Posts Tagged ‘obama administration’
Thursday, June 11th, 2009
Timothy Geithner, U.S. Secretary of Treasury, said the Obama Administration is proposing a new legislation called ‘say on pay.’ As the name implies, this proposal would give shareholders more voice on executive compensation, which will be authorized by the Securities and Exchange Commission (SEC).
“This financial crisis had many significant causes, but executive compensation practices were a contributing factor,” Geithner said in a statement.
Of course, there were criticisms, such as beliefs that the administration was interfering in the affairs of private firms. Geithner has tried his best to silence those complaints. He said,
“I want to be clear on what we are not doing. We are not capping pay,” he said. “We are not setting forth precise prescriptions for how companies should set compensation, which can often be counterproductive.”
Instead, shareholders would receive a nonbinding voice on executive pay and corporate compensation committees will be independent from company management. The nonbinding shareholder vote will include compensation on not just salary, but also on bonuses and stock awards for the top 5 executives at public companies.
However, if this legislation is approved by Congress, it would not just affect banks and other financial firms, but also all public companies. The Obama administration is doing what they can to better mange excessive executive compensation to prevent risk of jeopardizing the economy.
Tags: capping pay, congress, executive compensation, obama administration, say on pay, say on pay legislation, say on pay proposal, sec, Secretary of Treasurer Timothy Geitner, secretary of treasury, securities and exchange commission, the obama administration, timothy geithner, treasury secretary, treasury secretary timothy geithner
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Tuesday, June 2nd, 2009
A month after Chrysler declared bankruptcy, America’s biggest carmaker, General Motors came next in line to file for Chapter 11. GM has officially declared itself bankrupt in a legal filing, making it the biggest industrial collapse in U.S. history after racking up losses of $81 billion over 4 years. GM is also the 3rd largest bankruptcy of any sort, after the investment bank Lehman Brothers and the telecommunications firm WorldCom.
However, GM will continue to manufacture and sell cars. The U.S. government is hoping for a “surgical” process to build a new, smaller GM out of its remains. GM’s chairman, Kent Kresa, described this process as a “new beginning” for the company, saying that, “A court-supervised process and transfer of assets will enable a new GM to emerge as a stronger, healthier, more focused and nimbler company with a determination not to just survive but to excel.”
This massive reorganization of GM would leave the U.S. government holding 60% of the company’s equity but, nevertheless, this is an essential process in order for America to sustain a feasible US auto industry. Yet still, Obama had to reiterate that the government was still reluctant about becoming a shareholder in GM, but acknowledged that to go to with the alternative, which would be to extend more loads, would be worse.
Today, GM announced that they plan to sell their Hummer brand to Chinese equipment maker Sichuan Tengzhong Heavy Industrial Machinery Co. Ltd., in a transaction that would secure more than 3,000 U.S. jobs.
Yet another question lingers in our minds as we think to ourselves, “Will GM’s bankruptcy work?” Some people believe that GM has finally made the necessary changes to be competitive but still others hold their doubts about GM’s future prospect.
Tags: bankruptcy, chapter 11, Chrysler, general motors, GM, hummer, investment bank, kent kresa, lehman brothers, obama administration, sichuan tengzhong, telecommunications, worldcom
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Wednesday, May 27th, 2009
Will this be the end of General Motors? Bondholders have rejected a debt exchange offer from GM, which expired at midnight last night. The United States’ biggest automaker has failed to persuade enough creditors to ingest their losses and is now approaching their deadline that the Obama administration has set for them–June 1, which is next Monday. This leaves GM the rest of the week and the weekend to finish restructuring for a possible miracle or resort to filing for Chapter 11 bankruptcy, which is more than likely to happen.
One thing is for sure: GM’s uncertainty over its finances has hurt sales of their cars, as consumers worry about matters such as warranty protection. Would you purchase your own car from a company that is nearly bankrupt? For many people, this bankruptcy issue does not affect their personal interest, as the case shows that Chrysler’s sales have been holding up well even though they had recently filed for bankruptcy.
Does the news of GM dampen our optimistic attitude about the economy and its possible recovery by this year? More than 90% of economists predicted that the recession will end this year, acknowledging that the recovery will be bumpy and slow. Nevertheless, this news still may have a significant impact on consumer confidence, although there has been some positive reading in that consumer confidence has been improving lately. However the reality is that the economy is still very weak, which is also stated by Alan Gayle, senior investment strategist at RidgeWorth Capital Management.
