Wall Street - I guess it was trickle-down economics - that therefore Main Street would be fine."
I am not sure this is much of a defense. Even without McCain's access to such financial luminaries, I and many others predicted at the time the $700 billion slush fund would be used as, well, as slush fund to bail out the politically well-connected. I must admit I didn't see the GM/UAW bailout coming, but its not wildly surprising in retrospect.
Unfortunately for all of us, McCain's competition in the next election, JD Hayworth, is even less appealing.
Tags: aig, Arizona, Arizona Republic, Chrysler, Federal Reserve, General Motors, JD, Main Street, Treasury Secretary, Wall Street
The Honey Trap for Obama
I argued last week that all the electric vehicle talk we heard so much of at Chrysler and GM during their restructuring (remember all those GM electric car ads on TV, which have now disappeared?) were just a honey trap for Obama. Auto makers knew that they were not designing a car for the masses, but for one man, to get him to put taxpayer money into their companies. Now that they actually have to think about selling these cars to the public, the ads have disappeared and now Chrysler is ending its EV program.
I want to take you back to their restructuring plan. The plan had 7 steps, listed in priority order. The first and second priority was restructuring. The third priority was a deal with Fiat. The next priority, ahead of any others beyond the initial restructuring and Fiat deal, was their EV car program. Here is the page from their plan (click to enlarge)
In fact, this was very clearly a business plan aimed at Obama. Look at the #4-7 priorities and their order. Only one potential investor in the whole world would appreciate these priorities. Any private investor would find these priorities nuts:
4) Commitment to Energy Security and Environmental Sustainability
5) Compliance with Fuel Economy Regulations
6) Compliance with Emissions Regulations
7) Achieving a Competitive Product Mix and Cost Structure
So "achieving a competitive product mix and cost structure," arguably the problem that drove them into bankruptcy, is their dead last priority! Welcome to government motors, where commitment to energy security is more important than having a competitive product mix or cost structure.
Tags: Chrysler
When Cynicism Pays Off
Those of us who accused Chrysler and GM of hyping their electric car programs merely as a honey trap to capture money from the Obama Administration were accused of being ridiculous cynics. But...
Chrysler has disbanded a team of engineers dedicated to rushing a range of electric vehicles to showrooms and dropped ambitious sales targets for battery-powered cars set as it was sliding toward bankruptcy and seeking government aid.
The move by Fiat SpA marks a major reversal for Chrysler, which had used its electric car program as part of the case for a $12.5 billion federal aid package.
As late as August, Chrysler took $70 million in grants from the U.S. Department of Energy to develop a test fleet of 220 hybrid pickup trucks and minivans, vehicles now scrapped in the sweeping turnaround plan for Chrysler announced this week by Fiat CEO Sergio Marchionne.
I don't know if you remember, but during the GM bankrupcy deliberations, the airwaves were flooded with commercials for the Chevy Volt. Seen one lately? It is clear in retrospect those messages were political ads seeking subsidies, not marketing ads seeking to sell cars.
Tags: Chrysler, GM
Government Strongarm Tactics in the Chrysler Bankrupcy
This is an interesting video from the State Treasurer of Indiana about his state's experience as a secured creditor of Chrysler, and how their legal claims were pushed aside as the Administration moved more politically-favored constituencies (e.g the UAW) ahead of the secured creditors in line.
One side issue here. Early in the video he explains that the State of Indiana held a lot of Chrysler bonds because Chrysler is a big employer and they try to support companies with a big footprint in the state.
Isn't that terrible risk management policy, closely akin to Enron employees putting all of their savings in Enron stock? If Chrysler goes down, this means loss of investment returns in key retirement funds at the same time there is a large loss of tax money that will likely be the source of replacement funds.
Tags: Chrysler, obama
Chrysler Update
Apparently, Chrysler is toast. Which is what a lot of us were saying before taxpayers put billions of dollars into it. (ht: Maggies Farm)
Rumors, credible rumors, are beginning to circulate in the car industry and the automotive press, that Chrysler may not make it another year primarily due to its falling sales and growing financial losses at partner Fiat....
The Congressional Oversight Panel has already said taxpayers will not see most of the $81 billion that they put into the American car industry. The $14.3 billion put into Chrysler is more and more likely to be lost completely. The biggest single loser if Chrysler cannot survive is the UAW which owns 55% of the company.
