The Associated Press has reported that the domestic auto industry should look to a previous government-financed loan during the Carter administration to understand how to properly wheedle the American people out of their money.

Still, the Chrysler chapter offers lessons to the executives of General Motors Corp., Ford Motor Co. and Chrysler LLC — the private equity successor to the old Chrysler Corp. — as well as the United Auto Workers union as they try to win support in Congress for a stalled $25 billion rescue plan.

Apparently they already have learned - and the lesson is that if the government tossed them a bone before, they might do it again.  It’s like feeding an alligator in the wild.  They quickly learn where to get food from, and never fail to approach another human.  Some missing and chewed-up limbs are par for the course.

Just as with the bailout of banks and financial institutions, this is a process that will allow large institutions to act irresponsibly during prosperous times, and when things get tight, treat the government like a piggybank of last resort.  Unfortunately, this routine of pampering and coddling businesses that operate under a cloud of failure does not encourage them to improve.  Chuck Grassley notes that there is no impetus for improvement here:

“We’re asking the taxpayers to throw money in. We’re not asking management to do anything,” said Sen. Charles Grassley, R-Iowa, who supported the Chrysler deal as a House member. “We’re not asking unions to do anything and we aren’t asking government to do anything except throw the money in. We aren’t undoing a lot of the reasons why they’re in trouble.”

What’s the real point of this loan?  This sounds less like a “bridge” through tough economic times, and more like a failed business model trying to save itself without having to put forth the effort to adapt to changing conditions.

Carmakers claim that we’ll see an additional 10% unemployment if they go belly-up:

The auto companies argue a bailout is justified because one in 10 U.S. jobs depends on them.

GM, Chrysler and Ford employ close to 250,000 people in the United States and supporters claim they touch more than 4 million other jobs at suppliers, dealers, car haulers and rental companies.

Oddly, Japanese companies that have long out-competed American manufacturers are not screaming for the same time of assistance.  In fact, Honda is opening a new US plant, just as our own companies are backed into a corner asking for government aid - and they’re doing a better job of making cars here, and then selling them to us, than domestic automakers are.

As a shiny Honda Civic sedan rolled up beside Indiana’s governor and Honda’s president, Greensburg Mayor Gary Herbert posed a question designed to remind Americans that the U.S. auto industry extends beyond Detroit.

“Is this Civic an American-built automobile?” Herbert thundered, smiling at a sea of white-suited workers who seemed very pleased to have landed high-paying jobs in an industry where layoffs are common.

“Yes,” came the shouted reply from hundreds of voices.

This, along with their “sky is falling” warnings, illustrates what has been wrong with General Motors, Ford and Chrysler all along: for nearly 50 years, they have failed to realize that while they’re a big deal, they’re also not indispensable.  They have allowed themselves to be slowly marginalized by foreign innovation, and have not built particularly compelling products designed to compete on a long-term basis.  Marketing gimmicks such as 0% financing and commercials with rocks falling into trucks simply does not cut it.  In a market economy with active competition, complacency spells trouble.

These companies, which have not engaged their unions and until recently have not aggressively pressed development of automotive technology, claim to be at the forefront of the domestic economy - a prospect which is really quite scary.  The writing has been on the wall for some time, and they haven’t heeded it.  Maybe it would be better if these clowns found something that they’re better at, such as propelling themselves out of cannons.  The end result is that these companies may need to fail, and their assets reabsorbed into something that can more efficiently utilize them, so that the economy is better off in the long run.

Our economy may do poorly in the short run if these large automakers collapse - but we’ll continue to buy cars, and someone will be happy to continue to sell them to us.  Whoever that is will probably purchase some of the assets of the Big Three, hire their former employees, and do a better job of what they should have been doing all along.  In fact, Honda and Toyota seem to prefer opening plants in the United States - as opposed to General Motors’ tendency to open shop in Mexico.