Tags: alan gayle, automaker, bankrupt, big three, chapter 11 bankruptcy, Chrysler, detriot, economics, general motors, GM, obama administration, recession, ridgeworth capital management
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Sunday, May 3rd, 2009
As many of you probably heard, the stress test results of nation’s 19 largest banks will be announced next Thursday. So what exactly is the purpose of a stress test? Basically they are suppose to check each bank’s financial health. For example, techniques are used on a company’s asset and liability portfolios to determine their reactions to different financial situations, which are all hypothetical scenarios (changes can include interest rates, lending requirements, etc.). The test will then determine how the portfolio will fare during the situation and analyze the strengths and weaknesses of the institutions.
Results will ensure whether the company has enough cash on hand to undertake a continued economic crisis. Banks without sufficient capital could get more federal funds to meet their needs so that they can withstand this recession. The release date was actually suppose to be earlier this week but the Federal Reserve ordered banks to keep their test results a secret. Obviously, this had caused anger to investors because we all want to stay away from weak banks.
One side of the spectrum: (the bad)
William Black, a former senior bank regulator, is extremely critical of Timothy Geither, calling him a “failed regulator” who is “adding to failed policy” by not allowing “banks that really need desperately to be closed” to fail. Black also says that the stress test is viewed as part of Geithner’s toxic debt plan, which he calls “an enormous taxpayer subsidy for people who caused the problem.”
Another side of the spectrum: (the good)
“The purpose of this program is to prevent panics, not cause them,” an unnamed senior official told the Times. “And it’s becoming clearer that we and the banks are going to have to explain clearly where each bank falls in the spectrum.”
Tags: asset, current news, debt, economic crisis, federal reserve, financial, liability, obama administration, Secretary of Treasurer, stress tests, Timothy Geitner, toxic, william black
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Sunday, April 26th, 2009
Four days left for Chrysler?! Could they be preparing for a bankruptcy even faster than General Motors? The Detroit automaker, Chrysler, faces a fast-approaching deadline of April 30 to able to show the federal government a new plan for financial viability. Experts say that the likelihood of bankruptcy is greater than 50%. If they do go bankrupt, the company will be split into 2 parts, one that will deal with bankruptcy, and the other that will merge with Fiat, Italian carmaker.
Over the four remaining days, offers and counteroffers will fly back and forth between the White House and banks in their last attempts to save Chrysler. The White House is determined to save jobs at Chrysler, along with auto supplier companies that could also fall into bankruptcy if Chrysler does not survive. Then, the failure for those suppliers could impact GM, as well as Ford, and other foreign automakers that manufacture in the U.S..
The United Automobile Workers union have reached an agreement with Chrysler, meeting the federal government’s requirements for Chrysler to receive more financing. The agreement also including reducing the amount of money Chrysler must pay for a new health care fund for retirees.
“My sense is that it’s not liquidation, that it would be a reorganization,” a Detroit-area Chrysler dealer, Carl Galeana, said Sunday. “I just think a shutdown of a corporation this size, in this economy, would be devastating.”
I guess we’ll just have to wait 4 more days to find out and see what happens. Good luck to Chrysler.
Tags: chapter 11 bankruptcy, Chrysler, current news, fiat, ford, general motors, GM, obama administration, President Obama, united automobile workers
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Friday, April 17th, 2009
Fritz Henderson, the chief executive officer (CEO) of General Motors (NYSE:GM) said that “it is still feasible” for GM to meet the Obama administration’s June 1st deadline to come up with a new, acceptable plan and an effective form of management. Regardless, GM’s executives are still preparing to seek court protection if they are to file for bankruptcy, which Henderson considers as a “two-track plan.”
“It’s pretty simple,” Henderson said. “If we can’t accomplish it outside a bankruptcy, we would do it inside a bankruptcy.”
GM’s shares have dropped 5% so far from today’s open to $1.84. More info on GM’s bankruptcy can be found in my previous blog on April 23, 2009.
And what about Chrysler??
Chrysler could still be at a great risk if GM fails. However, Obama’s administration requires Chrysler to join an alliance with the Italian carmaker Fiat, which would then lead to management changes, for the better of course. This alliance would allow Chrysler to receive more government financing and decrease their chances of filing for bankruptcy. Once the alliance is completed, new management will take in effect as the U.S. government and Fiat will appoint a board of directors that are independent of the two companies. This means that the majority of the directors will not be employees of neither Fiat or Chrysler and then, the board will decide who to appoint as the new chairman and CEO in each other’s consent. Seems like some pretty good news right? Well..if it works out, that is, and considering that the new management will be effective.
Any news from Ford?
Good news! Standard & Poor’s raised its ratings for Ford Motors (NYSE:F) Reason why? Ford recently cut its debt by nearly $10 billion! But, keep in mind that there are still warnings that Ford might still be at risk for running short on cash.
Let’s hope that GM arrives soon with some good news!
Tags: chapter 11 bankruptcy, Chrysler, current news, fiat, ford, fritz henderson, general motors, GM, obama administration, poor's, President Obama, rick wagoner, standard, two track plan
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