I struggle to cry much for the UAW with that last part. They only own 55% because the President intervened to give what should have belonged to the secured credit holders over to the UAW in exchange for being so helpful in getting him elected.
In January 2009, Chrysler stood on the brink of insolvency. Purporting to act under the Emergency Economic Stabilization Act, the Treasury extended Chrysler a $4 billion loan using funds from the Troubled Asset Relief Program (TARP). Still in a bad financial situation, Chrysler initially proposed an out-of-court reorganization plan that would fully repay all of Chrysler's secured debt. The Treasury rejected this proposal and instead insisted on a plan that would completely eradicate Chrysler's secured debt, hinging billions of dollars in additional TARP funding on Chrysler's acquiescence.
When Chrysler's first lien lenders refused to waive their secured rights without full payment, the Treasury devised a scheme by which Chrysler, instead of reorganizing under a chapter 11 plan, would sell its assets free of all secured interests to a shell company, the New Chrysler. Chrysler was thus able to avoid the "absolute priority rule," which provides that a court should not approve a bankruptcy plan unless it is "fair and equitable" to all classes of creditors.
I had more here.
Update: A firsthand account from a hosed secured creditor (pdf)
Details of the bankruptcy were unprecedented. For the first time in American history and totally counter to all established laws of bankruptcy, secured creditors would receive less than nonsecured creditors....
Indiana's legal filings in the Chrysler, LLC bankruptcy sale made three essential points: First, the bankruptcy laws which have been in place protecting the rights of secured creditors cannot be arbitrarily overthrown by an act of the Executive. This is a violation of Article I, Section 8 of the U.S. Constitution in that Congress is solely assigned the role to determine uniform bankruptcy law. Neither the Courts nor the Executive can do this arbitrarily. Our funds suffered a "taking" in violation of the Fifth Amendment in that there was no "due process of law". There was, and is in all financial arrangements between debtor and creditor, a contractual relationship, which is here being rendered null and void. If allowed to stand, this violation of two party contracts undermines a basic and essential tenet of debt financing in the capital markets.
Second, money provided by the federal government to Chrysler is being provided illegally and clearly counter to the intent of Congress. When TARP was being debated then Secretary of the Treasury Henry Paulson testified the money was NOT for the auto companies. It was targeted to aid the ailing financial industry, i.e, those with "Troubled Assets" that needed a "Recovery Program." Evidence that the money was NOT intended to be an automotive bailout bill could not be more clearly illustrated than to review the failure of the separate automobile bailout bill presented in Congress in December 2008. If Congress had intended the TARP bill to cover the auto companies when it passed in October 2008, why were they even attempting to pass a separate automobile bailout bill just two months later? We believe both the Bush and Obama administration have acted illegally in this use of TARP funds.
Third, we argue that a sub rosa or "under-the-table-arrangement" between the Treasury and Chrysler prevented a fair valuation of the assets. In a legitimate auction sale, no potential bidder would be allowed to set the value of the assets being auctioned. But that is precisely what happened in this case as the Treasury was assigning values to creditors, determining which assets would be liquidated, what new parties, (i.e., Fiat SpA), would be brought into the deal, and how a new dealership network would be defined, etc. It was known from the outset that when the Chapter 11, Section 363 sale of the assets would occur, there would be only one bidder: the U.S. Treasury. Secured creditors could not have their rights protected or fairly valued in such an arrangement. Such an "insider-deal" reeks of impropriety.
Tags: bankruptcy, Chrysler
GM = Chrysler Redux
I have not blogged much in the last week on the Obama takeover of GM, but you can take all my old Chrysler posts and just substitute "GM" for "Chrysler" and you will have it pretty much straight. Having gotten away with hammering secured creditors in favor of the UAW at Chrysler, Obama is setting the same course at GM. Via Q&O:
The United Auto Workers retiree health fund is set to own as much as 39 percent of the restructured GM, in exchange for giving up its claim to at least $10 billion that the company owes it....
The chief obstacle to an out-of-court settlement for GM remains: There has been no agreement between the company and the investors who hold $27 billion worth of GM bonds.
