Accuride makes parts and accessories for commercial trucks. Due to the recession and environmental law changes, demand for new trucks is very low at the moment. The company is basically surrendering itself to the Private Equity firms and lenders to whom it owes money via chapter 11 bankruptcy..
Archive for the ‘Financial Collapse’ Category
Bankruptcy Watch – Accuride
Thursday, October 8th, 2009Unbankruptcy Watch – Delphi
Wednesday, October 7th, 2009After 4 years, Delphi (the parts maker for GM) is out of bankruptcy.
Before you get a thrill running up your leg, basically the deal is that GM is taking back its domestic parts plants (which were spun off from GM around 20 years ago), and the non-US plants are being given to the debtholders for what Delphi owed them (about $3 Billion)
During GM’s spiral downward, they had plowed about $12.5 billion into Delphi to try to keep it alive – without Delphi parts, there are no GM cars.
So our Government Motors car company lurches forward. What will be very interesting is the next time the UAW’s contract is up and the “workers” end up negotiating with their own union leadership “management” – with the U.S. taxpayers footing the bills for the next time GM fails.
Bankruptcy Watch – Canwest
Tuesday, October 6th, 2009Canwest Global Communication – Canada’s largest Newspaper and private TV company has filed for bankruptcy. Their most well known asset is the National Post newspaper.
How money is made
Monday, October 5th, 2009Glenn Beck alluded several times to the games being played by the Fed and the US Treasury, and he had a guest on who explained it away as “Oh, that’s a repo agreement – those are done all the time”.
I’ve heard of Repos before, but not really understood them. A Repo agreement is a two step transaction – the seller owns a bond (or other financial instrument) and agrees to sell the bond to a buyer, but with an additional requirement that the seller will buy back the bond at a future time at a fixed price. The only credit risk is if the seller is unable to buy back the bond in the future and the value of the bond has dropped, then the buyer has to resell the bond and eats any loss.
So how does this work in practice? Let’s say you’re a primary dealer for the New York Federal Reserve Bank (a securities firm that trades in US Treasuries and has a special relationship with the Fed).
Here is a scenario – the primary dealer currently has $1 billion in cash on account at the Federal Reserve.
The US Treasury holds an auction and sells $1 billion in Treasury bonds to our Security Dealer (let’s say it is Goldman Sachs, for example). GS transfers $1 billion to the US Treasury and gets $1 Billion in bonds. The US Treasury now has $1 billion more on account with the Fed (until they spend it).
GS now takes the $1 billion in bonds and enters into a Repo agreement with the NY Fed. It agrees to sell the $1 billion in bonds to the NY Fed, and agrees to buy them back at a later date. The NY Fed now adds $1 billion in bonds to its stockpile of Repo agreements, and puts the $1 billion back into GS’s Federal Reserve account. There is of course interest being paid and collected, and that’s accounted for in the pricing of the Repo agreeement.
So at the end of the transaction, the US Treasury has an extra Billion in debt and cash to spend, the Federal Reserve has temporary ownership of $1 billion in US Treasury debt, and GS is back pretty much to where they started, other than they probably make a nice profit on the deal – but the Fed didn’t actually buy any securities directly from the US Treasury.
It’s magic!
Here is the Fed’s explanation of Open Market Operations and how they use Repos and Reverse Repos to control the money supply. The writeup mentions that Repos are usually done for only a day at a time. How much money and debt is sloshing back and forth each night between the Fed and the Primary Dealers?
The Fed puts that information online weekly:
http://www.newyorkfed.org/markets/soma/sysopen_accholdings.html
about $1.6 trillion dollars….
Capitalism: A Love Story
Saturday, October 3rd, 2009Michael Moore’s movie Capitalism: A Love Story opened in wide distribution this weekend.
I was working in Flint Michigan (as a contract worker for EDS) at the time Mr Moore was filming Roger & Me, and I have a very different perspective than him. The city of Flint didn’t die because GM didn’t care about Flint – Flint died because the city of Flint became a corrupt bloated cesspool dominated by the labor unions and the Democratic party. They imposed a city income tax and became very anti-business – figuring GM and parts suppliers had no alternative but to keep building cars in the city, and the city could tax its workers and GM forever without consequences and give themselves huge pension packages.
The first thing that happened was businesses fled the city. What Roger & Me didn’t show was that just over the city line (in Flint Township to the west and Burton to the East), there were prospering shopping centers, new housing construction and a prosperous middle class.