Just in case anyone has any ideas, none of this has anything to do with executive pay.  Unlike government, businesses can pay their employees whatever they wish.  Corporations are answerable to their shareholders, but members of the public at large are not shareholders in a given publicly traded company.  If Alan Mulally brings home $100 million in a bad year, that’s between him, Ford and Ford’s shareholders.

By the way, Americans for Prosperity has been extraordinary at getting bloggers to this conference.  They gave $1000 scholarships to people who wanted to attend - which included airfare and hotel expenses.  That type of generosity is a great way to drum up visibility, and other groups should follow suit.

A big sign…

People meeting, booths, etc…

It looks like quite a few different groups are there, some more well-known than others…

It looks like a pretty good event with decent attendance.  Austin mentioned that he has met George Will - hopefully with pictures.  I look forward to getting more information in the coming days.

In a unanimous opinion, the six-member bipartisan committee said there is “substantial credible evidence” that “Cranston engaged in an impermissible pattern of conduct in which fundraising and official activities were substantially linked.”

Cranston, who got $900,000 of the $1.3 million Keating contributed to the senators and their causes, has a right to respond to the allegation and ask for an investigative hearing before the committee recommends his punishment.

Everyone is going to read this incident from 17 years ago according to their own prejudices.  However, the factual record seems to reflect that John McCain, then a very junior senator from Arizona, was not aware of Charles Keating’s shady dealings.  Once he became aware, he told Keating to hit the road, and that was the end of that.

What could McCain have done differently?  Maybe he should have asked more questions to start with, or spoken to someone else at Lincoln S&L besides Keating.  Maybe he shouldn’t have gotten involved at all.  It’s impossible to say how things might have turned out otherwise.  What is certain is that McCain never had malicious intent.  He never intended to deceive or deal with someone who he knew was in the wrong.

The real criminal here is Charles Keating - he lied to everyone, including the five senators, and then went to prison for it.  To this day, he remains unrepentant and says that the whole thing was caused by regulators.  Apparently they forced him to mismanage his clients’ money.

As an interesting side note, his trial was presided over by none other than Judge Lance Ito.  Strange.

In an interview, Bennett said McCain should never have been dragged into the ethics case to begin with. He said that after his own lengthy investigation, he came to the conclusion that the case against McCain and former Sen. John Glenn (D-Ohio) “should have been dropped” because the evidence suggested that once McCain understood that the Justice Department was investigating Keating, he backed off any involvement. Dowd noted that McCain threw Keating, once a strong supporter, out of his office after Keating pressed him to intervene in his case.

People who examine this case closely can discern that McCain’s actions actually show his character in a positive light.

Once McCain knew that Keating had acted wrongly, he cut himself off.  He repeatedly said that it was a stupid thing to do, that he should have known better, and that he couldn’t believe what a mess he’d gotten himself into.  Most people make huge blunders at least occasionally, even if it doesn’t make worldwide news because they’re not a sitting US Senator.

Contrast this with Obama - once he knew that Ayers had built bombs and endorsed revolution against the government…he had a party at his house?  Since then, he hasn’t said, “Gee, you know…I should never have hung around Ayers.  He was a bad influence on a lot of people.  That was a big mistake.”  No…he simply tried to justify it away with some vague argument about how they didn’t really socialize that much.

Apparently the White House will soon appoint Neel Kashkari to head the Treasury Department’s Office of Financial Stability.  Kashkari is currently the assistant secretary for international affairs for the Treasury Department.  He is a former VP at Goldman Sachs.  Neel is referred to as an “Indian-American” - no idea if he himself is from India, or just his parents.  Unfortunately as he has not yet occupied a particularly high-profile position, there’s just not a lot of information yet about him.  I have to say that I like his haircut, though.

It’s really unfortunate, when one thinks about it, that we need an Office of Financial Stability.  No real word on what that’s going to do exactly, except for manage the Troubled Assets Relief Program (translation: the $700 billion Treasury asked for).  Assuming OFS were to take a preventative role, it might be worthwhile - but overall, it sounds like a department that will have little or no teeth outside of its role of managing TARP.  If that’s all it ever does, hopefully it will go away immediately once the money is given out.

