In a move heralding the Obama administration’s most aggressive intervention in the business sector to date, the federal government has forced GM CEO Rick Wagoner to step down. The change in leadership was announced by GM in a statement released in Wagoner’s name on Monday. In it, the former CEO said the government asked him to leave. “On Friday I was in Washington for a meeting with administration officials,” Wagoner begins. “In the course of that meeting, they requested that I ‘step aside’ as CEO of GM, and so I have.”
On February 4, Rep. Rosa DeLauro (D-Conn.) introduced the Food Safety Modernization Act of 2009 (H.R. 875) in the House. Its stated objective sounds rather benign — even beneficial: "To establish the Food Safety Administration within the Department of Health and Human Services to protect the public health by preventing food-borne illness, ensuring the safety of food, improving research on contaminants leading to food-borne illness, and improving security of food from intentional contamination, and for other purposes."
For the fourth time in six months, the federal government is giving billions of taxpayer dollars to AIG, following the latter’s announcement of a $61.7 billion fourth quarter loss — this despite the massive bailout shoveled AIG’s way by the Bush administration last September. By the terms of this latest lifeline (“life support” would be a more apt metaphor, since the patient has been clinically dead for many months), the federal government is extending an additional $30 billion in loans to the former insurance giant and allowing more lax repayment terms on an additional $38 billion credit line from the Federal Reserve.
Figuring prominently in President Barack Obama’s newly released budget proposal for fiscal 2010 is another massive bank bailout. The Bush administration’s gargantuan $700 billion bank boondoggle was bad enough, but President Obama, not to be outdone, is proposing a positively pantagruelian $750 billion in additional relief for America’s beleaguered money-center banks.
Though the Obama administration continues to deny it, the U.S. government continues to move closer to nationalizing the nation’s largest banks. The last week of February the Federal Reserve and the Treasury Department both announced that the federal government may convert the shares of preferred stock it already owns in Citigroup and other banks into common shares, thereby acquiring voting rights and a greater measure of outright control over the institutions.
“President Barack Obama threw a $75 billion lifeline to millions of Americans on the brink of foreclosure,” the Associated Press reported after the president’s February 18 speech in Phoenix, Arizona, where he unveiled his solution to the mortgage crisis. But the “lifeline” Obama threw comes at a cost, since the government does not create wealth (though it does create money via the Federal Reserve), and the $75 billion that will be spent to “rescue” beleaguered homeowners will have to come from the American economy.
General Motors and Chrysler submitted “financial viability” plans to the U.S. Treasury on February 17 that included combined requests for another $18.6 billion in federal bailout funds — $16.6 billion for GM and $5 billion for Chrysler.
Will the banks be nationalized? That question would have seemed preposterous prior to the $700 billion Troubled Asset Relief Program to bailout major financial institutions. But with the TARP money comes federal control, and that control could be strengthened to the point of full-blown nationalization, particularly if the already congressionally authorized $700 billion is deemed insufficient to “rescue” the banks.
Oil prices dropped from $141 per barrel to below $40, but experts say that this decline is going to end in 2009, according to 24/7 Wall Street. When oil prices tumbled, OPEC made an attempt to reduce production, calling on OPEC nations to produce less, but its efforts were largely unsuccessful because, it is speculated, some OPEC nations bucked the cartel and kept production high, maintaining falling prices. About the only thing that kept the prices at U.S. pumps from falling even lower than they did is that some California refineries shut down for routine yearly maintenance.
On Monday Apple's stock rose dramatically, gaining 4.22 percent by the end of trading and closing at $94.58. Analysts attribute this dramatic rise to an announcement made today by Steve Jobs, Apple's CEO, regarding his health situation.
The federal government handouts to the auto industry continued over the weekend with the announcement of a $4 billion bridge loan to Chrysler LLC to help keep the Big Three automaker afloat. Chrysler, be it duly noted, is 81 percent owned by Cerberus Capital Management LP, one of the world's largest hedge funds, which has been inexplicably unwilling to use any of its own billions to help the troubled automotive giant.