"CASH FOR CLUNKERS" is a bad idea whose time seems to have come. Congress has added trade-in incentives for old gas guzzlers to a $106 billion supplemental appropriations bill whose primary purpose is to fund military operations in Iraq and Afghanistan. President Obama is likely to sign the measure this week. Still, it could have been worse: Instead of a very large and wasteful cash-for-clunkers program, lawmakers approved only a middle-size wasteful program.

Here's the deal: Motorists who have owned an older car or truck for at least one year may trade in their vehicles and receive vouchers to help pay for new, more fuel-efficient models. The bigger the fuel-efficiency gain, the bigger your voucher, up to a maximum of $4,500. The program, which is expected to start in August and run through October, is supposed to help the troubled auto industry and modernize the U.S. auto fleet. It's modeled on similar plans in many European countries, which have boosted new-car sales in recent months. Since when is a car or truck older than one year, a clunker? Who made this stuff up? Aren't we supposed to be saving and not be living beyond our means, like Congress and the Administration?

 

The program is capped at a total cost of $1 billion, down from $4 billion in earlier versions. Stop the madness! Even $4,500 per clunker may not be enough to help many owners trade up: Clunker "owners are either not looking for an increased car payment or cannot afford to purchase a new vehicle, which averages nearly $30,000," (You think?) a report by analysts at Edmunds.com concluded. And the plan offers nothing for owners of cars with a trade-in value equal to or greater than $4,500. Edmunds.com believes the program will "struggle" to produce sales of 250,000 vehicles -- or half of Congress's goal.

 

Those paltry results will merely represent the shifting of future demand for cars to the present; they will also come at the expense of sales of other goods that people might have chosen to buy this summer or fall. This is why Germany's program, though it dramatically boosted new-car sales, was also met with criticism from other retail businesses, as well as used-car dealers, spare-parts suppliers and repair shops.
 

If you think the government could find better uses for its money than subsidizing this shell game, we agree with you. If you think the best way to move current car owners into more fuel-efficient models would be to increase motor fuel taxes, as Europe did in tandem with its cash-for-clunkers programs, we agree with you even more. Alas, this could be just the beginning of cash for clunkers. When the program's initial round disappoints, as seems likely, pressure will mount to expand it. That's the lesson of recent policy moves in the residential real estate market. There are three bills pending in Congress to extend or increase an $8,000 tax credit for first-time homebuyers, which was introduced in July 2008 and augmented in the February stimulus package. The temptation to drain resources from the rest of the economy to "stimulate" troubled industries, especially those backed by powerful lobbies in Washington, is strong. And once Congress starts, it's hard to stop.

Source: Clunk Me 

 

 

 

GE hires Linda Daschle as a lobbyist

By: Timothy P. Carney
Examiner Columnist
06/22/09 4:29 PM EDT

General Electric, a top-20 source of funds for Obama in 2008, and owner of the Obama-friendly MSNBC, already has strong ties to Democrats, but the company has bolstered that relationship, according to recently filed federal lobbying registrations.

GE's transportation business has hired as a lobbyist Linda Hall Daschle, wife of Tom Daschle, the former Senate Democratic Leader and Obama's first pick to head the Department of Health and Human Services. Mrs. Daschle will lobby on issues including Amtrak, high-speed rail, and freight rail, the lobbying form says. Obama has declared support for added federal funding for high-speed rail.

The $90,000 in very cold cash that was wrapped in foil, stuffed into cardboard cartons for Boca Burgers and frozen pie crust, and found during an FBI raid on the home of former congressman William Jefferson wasn’t bribe money, defense lawyers said this week at Jefferson’s corruption trial.

 

It was evidence of an FBI sting operation that flopped, said Jefferson attorney Robert Trout, who called the cash cache the “elephant in the room” during his opening statement in an Alexandria, VA., federal courtroom. Wait a minute, the sting flopped so he kept the money? Say what? 