The second problem was that Flint decided to choose its mayor based on the color of his skin, not the content of his character. Shortly after I moved there, I was stunned to turn on the nightly news on TV and hear the police chief say… “Well, basically there is nothing I can do about the crime. It’s being caused by drugs and poverty, and that I can’t solve – the Federal Government needs to fix that by creating new programs”.
So prostitution and drug dealing went on right out in the open all day long with the police looking the other way. In its good times, Flint was the model of a racially diverse community – many blacks from the South moved to Michigan in the “Great Northern Migration” and filled the ranks of the people working in the factory. Black and white worked and lived side by side with mutual respect with no racial tension. The Mott Foundation supported the school system to help the immigrants from the South be prepared to participate as true equals.
Without any effective political opposition to the Democratic party rule, the city lost its tax base and filled up with non-working parasites. The middle class moved out. More stores closed. GM became a larger and larger portion of the city’s revenue – they tried to get the city to lower the property tax valuation on its inefficient obsolete factories (they were designed for the old days when you had a discrete “chassis” and a body – which is no longer how cars are designed or made). When the city said no, GM tore down the Fisher Body plant (the focus of Roger & Me). With just an empty field left, the city could no longer justify the taxes it was extorting. In 1992, Flint and Gennessee County were ordered by the State Tax Tribunal to pay GM back $35 million after a 9 year long battle. Buick City would last another 15 years or so but is now just another big empty field. Background info
So while I look forward to seeing more people understanding the Goldman Sachs / Paulson / Geithner connection, I don’t expect the film to be at all balanced or objective in its politics.
Bankruptcy Watch – Jolt Cola
Tuesday, September 29th, 2009College students all over the country are now in panic mode…
The reason behind this filing is that Jolt promised to buy 90 million cans from a supplier and sales are nowhere near what they were hoping for.
The “bad” FDIC
Tuesday, September 29th, 2009The FDIC is out of money as of this week.
If the FDIC tries to assess banks to raise emergency funds, they’ll push more banks into receivership, or at least make them unprofitable. The FDIC decided today to REQUIRE all banks to prepay their insurance premiums through 2012 to raise cash.
What will the FDIC use for income for the next 2 years after it burns through this cash?
The insurance fee is based as a rate per $100 on deposit – how can a bank prepay a premium when it doesn’t know how much it will owe in 2012?
Don’t let local property tax people think this is legal to do…
Congress has approved allowing the U.S. Treasury to lend up to $500 billion to the FDIC (on top of the $2.5 trillion the FDIC is currently administering for the non-bank emergency bailouts/guarantees). But Tim Geithner wants to control the FDIC and make it play by his rules – as soon as the FDIC takes bailout money, they lose control of their destiny. So the FDIC is looking to borrow money from “good banks” in order to continue the implosion of zombie banks.
Bankruptcy Watch – Holley
Monday, September 28th, 2009Holley Performance Products – the maker of carburetor and fuel injection systems becomes the next bankruptcy case in the automobile related business sector. This is not their first time in Chapter 11, but sales are down 40% this year.
52.2% youth unemployment! – wrongo… bzzzzt….
Sunday, September 27th, 2009This is a great example of the reason you shouldn’t believe things on the internet, especially sites with an “Agenda”.
It’s listed on Drudge, and that link points to a New York Post Story that says “The unemployment rate for young Americans has exploded to 52.2 percent — a post-World War II high, according to the Labor Dept. — ”
There is just NO WAY that’s right, no matter how much you want to blame President Obama…. that “statistic” is now bouncing around all the right wing blogosphere.
Here was the original press release from the Bureau of Labor Statistics
http://www.bls.gov/news.release/pdf/youth.pdf
It’s talking about summer employment (age 16 to 24) and there IS one number in the report that says 52.2% – it is the EMPLOYMENT rate of young men during the summer. What the statistic said is that 52.2% employment was the lowest employment rate since WW II. Not all 16-24 year olds are looking for work during the summer. A lot are in school, many don’t need or want a job, some are probably working for cash “off the books”… the actual youth unemployment rate in July was 18.5%
Bannkruptcy Watch – Simmons
Friday, September 25th, 2009Simmons, the mattress folks have filed Chapter 11 bankruptcy. The bedding business is being transferred to a teacher’s pension fund as part of a prepackaged bankruptcy.