Under orders from the Obama administration, GM has offered to give the bondholders a 10 percent equity stake in the restructured company in exchange for giving up their bonds.
Hmmm... let's give unsecured creditor the UAW a 10x better deal than the secured creditors. No wonder Obama wants to keep this out of bankruptcy court -- laws and contracts and stuff actually would have to be applied there. But the company will be set for the future -- the US and Canadian governments will control a majority of the board seats, with the rest presumably controlled by the UAW. Does everybody believe me now when I say we are heading toward a European-style corporate state?
The only thing standing in the way, of course, is those pesky secured creditors, who are actually holding out for what they are legally and contractually due. Obama's got a bit more difficulty here at GM than at Chrysler because a smaller percentage of the secured creditors are TARP recipients, and therefore he has less leverage to make them give up their rights (at Chrysler, the TARP majority was pressured successfully into selling out their non-TARP brethren among the creditors).
Of course, Obama has the advantage of Chrysler as a precedent, which makes it pretty clear why he set Chrysler up as the first to be intimidated, as he had the most leverage over them with TARP recipients in the creditor group. Interestingly, this is very similar to how the UAW has always dealt with the Big 3, targeting the most vulnerable for pressure in contract talks, and then using that settlement as a precedent in the rest of industry. One wonders if the UAW hasn't been whispering in his ear through this whole process.
Tags: bankruptcy, Chrysler, GM, obama
Why Chrysler is Closing Dealers
I had a question the other day: Why is closing dealerships a cost savings for Chrysler? My understanding is that dealers were independently-owned businesses that bought inventory from the manufacturer, and then sold and serviced the cars.
I came up with only two answers:
Auto makers finance dealer inventory in some way (either as financing or putting the inventory on consignment) such that cutting back on dealers cuts back on financing needs. Yes, with fewer dealers, the others are likely to need more inventory, but basic inventory theory says the total in the system will still be less with fewer outlets. Also, they might preferentially cut weaker dealers more likely to need financing in favor of larger dealers who can self-finance
Having too many dealers competing against each other with the same product undermines pricing in the market. Dealers cut pricing to the bone in order to get the servicing income stream after the sale. While this should not directly affect the pricing to the manufacturer, it might be argued that retail discounting is a negative for the brand over time (electronics manufacturers have debated this point for years, and there is certainly no consensus on this).
Megan McArdle provides her own answers to this question, some similar and some different:
A number of readers have asked a simple, obvious question: why do the dealers cost Chrysler so much money that they want to shut them down? I don't have a complete answer to it, but here's what I understand:
Inventory: Chrysler often has to take back unsold inventory. A lot of dealers selling a little inventory is costly, because you have to ship a minimum number of cars to each dealer
Financing: Chrysler helps many dealers float their purchases (though to be fair, those dealers also tap their own credit for things like advertising, expanding the company's effective spending)
Brand costs: Shabby, run-down dealerships don't improve the image of the firm, and if they are the only game in town, drive users to other cars.
She follows with a good analysis of why independent dealers exist in the first place.
It will be interesting to see how this goes down. Frequent readers will know that I often have said that the power base of many small-medium size towns is made up of 1) the auto dealers, 2) the beverage wholesalers and 3) the owners of the local TV stations and newspapers. Auto dealers wield a lot of local political power - they are often the largest single financial supporter of local politicians and even some Congressional reps. They also wield power as typically the largest single advertiser in local media, so they get sympathetic coverage. Over the years, they have translated this into a lot of legislative help (such as limitations on Internet competition).
Tags: auto dealers, Chrysler
The Thugs Win
Via Zero Hedge:
A group of Chrysler creditors opposing the carmaker's reorganization is likely to disband after two more investment firms withdrew from its membership, a person briefed on the matter told DealBook on Friday.
The withdrawals of OppenheimerFunds and Stairway Capital Management will likely drop the group, calling itself the Committee of Non-TARP Lenders, below 5 percent of Chrysler's $6.9 billion in secured debt, this person said. That would almost certainly eliminate the group's standing in federal bankruptcy court.
Ever since the group made public last week, its membership has shrunken by the day as it faced public criticism from President Obama and others. That continued withdrawal of firms led Oppenheimer and Stairway to conclude that they could not succeed in opposing the Chrysler reorganization plan in court, the two firms said in separate statements.