 

Jefferson, a Democrat who represented part of New Orleans until voted out of office in 2008, is charged with a long and hefty list of corrupt acts: racketeering, solicitation of bribes, and money laundering among them.

It added up to $500,000 received and millions more that the congressman asked for in peddling his influence to grease business deals in West Africa, prosecutors claim. One of the biggest problems Jefferson’s attorneys face is explaining away recordings made by Virginia businesswoman Lori Mody, who wore an FBI wire while pursuing an African deal with the member of Congress.

Jefferson was also videotaped in July 2005 accepting $100,000 from the wired Mody, all but $10,000 of which ended up in his freezer like so many Boca Burgers.

True, Trout told jurors Tuesday, Jefferson took the money. But he never paid it to Atiku Abubakar, then vice president of Nigeria, to rig a major telecom deal there, as prosecutors charge. True, it was “really stupid” for Jefferson to accept the intended bribe, Trout continued. But he never paid it, which Trout characterized as a hole in the government’s case. Prosecutors say Jefferson didn’t pay it because he screwed up the drop.

Trout didn’t say what Jefferson intended to do with the money, but assistant U.S. attorney Mark Lytle noted in his own opening statement that Jefferson and his wife had $100,000 in credit card debt and overdraft fees, as well the financial pressure of putting five daughters through Ivy League schools.

Jefferson is on trial, Lytle said, because “one of our government’s most powerful officials, a member of the U.S. House of Representatives, was using his public office for private gain.” And lets have all of the other ones step forward please....

 

Trout allowed that his client may have acted unethically, but he “is not charged with violating House ethics rules.” I am laughing myself silly!

 

Treasury Announces Additional Tax Deductions for New Auto Purchases

June 11, 2009
TG-167

Treasury Announces Additional Tax Deductions
for New Auto Purchases
New Auto Purchase Tax Deduction Available in States Without Sales Tax

"Building on the Recovery Act, the Treasury Department is taking steps to make sure every American, in every state qualifies for a tax deduction when purchasing a new car," said Deputy Secretary Neal Wolin. "This tax deduction not only increases support for the auto industry as it seeks to rebuild, but also puts money back into the pockets of hardworking Americans."

Taxpayers who purchase a new motor vehicle in states that do not impose state sales or excise taxes are entitled to deduct other fees or taxes imposed by the state or local government that are based on the vehicle's sales price or as a per unit fee.  According to the IRS and Treasury, the intent of the provision is that these other fees or taxes could qualify for purposes of the special tax deduction.

To qualify for the deduction, the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010.  The special deduction is available regardless of whether taxpayers itemize deductions on their returns.  Taxpayers can claim this special deduction only on their 2009 tax returns next year.

The deduction is limited to the fees or taxes paid on up to $49,500 of the purchase price of a qualified new car, (what is a qualified car?) light truck, motor home, or motorcycle.

The case is scheduled to start at 10 a.m. Tuesday in federal court in Alexandria, Va.

William Jefferson is accused of soliciting bribes, racketeering, money laundering and other crimes. Jefferson represented parts of New Orleans until losing re-election last year.

Prosecutors say he received more than $500,000 and sought millions more for using his influence to broker business deals in Africa.

Russia wants to replace the U.S. dollar as the principal international reserve currency of the global economy, reports Barrons.com. Toward that end, both Russia and Brazil have recently bought a total of some $10 billion in IMF securities.

But a mere $10 billion hardly diversifies Russia's currency reserves, which at latest count stood at $400 billion. Russia, however, says it's planning further cuts.

Russian President Dimitry Medvedev recently challenged the U.S. dollar's strength in view of the ever-increasing U.S. debt and deficits, financed by trillions of dollars in Treasuries.

A U.S. dollar, devalued because of the nation's huge debt, would also decrease the value of foreign reserves held in American currency. In response to these moves, 10-year Treasuries temporarily hit a 4 percent yield, a level not seen since last October, before pulling back.

