Today we continue to celebrate the bravery of the US military and the Navy Seals who finally brought Osama Bin Laden to justice:

http://washingtonexaminer.com/politics/2011/05/get-bin-laden-obama-relied-policies-he-decried

And it’s worth remembering again that one of the reasons we were able to find Bin Laden is because of the interrogation procedures of the Bush administration:

“The enhanced interrogation techniques reportedly led to identification of the courier who eventually led our forces to bin Laden’s hiding place. Critics of waterboarding and other enhanced interrogation techniques assured us that “torture” could not produce reliable information. They were probably right that sometimes such techniques yield false information. But the bin Laden operation shows that they can also produce actionable intelligence. You may remember that many Democrats called for criminal prosecution of CIA interrogators who were acting under orders vetted by legal counsel. Attorney General Eric Holder actually considered bringing such prosecutions.”

Context is so important in these debates. Are enhanced interrogations are a good thing? As a general rule, no. But in this case, they appear to have helped capture Bin Laden. And that means the Bush administration was probably doing the right thing in using these procedures.

Remember when President Bush and Congress passed a $700 billion bailout package last fall?  Do you know where the money went?  You don’t?  Well, you’re not alone. The government doesn’t know either. Or at least it’s not telling.

The original plan was for the government to provide assistance to financial institutions so that credit would again become available.  But a new report from a government watchdog agency raises questions about how banks are using the money:
http://apnews.myway.com/article/20090109/D95JKCI80.html

Elizabeth Warren, a Harvard professer and the head of the Congressional Oversight Panel, announced that the Treasury Department did not fully cooperate with her investigation of where the money has gone.  When her committee asked specific questions about the money, Treasury “did not provide complete answers to several of the questions….”  Warren added: “For Treasury to advance funds to these institutions without requiring more transparency further erodes the very confidence Treasury seeks to restore.”

But don’t just blame Treasury.  Why didn’t Congress insist on reporting requirements when it loaned the money?  This is basic business.  If you loan someone money, you do so for a specific purpose, and you have guidelines on how and when the loan will work.

Why did Washington think that writing a $700 billion check with no transparency was a good idea?  Has anyone there ever worked in the business world? I guess that question answers itself.
-Randy Hill

Today, President Bush decided to go ahead with a $17.4 million bailout package for the auto industry.  The money will come from the pot of cash approved by the Congress a few weeks ago to help rescue the financial markets.
http://online..wsj.com/article/SB122969367595121563.html

In announcing the decision, the president said the loans available to the automakers will have two conditions:

“First, they will give automakers three months to put in place plans to restructure into viable companies — which we believe they are capable of doing. Second, if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success — and gives consumers confidence that they can continue to buy American cars.”

In other words, the automakers get the money now.  They just have to get back to us later on how they will re-structure.  In negotiating, this is called losing your leverage.  The time to ask for concessions is before the money is offered, not after. This plan has too much carrot and too little stick.

While I believe America needs a viable domestic car industry, I believe it we can only achieve this if we have major reforms of both management and labor.  Unfortunately, today’s bailout does neither.

- Randy

Our current economic crisis started on Sept 11th 2001.

The Bush administration, along with Congress and a host of others,
made great efforts to prop up the economy. The straw that broke
the camel’s back was coated with oil. The surge in oil prices broke
the economic dam of America. All the efforts to prop up our economy
that continued until mid 2007 seemed a success until the economy
slipped in the rising price of oil and continues to fall. Today,
the dollar’s decline and OPEC’s plans to reduce daily output by 2.2
million barrels had no effect other than a close below $40.

When the dam of a lake breaks and the water rushes out, its level
drops. Stopping the out flow does not fix the dam and you can’t
expect the lake to return to the past level until you stop the
decline and repair the break. In July we broke the dam of our
economy and simply believing that it will shortly return to recent
levels is foolish. It’s like thinking the lake will just fill back
up once it hits the low level and again begins to rise…….the dam
is broke and the lake will not hold water until the dam is repaired
and it rains enough to fill the body of water.

All we have seen so far is our economic dam has broken and the
level continues to drop to new lows. You never can repair a dam (economy)
as long as it is loosing water and eroding (oil prices and stock
market dropping). You must first let it fall or empty to a level
able to be repaired. Then you must repair it so it once again
will hold back the water and pray for rain (business, economic growth)
to refill the body.

We are nowhere close to the bottom of the market. I am adjusting
my comments from Sept that oil will go below $40 barrel. I think we
will soon see oil well below $20. We have not seen anything yet.

But then, like always, the price will go back up. Boone Pickens recently
said as much: http://www.oregonlive.com/business/index.ssf/2008/11/pickens_oil_prices_heading_bac.html

So oil will go down and then up again…and so will our economy.

- Randy Hill