Just another step closer to a Mussolini-style corporate state.
Update: David Skeel argues the Chrysler bankruptcy settlement is a sham sale of the sort that was outlawed in 1938. Except, of course, when the President does it, I guess.
Tags: bankruptcy, Chrysler, tarp
Chicago-Style Politics, Chrysler, and the Rule of Law
Finem Respice has a great post on the Administration's bare-knuckle tactics in trying to enforce its will (against the dictates of bankruptcy law) on Chrysler:
It should be obvious to most observers that, recent allegations of strong-arm tactics in negotiations with Chrysler creditors notwithstanding, given the current situation the White House shouldn't need to resort to anything so openly thuggish as naked threats issued by the likes of Steven Rattner. Assuming for a moment, and for the purposes of conversation, that the allegations are substantially true (and I believe they are), the fact that a bit of Chicago-style thuggery seems to have been required- and seems to have failed- says a lot about this White House. It also says quite a bit about the wild overconfidence intrinsic in the administration and how entirely unused to being denied their will are the senior members thereof. A more deft executive need not have pushed so hard, or rattled the saber of class warfare so loudly, but then a more deft executive would not have expected so much....
There are three things that are scarier than the actual resort to common thuggery. The ease with which it comes to this administration. The ubiquitous and rank ineptitude that makes a resort to thuggery necessary in the first place- and promises it will become a common tactic in the days to come. And the forgiveness the population regularly affords the administration after one or another of these episodes is, yet again, made public.
The tantrums that follow missed targets sketch an interesting family portrait of a class of politically spoiled children, think Hillary Clinton meets Paris Hilton- totally devoid of real executive experience but somehow still used to getting their way no matter what some silly law book says. I believe I'll take my chances with the "speculators" over these alternatives any day, particularly when the spoiled children have the 82nd Airborne Division in their toy chest.
When Obama, who has no real experience with bankruptcy or really with any business enterprise, attempts to substitute for a bankruptcy judge, we have to ask ourselves why. He certainly does not have as much experience or expertise. He has no particular unique knowledge of the business. The only unique "quality" Obama has that a bankruptcy judge does not is that Obama does not feel bound by bankruptcy law. The only possible reason for his involvement is to substitute his desired outcome for the one that would result from the normal application of contract law and bankruptcy precedents. Since this is an inherently political process, it should not be surprising that at its core, Obama's actions are meant to promote the interests of a politically important Democratic constituency at the expense of a group of bondholders he is confident he can portray to the public as unsympathetic.
Megan McArdle said it quite well:
For the record, I have no problem with whatever cramdown those debtholders--or any others--get in bankruptcy court. If the judge thinks that the reorganization can't be done without making the UAW basically whole, fine. I just think that the reorganization should be done under the well-established procedures of the bankruptcy court, not at the behest of an administration trying to reward its supporters.
It's all very well to say that most of the senior lenders are going along, but of course, the leading senior lenders are doing this because the administration has them over a barrel. I think most of the people enthusing about this actually recognize that in other countries, when the government uses the banking system as a slush fund to reward its constituencies, this generally turns out badly--and makes the banking system a lot more frail.
Nor will it fly to claim that the administration's threats--and note that Perella Weinberg has most carefully not denied that they were threatened--are just standard jawboning. Standard jawboning does not involve the White House bloody press corps. It is true that DIP financiers often get to demand serious concessions from creditors, but those creditors are limited by what those creditors would get out of a recession, and are aimed at either maximizing enterprise value, or maximizing the likelihood that the loan will be repaid. This deal does neither.
Perhaps it's idealistic of me, but the American bankruptcy system actually works very, very well. I think we should be very cautious about mucking with it, particularly when there's no reason to. The administration didn't need to beat up the creditors in order to reorganize the company--or at least, they wouldn't have needed to do so, if they weren't trying to make the creditors take less than they'd get in a liquidation. Nor did it need to do so to keep the UAW at the table--unlike capital, the UAW isn't going anywhere. The administration is beating up the creditors because a) it wants to give the UAW a much better deal than they'd get in liquidation and b) they'd like someone else to pay for it.