The senators involved in the Charles Keating scandal, being questioned by the Senate Ethics Committee.

Charles Keating and McCain had been friends since the early 1980s, and Keating had definitely contributed well to McCain’s career in Congress - the developer had brought in well over $100,000 through the years.  Eventually, Keating got his company, Lincoln Savings & Loan, into serious trouble (unbeknownst to McCain) and complained to McCain and several other senators that he was being treated unfairly by government regulators.  Concerned about over-regulation in the marketplace, the senators agreed to meet with him and discuss the issue.

Eventually, regulators let on to the group of senators that they weren’t simply picking on Lincoln Savings & Loan - it was being investigated on criminal charges:

Then Patriarca made a stunning comment, according to transcripts released later.

“We’re sending a criminal referral to the Department of Justice,” he said. “Not maybe, we’re sending one. This is an extraordinarily serious matter. It involves a whole range of imprudent actions. I can’t tell you strongly enough how serious this is. This is not a profitable institution.”

This came as a huge shock to everyone but Keating and the regulators.  Senators Alan Cranston, Dennis DeConcini, and Donald Riegle had been the “Keating Three” that put everything together.  John Glenn and McCain had been along for the ride, and quickly bailed.

After the meeting, McCain was done with Keating.

“Again, I was troubled by the appearance of the meeting,” McCain said later. “I stated I didn’t want any special favors from them. I only wanted them (Lincoln Savings) to be fairly treated.”

McCain also had other dealings with Keating, including accepting vacation flights - which he admitted looked bad, and which he regretted.

Banker Charles Keating’s mugshot.

Overall, the scandal was a mistake that McCain could have avoided - but it was also a valuable learning experienced for the newly-minted senator.  In fact, it may well have been the impetus for his future attempts to stem the influence of campaign money and the resulting corruption through measures such as McCain-Feingold.  Ultimately, McCain walked away from the table when it became apparent that the situation was an extraordinary case of criminal corruption, not simply a bureaucratic hassle created by bored regulators.

In the end, McCain bears no real guilt - although connected to Keating, he did not assist him in dodging the law.  Rather, he stepped aside and let the regulators do their work.  Ultimately, McCain was investigated by the Senate Ethics Committee, and cleared of wrongdoing.

And then it broke. People couldn’t afford the homes they’d bought. Foreclosures. Massive oversupply of housing. Soon prices began to drop and drop.

It’s depressing, but this is the legacy of the Community Reinvestment Act…

Interestingly, Congressman Frank is “involved” with a man who has ties to Fannie Mae…

Unqualified home buyers were not the only ones who benefitted from Massachusetts Rep. Barney Frank’s efforts to deregulate Fannie Mae throughout the 1990s.

So did Frank’s partner, a Fannie Mae executive at the forefront of the agency’s push to relax lending restrictions.

Now that Fannie Mae is at the epicenter of a financial meltdown that threatens the U.S. economy, some are raising new questions about Frank’s relationship with Herb Moses, who was Fannie’s assistant director for product initiatives. Moses worked at the government-sponsored enterprise from 1991 to 1998, while Frank was on the House Banking Committee, which had jurisdiction over Fannie.

Both Frank and Moses assured the Wall Street Journal in 1992 that they took pains to avoid any conflicts of interest. Critics, however, remain skeptical.

“It’s absolutely a conflict,” said Dan Gainor, vice president of the Business & Media Institute. “He was voting on Fannie Mae at a time when he was involved with a Fannie Mae executive. How is that not germane?

“If this had been his ex-wife and he was Republican, I would bet every penny I have - or at least what’s not in the stock market - that this would be considered germane,” added Gainor, a T. Boone Pickens Fellow. “But everybody wants to avoid it because he’s gay. It’s the quintessential double standard.”