White House Gives the Go Ahead to Waterboard Bondholders

If water -boarding of terrorists is torture and as a result criminal , why is it that the financial equivalent of water-boarding is now routinely practiced not by the CIA on terrorists, but by the White House, Treasury and The Fed on bondholders, investors and CEO's.

Water-boarding was part of the enhanced interrogation techniques the CIA used to extract information from enemies of the United States. Enhanced interrogation techniques are performed outside of the normal interrogation process that is used on enemy combatants. When the government chose to restructure the failing automakers outside of the normal process (a bankruptcy proceeding is the normal process when you are insolvent) they did so for a reason, and yesterday that reason became crystal clear.

Keeping the Automakers out of bankruptcy, and thereby removing the necessity that the restructuring move forward based on "The Rule of Law", was paramount if the Unions were to have any hope of securing the payment of their unsecured VEBA health care trust claim. A big win for the Politically savvy and well connected UAW, but a terrible loss for the bondholders and taxpayers who will foot the bill.

Only in the political arena could two unsecured creditors receive vastly different treatment, as have the Bondholders and the Unions. The UAW, whose unsecured VEBA is owed $10 Billion by GM, will receive 39% of the GM stock; the Bondholders, who are owed $28 Billion, will receive 10% of GM stock . Do the math: the Union has received 10 times what the government expects the bondholders to take in this restructuring.

In the Chrysler deal, the Union fared even better, as they were unsecured creditors and the Chrysler bondholders were secured creditors. The bondholders received 28% of the value of their $6.9 billion in bonds in cash; the Union will receive stock worth approximately $4.2 billion, and a note for an additional $4.58 billion, which represents 82% of the value of their claim. Either the government negotiators have dyslexia and have made a terrible mistake in their paperwork, or this is political payoff WRIT LARGE. Is this not the equivalent of financial waterboarding?

And thus we enter a brazen new era of government, when the White House is openly complicit in the theft of, as a matter of fact is directing, the looting of private property from investors. Welcome to the Rule of Man, or as the President calls it, change we can believe in! Where campaign contributions mean everything and the rule of law, not so much.

Exactly what did he mean when the President of the United States said;
"Let me be clear. The United States government has no interest in running GM. We have no intention of running GM." Apparently he meant it's not an interesting job, but we are going to do it anyway!

Back to Prosperity ? Tea Parties Show the Way

While reporting on the nationwide Tea Party Protest, Larry Kudlow spoke about the idea that the United States should become a tax haven; a country whose tax laws would encourage capital formation and attract investment capital from around the world to fuel not just a recovery but an economic resurgence. This very simple yet very powerful economic idea would produce greater prosperity for everyone, greater than all of the government handout programs enacted to date.

The Tea Party Movement shows the electorate is ready for just such an alternative. The outrage over the bailouts and growing government intervention into every part of our lives has finally touched a nerve. The progressives who are dismissing this movement as nothing more than a fringe group fail to understand that all change takes place at the margin. When Grandmothers and Grandfathers both democratic and republican are demonstrating not for increased benefits but for less spending they are the voters at the margin. What the Tea Party demonstrators instinctively understand is that this "Government Intrusion" is fueled by the ever growing tax burden they must bear.

Their furor grows as Federal, State and Local government spending increases, continue unabated during a recession, funded with a whole host of new taxes on them to pay for it all. The disconnect is striking as they watch the private sector cut jobs and expenses to regain profitability, while the ever expanding public sector continues to hire new workers and increase the pay and benefits of existing employees. Is this responsible government?

The key to capitalizing on this movement is to unite these disparate groups into a coalition of tax payers who have had enough and not fracturing this movement by segmenting them according to which tax they may or may not pay. Does it really matter if it is your income or real estate, or social security tax burden that is too high? Throughout last year's campaign we heard too often about how some people who were not paying income taxes were going to get a tax refund and not often enough about how taxes of all kinds have risen to unacceptable levels. All taxes are a tax on income.

The Democratic argument that we are simply going back to Clinton era tax rates is nothing if not disingenuous. When the top marginal rates were increased in the early 90's real estate, social security and sales taxes were nowhere near the level they are today. Politicians know that by dividing people according to which tax they pay they can turn one group of overburdened taxpayers against another and continue their reckless spending .

High rates of tax on labor (the social security combined rate is 15.6%, up to $106,800 of income), income ( the personal income tax rate is scheduled to return to 40+%) and capital ( divendend and capital gains rates are inceasing) serves only to assure that they remain scarce commodities. What this economy lacks is investors willing to deploy additional capital, to employ additional labor at higher income levels. More people earning more income can better provide for themselves, thus greatly reducing the need for government to provide services. Governments at all levels need to cut spending in order to reduce the tax burden on those who choose to work and invest their money to provide the jobs this economy needs so that individuals will have the resources to support themselves.