Update: More of the same coming out (as I predicted here):
Although the focus has so been on allegations that the White House threatened Perella Weinberg, sources familiar with the matter say that other firms felt they were threatened as well. None of the sources would agree to speak except on the condition of anonymity, citing fear of political repercussions.
The sources, who represent creditors to Chrysler, say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler. One person described the administration as the most shocking "end justifies the means" group they have ever encountered. Another characterized Obama was "the most dangerous smooth talker on the planet- and I knew Kissinger." Both were voters for Obama in the last election.
One participant in negotiations said that the administration's tactic was to present what one described as a "madman theory of the presidency" in which the President is someone to be feared because he was willing to do anything to get his way. The person said this threat was taken very seriously by his firm.
The White House has denied the allegation that it threatened Perella Weinberg.
Tags: bankruptcy, Chrysler, obama
So what may be the most important Chapter 11 proceeding in modern history has begun -- important not just because it is large, but because the court in a sense is being asked to validate or invalidate the unprecedented power grab by the Obama administration. The results of this trial may well slow or accelerate America's devolution into a European-style corporate state where political pull rather than costs or products determine corporate success. It also will have a lot to say as to whether the rule of law has any meaning any more, at least as far as President's go.
The first salvo, by the non-TARP secured creditors that Obama was unsuccessful in beating down, has been fired:
Just hitting the Chrysler bankruptcy docket is an objection filed by W&C on behalf of its clients, objecting to the 363 asset sale. The filing is attached below (and linked here). Some very harsh language with regards to Uncle Sam in there...
The summary of the grounds for the objection:
1. The Proposed Sale Constitutes an Illegal Sub Rosa Plan that Redistributes Value Among Creditor Classes.
2. The Proposed Sale Fails the Requirement of Section 363(f).
3. The Sale Is Not Proposed In Good Faith.
4. The Taking of Collateral through a Direct or Indirect Use of TARP Authority is Unconstitutional. (This one is Huge as it sets a case law precedent.)
Over the weekend, there was a lot of back and forth with W&C (White & Case) senior attorney Tom Lauria, who said that one of his clients gave in to the restructuring when threatened by the Obama administration with having its reputation destroyed by the White House press office. Both the White House press office and the client in question denied this account of events, but never-the-less Obama was indeed vilifying the holdouts, though in a general rather than specific way.
This is probably only the tip of the iceberg. I think if creditors start to see that the bankruptcy judge is unwilling to automatically roll over for the administration, more such revelations will emerge. The blog Finem Respice has a doozy, though it is unsourced and so must be treated with caution.
Paying Back TARP
Apparently a number of the lenders to Chrysler were recipients of TARP money, and thus were especially susceptible to Obama Administration blackmail to take less money for their Chrysler debt than they would normally get in bankruptcy court. In effect, Obama is asking for partial payment for the TARP money in the form of concessions to Chrysler's other parties in the bankruptcy, mainly their unions.
But the TARP money is MY money. And I don't want to get paid back this way. If these lenders have the ability now to pay out billions of dollars (in the form of forgiven loans) then I would rather see them returning this money to the Treasury rather than sticking it in the pocket of the UAW or propping up a zombie auto company that hasn't made a car I would even consider buying in over 10 years.
TARP is going to turn out to be the greatest tool ever invented for increasing the power of government in the economy and accelerating the development of the American corporate state. And Obama can laugh all the way to the bank(s) knowing that it was a Republican administration that handed him this power.
Postscript: I thought this was funny, via Instapundit:
And though I'm not a gearhead, I'm a little surprised to hear the administration saying that Chrysler is going to be saved by""Fiat's world-class engineering.
All the more so given that Daimler couldn't help.
Tags: bankruptcy, Chrysler, fiat, tarp
Category: The Corporate State | 1 Comment
Who Do You Know Who's Been Saying This About Chrysler?
Good for Megan McArdle:
when did it become the government's job to intervene in the bankruptcy process to move junior creditors who belong to favored political constituencies to the front of the line? Leave aside the moral point that these people lent money under a given set of rules, and now the government wants to intervene in our extremely well-functioning (and generous) bankruptcy regime solely in order to save a favored Democratic interest group.