Although the Russian stock market and ruble spiked upward recently as crude oil jumped to $70 a barrel, the nation's economy rests on a shaky foundation. Russia continues to struggle with double-digit inflation, and their multi-billion dollar stimulus package has yet to produce the desired results.

Frank is at work on a bill that would overhaul the regulation of the nation’s financial system, including more controls on executive pay, and he told The Examiner he planned to have a bill written and approved by his committee before August.

Rep. Spencer Bachus of Alabama, the top Republican on the financial services panel, said pay controls on non-bailout firms would subject compensation decisions to “a one size fits all” strategy, or even worse, politically based “blackmail and coercion.”

House Republicans on Thursday unveiled a reform plan that stands in stark contrast to what the Democrats have in mind.

“The guiding principle of the Republican alternative can be summed up in one sentence — no more bailouts,” the six-page outline of the GOP plan reads.

“I don’t think this will lead to a pattern.” Frank said.

Frank was able to convince Fritz Henderson the new Government Motors CEO to keep a distribution center in Norton, Mass., open for at least another 14 months.

Of course this has caused criticism from those who question whether other lawmakers will ask for favorable treatment GM entities in their states. Of course Obama has repeatedly said that this administration has “no interest” in running GM and that the government will not be running “the shots.”

It is not clear if the administration has told other lawmakers and Frank to “refrain from further politicization of GM business decisions.”

Frank stuck up for his intervention by saying the intervention was “unique in that the Norton center was neither an auto plant nor a dealership.” So, what is it? Hello. Frank also stressed environmental reasons for keeping the Norton center open. “Closing it, he said would have meant parts would have been sent to New England from a distribution center in Philadelphia, putting more trucks on the road and for greater distances.

Statement by Treasury Secretary Tim Geithner on Compensation

Today, I met with SEC Chairwoman Mary Schapiro, Federal Reserve Governor Dan Tarullo, and top experts to examine how we can better align compensation practices – particularly in the financial sector – with sound risk management and long-term growth.

In considering these reforms, we start with a set of broad-based principles that – with the help of experts like those we assembled today – we expect to evolve over time. By outlining these principles now, we begin the process of bringing compensation practices more tightly in line with the interests of shareholders and reinforcing the stability of firms and the financial system.

First, compensation plans should properly measure and reward performance.

Compensation should be tied to performance in order to link the incentives of executives and other employees with long-term value creation. Incentive-based pay can be undermined by compensation practices that set the performance bar too low, or that rely on benchmarks that trigger bonuses even when a firm's performance is subpar relative to its peers.

To align with long-term value creation, performance based-pay should be conditioned on a wide range of internal and external metrics, not just stock price. Various measurements can be used to distinguish a firm's results relative to its peers, while taking into account the performance of an individual, a particular business unit and the firm at large.

Second, compensation should be structured to account for the time horizon of risks.

Some of the decisions that contributed to this crisis occurred when people were able to earn immediate gains without their compensation reflecting the long-term risks they were taking for their companies and their shareholders. Financial firms, in particular, developed and sold complex financial instruments that yielded large gains in the short-term, but still presented the risk of major losses.

Companies should seek to pay top executives in ways that are tightly aligned with the long-term value and soundness of the firm. Asking executives to hold stock for a longer period of time may be the most effective means of doing this, but directors and experts should have the flexibility to determine how best to align incentives in different settings and industries. Compensation conditioned on longer-term performance will automatically lose value if positive results one year are followed by poor performance in another, obviating the need for explicit clawbacks. In addition, firms should carefully consider how incentives that match the time horizon of risks can extend beyond top executives to those involved at different levels in designing, selling and packaging both simple and complex financial instruments.

Third, compensation practices should be aligned with sound risk management.

At many firms, compensation design unintentionally encouraged excessive risk-taking, providing incentives that ultimately put the health of the company in danger. Meanwhile, risk managers too often lacked the stature or the authority necessary to impose a check on these activities.

