The trade wars begin-Mexico raises tariffs on U.S. exports in retaliation of truck project cancellation, Obama angry at A.I.G. over bonuses-tries to cut them, small businesses to be next bailout beneficiaries, government tries to track down and confiscate Madoff assets-who will keep them? China uses global downturn to boost competitive advantages, Jon Stewart rips apart Jim Cramer in debate on poor financial reporting…just the latest in your Freedom Under Fire Report!
Mexico Raises Tariffs on U.S. Exports. Mexico announced plans to raise tariffs on almost 90 U.s. exports. The new trade measures are in retaliation for the cancellation earlier this year of a U.S. commercial trucking project and will target industrial and agricultural products. The global trade war continues to heat.
Obama Tries to Block A.I.G. Bonuses. President Obama ordered the Treasury Department to “pursue every single legal avenue to block these [A.I.G.] bonuses” and make the American taxpayers whole. A.I.G. received $160 billion in federal aid in the last year, and has used about $1 billion to pay “retention bonuses” to key employees.
No rational person would dispute that A.I.G. executives should not receive $165 million bonuses. The current ‘rationale’ for this largess is that the contractual agreements would cost more money to unwind than to pay upfront. These payments are an affront to ‘pay for performance’: A.I.G. lost $61.7 billion last quarter- the largest loss in corporate history. Also, A.I.G. lost $90 billion to counterparties on mortgage investments. The counterparties that won at AIG and the tax payer’s expense were: Goldman Sachs ($12.9 b), Societe Generale ($11.9 b), Deutsche Bank ($11.8 b), Barclay’s ($8.5 b), and Merrill Lynch ($6.8 b). Finally, it appears we agree with Rep. Barney Frank on something!
Small Businesses to Receive The Next Bailout. In an effort to ease freezing credit markets for small businesses, the Obama administration will inject $15 billion, buying up securities that are linked to small-business loans. President Obama says that “This is still just going to be a first step in what is going to be a continuing effort to make sure that people get credit out there.”
Government Tracking Down Madoff Assets to Confiscate. Federal prosecutors filed a notice in federal court on Sunday evening declaring their intent to seek the forfeiture of a wide swatch of property owned by Bernard and Ruth Madoff. The Madoff’s net worth was estimated to be $823 million at the end of 2008. The big question will be who gets to keep the assets once seized? Government or the victims?
Chinese Invest $600 billion to Make Country More Productive. Chinese leaders are turning economic crisis into competitive advantage, investing an aggressive $600 billion stimulus package to make companies better able to compete in markets at home and abroad, to retain migrant workers on an immense scale and to rapidly expand subsidies for research and development. Railways and roads are being improved to decrease transportation costs for commerce. Meanwhile, the U.S. is squandering the last of its remaining borrowing and printing capacity to prop up bad businesses and subsidize consumption, including housing.
Stewart trounces Cramer in debate. Last Thursday, Jon Stewart hosted Jim Cramer on The Daily Show after the pair indirectly insulted one another the previous week. In the interview, Stewart unrelentingly attacks Cramer and CNBC for poor reporting prior to, and during the financial crisis. Is this fair to Cramer? Yes! As Stewart points out, his show sells ‘snake-oil’ to unsophisticated, retail investors, despite the ‘small print’ disclaimer displayed prior to the show. However, it is not fair to CNBC as a whole. The network solicits a wide variety of opinions and interviews from both the bulls and bears. As always, the investor must ultimately choose where to deploy their capital. Caveat Emptor!
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