No, leave that aside for the nonce, and let's pretend that the most important thing in the world, far more interesting than stupid concepts like the rule of law, is saving unions. What do you think this is going to do to the supply of credit for industries with powerful unions? My liberal readers who ardently desire a return to the days of potent private unions should ask themselves what might happen to the labor movement in this country if any shop that unionizes suddenly has to pay through the nose for credit. Ask yourself, indeed, what this might do to Chrysler, since this is unlikely to be the last time in the life of the firm that they need credit. Though it may well be the last time they get it, on anything other than usurious terms.
I am not sure I agree with the last part. While banks seem to have an unbelievably long memory when it comes to you or I trying to get a loan after we forgot to return those Columbia House records 15 years ago and couldn't pay our bills, major banks have goldfish memories when it comes to major losses. Whether it be lending to Latin American companies or to industries like airlines that go bankrupt with clockwork regularity, banks seem perfectly capable of repeating the same mistakes over and over again.
This is in part due to something I was trying to tell folks waaaaay back in October with the threatened liquidity crisis -- banks have to lend. There is simply no good business model for a bank that involves sitting on hoards of cash under the mattress. And when you have tens of billions of dollars to lend, you can't just do it in $100 increments -- you have to lend big slabs to large institutions. And given that lots of other banks are trying to lend to the same guys, someone is going to issue that $300 million line of credit to Chrysler a couple of years hence.
Tags: bailouts, bankruptcy, banks, Chrysler, unions
Category: Economics, The Corporate State | 4 Comments
Changing Their Story
I am not shocked that Obama is full of sh*t -- all politicians are. But I am constantly surprised at just how awful the press has become.
Here was the Arizona Republic towing the government line, attempting to stampede the country into subsidizing the auto companies because bankruptcy would be a disaster:
Advocates for the nation's automakers are warning that the collapse of the Big Three - or even just General Motors - could set off a catastrophic chain reaction in the economy, eliminating up to 3 million jobs and depriving governments of more than $150 billion in tax revenue.
Industry supporters are offering such grim predictions as Congress weighs whether to bail out the nation's largest automakers, which are struggling to survive the steepest economic slide in decades.
Even if just GM collapsed, the failure could bring down the other two companies - and even the U.S. operations of foreign automakers - as parts suppliers run out of money and shut down....
Automakers say bankruptcy protection is not an option because people would be reluctant to make long-term car and truck purchases from companies that might not last the life of their vehicles.
There was absolutely no background on the chapter 11 process, or any mention by this reporter or in any subsequent AZ Republic article that bankrupcy meant anything but liquidation and disaster. Not even a hint that many large companies, including the largest company based in Phoenix -- US Airways -- have operated seamlessly through chapter 11.
It was left to bloggers like myself to remind folks that the businesses and assets don't just go *poof* in a bankruptcy, and in fact it is generally in creditors' interests to have the company continue to operate.
So, now that Chrysler is heading for bankruptcy, Obama's incentives are now to make chapter 11 look friendly instead of menacing. And the AZ Republic is finally, after 6 months of coverage, explaining what this really means:
Bankruptcy doesn't mean the nation's No. 3 automaker will shut down. A Chapter 11 bankruptcy filing would allow a judge to decide how much the company's creditors would get while the company continues to operate. The goal is for the whole process to happen quickly, Obama said, perhaps within a couple months.
I thought this was priceless:
[Obama] said a group of investment firms and hedge funds were holding out for the prospect of an unjustified taxpayer bailout.
"I don't stand with them," Obama said at the White House event.
I actually don't think this is true -- as secured creditors, they are FIRST in line in a bankruptcy. Obama has effectively told them to voluntarily move to the back of the line, and they reasonably said "no way." Obama is miffed that they have not taken his royal direction, but I think they are correct they will get more out of a process run by bankruptcy law rather than one run by political pull.
But, even if hedge funds had this expectation of a taxpayer bailout, who in the hell do you think has given them reason to have this expectation? Can anyone say "moral hazard?"
Tags: bailouts, bankruptcy, Chrysler


Fall has arrived and it is time to get the interior of the abode ready for snuggling indoors during the cooler months. Spring and summer brings lovely green growth that awakens the senses as we spend much of our time relishing in the natural beauty outdoors.