Compensation committees should conduct and publish risk assessments of pay packages to ensure that they do not encourage imprudent risk-taking. At the same time, firms should explore how they can provide risk managers with the appropriate tools and authority to improve their effectiveness at managing the complex relationship between incentives and risk-taking.

Fourth, we should reexamine whether golden parachutes and supplemental retirement packages align the interests of executives and shareholders.

Golden parachutes were originally designed to align executives' interests with those of shareholders when a company is the potential target of an acquisition. Often, they have been expanded beyond that purpose to provide severance packages that do not enhance the long-term value of the firm. Likewise, supplemental executive retirement benefits can make it more difficult for shareholders to readily ascertain the full amount of pay due a top executive upon leaving the firm.

We should reexamine how well these golden parachutes and supplemental retirement packages are aligned with shareholders' interests, whether they truly incentivize performance, and whether they reward top executives even if their shareholders lose value.

We intend to work with Congress to pass legislation in two specific areas. First of all, we will support efforts in Congress to pass "say on pay" legislation, giving the SEC authority to require companies to give shareholders a non-binding vote on executive compensation packages. "Say on pay" – which has already become the norm for several of our major trading partners, and which President Obama supported while in the Senate – would encourage boards to ensure that compensation packages are closely aligned with the interest of shareholders.

Secondly, we will propose legislation giving the SEC the power to ensure that compensation committees are more independent, adhering to standards similar to those in place for audit committees as part of the Sarbanes-Oxley Act. At the same time, compensation committees would be given the responsibility and the resources to hire their own independent compensation consultants and outside counsel.

Beyond legislation, I also want to emphasize the importance of the efforts being taken by Chairman Bernanke and the bank supervisors to lay out broad standards on compensation that will be more fully integrated into the supervisory process. These efforts recognize that an important component of risk management is getting incentives right, and we will support the Fed and the other regulators as they work to ensure executive and employee compensation practices do not create unnecessary risk.

Finally, I want to be clear on what we are not doing. We are not capping pay. We are not setting forth precise prescriptions for how companies should set compensation, which can often be counterproductive. Instead, we will continue to work to develop standards that reward innovation and prudent risk-taking, without creating misaligned incentives.

The administration is expected to name Kenneth Feinberg, who oversaw the federal government's compensation fund for victims of the Sept. 11, 2001, terrorist attacks, to act as a pay czar for the Treasury Department, these people said.

Feinberg's appointment could be announced as early as next week, when the administration is expected to release executive-compensation guidelines for firms receiving aid from the $700 billion Troubled Asset Relief Program. Those companies, which include banks, insurers and auto makers, are subject to a host of compensation restrictions imposed by the Bush and Obama administrations and by Congress.

Wall Street has been anxiously awaiting more details on how the rules will be applied. "The law is confusing and a bit ambiguous, and so we're looking for certainty as to how to structure pay incentives," said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a trade association.

The move comes amid a series of sometimes-overlapping efforts to curb pay at financial firms following perceived industry excesses that led to the lending boom and bust.

The Obama administration earlier this year issued guidelines that include limiting salary for top executives at some firms receiving TARP funds and requiring that additional pay be in the form of restricted stock, vesting only after the company repays its debt, with interest, to the government. Congress then chimed in with even tougher rules curbing bonuses for top earners at firms receiving TARP money. As part of that effort, lawmakers barred those firms from paying top earners bonuses that equal more than a third of their total compensation.

The real estate market's troubles are hitting close to home for Treasury Secretary Timothy Geithner. Geithner recently rented out his Westchester County home after it didn't sell, even though he reduced the price to less than he paid.

Geithner put the five-bedroom Tudor near Larchmont on the market for $1.635 million in February.

Agents Scott Stiefvater (steef-VAH'-turh) of Stiefvater Real Estate and Debbie Meiliken (MILL'-eh-kin) of Keller Williams Realty say the house was rented for $7,500 a month on May 21, a few weeks after the asking price was dropped to $1.575 million.

Neither was directly involved in the rental. Treasury Department representatives didn't immediately return calls.