Plants in themselves are alive, thus adding new life to the abode's decor. A plant will give back by helping to filter the indoor air.
Place some greenery in a grouping on a table by a window.
When the fireplace is not in use, a plant placed on the hearth will provide a different type of warmth to the room.
The kitchen window sill is a wonderful spot to grow a herb garden that will provide seasonings for your meals.
An empty corner is the perfect location for a tree to add natural beauty to the room.
As living creatures, plants do need to be cared for. They need water and food and to be pruned and pampered.
Using Click & Grow's two integral parts easily will bring lovely greenery into the abode with no fuss.
You can now own technology that allows for growing plants without any mess or work.
Plants will easily grow without any watering and fertilizing; add batteries, then fill the water tank. The plants grow using Click & Grow's smart technology.
Remember that plants like music so turn it up and never be afraid to dance!


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February is known as the Month for Love and is also American Heart Month.
Every year thousands of people die due to heart disease with one in four deaths attributed to a heart problem. Men and women are both affected by diseases of the heart, many of which are preventable.
Eighty percent of heart disease could be prevented with changes in lifestyle, education regarding causes and learning the prevention methods. With the proper knowledge and action, you could avoid being a heart disease statistic. It is never too late to make the changes necessary for a healthier heart. Let's explore suggestions to keep your heart healthy.
One of the biggest culprits leading to heart disease is smoking. This one habit affects many areas of health and is one of the most preventable causes of early death. When you smoke, fatty substances in the arteries, atherosclerosis, build up. Blockages contribute to a decreased blood flow.
It is difficult to stop smoking. Fortunately, many resources are available to help those who wish to quit. Speak to your doctor about options or contact the American Heart Association for additional resources.
Good nutrition is essential to living a healthy lifestyle. Eating healthy, heart-smart foods is not only good for your heart but also skin, energy levels, and overall wellbeing. The likelihood of developing atherosclerosis is reduced with a healthy diet.
Vegetables, particularly green and leafy vegetables, are known to be very beneficial for hearts. Topping the list are spinach, kale, and collard greens. These contain vitamins, minerals, antioxidants and are an excellent source of vitamin K, important in protecting the arteries and creating efficient blood clotting. Greens also reduce blood pressure and decrease arterial stiffness. Dietary nitrates found in these foods do assist with the function of cells lining the blood vessels.
Inflammation and oxidative damage contribute to heart disease. Vegetables containing antioxidants fight against both. One food, tomatoes, has been discovered to contain lycopene, which has powerful antioxidant properties. High levels of lycopene decrease the risk of stroke and/ or heart attack. One study showed levels of HDL cholesterol, the "good" cholesterol, was increased when eating just two raw tomatoes four times a week.
Among well-known superfoods fighting heart disease are cold water fish: salmon, tuna, herring, mackerel, trout, and sardines. These fish have omega 3 fats which are recognized for lowering triglycerides and blood pressure while working against inflammation in the blood vessels. Eating a serving of these fatty fish, about 3.5 ounces, twice a week, you could reduce the risk of heart disease.
Fish from the ocean potentially have mercury contamination. It is recommended no more than 12 ounces per week of these fish be consumed: halibut, sea bass, swordfish, mackerel, grouper, red snapper, and orange roughie. Avoid frying to receive the best benefit. Instead, try baking, broiling, grilling or steaming.
Junk food may be a convenient choice, but nutrients are lacking. Refined sugars, saturated fats and an overabundance of salt negatively impact heart health. Not only does junk food contribute to obesity, but also clogs arteries and raises blood pressure. Instead of junk food, choose nuts, seeds or berries. These contain fiber, vitamins, minerals, and antioxidants, all of which prevent heart disease.
Exercise helps decrease cardiovascular problems. Aerobic exercise stimulates hearts to work harder and contributes to overall wellbeing. You will stay in shape, sleep better and clear your mind. As little as 30 minutes of moderate exercise every week creates a significant difference. Break exercise sessions into 10- or 15-minute increments during the day to meet exercise recommendations or consider a short brisk walk.
Building muscles are extremely valuable. Strength training helps tone muscles by burning fat and building strength improves muscle function and decreases chances of injury. Moderate to high-intensity strength training is recommended twice a week by the American Heart Association.
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