Tag Archives: Bailout

Federal Bailout of the NFL

Over the last few months, as our country navigates through turbulent waters of this Recession, the Federal Government has conducted some unprecedented moves – increased deficits spending, bailouts, and increased unconstitutional powers to the Department of Treasury.

On the heels of the forced retirement of CEO Rick Wagoner of GM, Secretary Timothy Geithner has acknowledged recently on “Face the Nation” on CBS that the Federal Government should have the option to purge any directors or senior management of financial institutions that received aid from the Federal Government – “Where that requires a change in management and the board, then we will do that” states Geithner.NFL

Wow!  Now that is power.  Maybe Geitner and the Federal Government need to take this power to the next step by beyond struggling financial firms and auto companies, but to all areas of the economy.  My first suggestion would be for them to start with the National Football League.

You heard me correctly…the multi-billion dollar a year industry that is call the NFL which is sorely in need of Federal help.  If anywhere there was an example of poor leadership and grossly abuse of bonus money, the NFL is defiantly the poster boy in these areas. 

Where else can besides Fannie Mac and Fannie Mae can an individual receive millions of dollars of bonus money for failure and performing below expectations.  Take for example DeAngelo Hall of the Washington Redskins.  He received a six-year deal worth $55 million, $23 million of which is guaranteed this year.   To give you an idea of the season that Hall had in 2008 here are his stats:

  • 73 Tackles, 63 Solo Tackles, .5 Sacks, 4 Interceptions, and 21 Pass Deflections in 15 games

Not too bad, I guess…However, this is the same guy who got beat out of starting position in Oakland and dumped mid way through 2008{is this the right year} by Al Davis due to poor performance.  Oh yeah, he just signed a $70 million free agent contract months beforehand with the Raiders.  To break it down, he was paid $8 million for eight games, while receiving a $7 million signing bonus for that bit of work.  To make matters worse, he struggled in the man-to-man defense scheme that Oakland runs and was rottenly beaten for big plays which lead to numerous Raider losses. 

Where is the outcry about Hall’s over bloated salary and bonus that were paid out for his poor play and performance?  I don’t see Congress freezing his pay or the pay of his ex-teammate Javon Walker who received an $11 million signing bonus for the 15 catches in 10 games he played in.  $733,333.333 per catch!!!  OMG!  Hall and Walker are just a few examples of bonuses being paid for underperforming employees without any Congressional outcry…where are you Nancy Pelosi??!!

Now let’s talk about management.  No one can argue that Geitner needs to fire everyone involved from the owner down to the towel boy in the Detroit Lions organization after their historical 0-16 season.  Mr. Obama himself could run a better organization that the Fords can.

You shouldn’t discount doing the same type of dismal strategy to the organization that seems to draft more felons than the Dallas Cowboys and that would be the Cincinnati Bengals (4-12 in 2009 and 110-193 since 1990).  Tell me one reason why Mike Brown and William Clay Ford should still be in position to run these teams in communities that deserve better?  Mr. Geitner, time to make your move and hand out some pink slips, the fans are waiting!

If you are not convinced yet that NFL needs government oversight and help, then I offer one last example.  The bloated rookie signing bonus that draftees receive year in and year out for services yet performed on the expectation that they will “rock stars” and be worth every penny they were given.  However that seems not to be the case for most first round draft picks. 

Take for example Jake Long on the Miami Dolphins.  He signed last year for a $57.5 million contract which included a guaranteed the $30 million signing bonus he received in 2008 as the #1 draft pick.  The $30 million guarantee bonus was given out for services that yet to rendered and Congress is ruffled by the AIG bonuses.  What a hypocritical world we live in!!!  I guess the severance package that Wagoner received for 30 years of service at GM of $20 million is not looking too bad after all.

Hopefully I have created a good case for Federal intervention into the NFL so our national pastime can be saved.  So, I deeply implore everyone to write and call their Congressional representative requesting Government assistance before it becomes too late… Do for the children!


What would you do with $53623.19 from the Goverment

A 7.4 trillion dollar bailout; is Congress, President Bush, and Mr. Obama kidding?  That is $53,623.19 for each of the 138,000,000 tax returns filed in 2007 if you do the math.  Instead of focusing in propping up the financial industry, auto industry, or any other industry that comes groveling to the Federal Government, I say give the money directly to the taxpayers.money

The taxpayers would have a greater influence in pulling this economy out this “recession” than any current or future program our economic wizards can think of.  Just image what each taxpayer would due with the $53,623.19.

  1. The taxpayers would put that money in the bank; this would trouble banks by providing increase assets to draw on. (bank bailouts)
  2. Majority of the taxpayers would pay off their debts. This would increase liquidity in the market and improve the lending potential of the public since credit scores would increase. 
  3. A portion of the taxpayers would use the funds as a nice down payment on foreclosed home or a new home.  This would boost the housing market and mortgage industry.  
  4. Another portion would get a new car.  Hopefully an American car which would boots sales and would starve off any threat of bankruptcy in the near future.  Hmm…maybe that not a good thing.
  5. Consumer confidence would rise which would lead into increase sales of durable goods and services.

All in all, a win-win situation for economy, the public, and believe or not our government since they would be serving the public interest for once in the last twenty years.

Should GM fail?

GMWholly printing press Batman!!!!  The window at the U.S. Treasury is still open for business.  Just a few weeks ago, Congress passed the unprecedented and quite controversial $700 billion bailout plan for the Financial Industry.  Since then the market seemed to settle down and our financial institutions were saved from a so called “collapsed.”  Unknown too many, Congress was also providing relief to GM, Ford, and Chrysler LLC with a $25 billion loan to assist them in retooling their manufacturing base toward small and economical vehicles.  Wow!

Now just over a week from the completion of the 2008 Presidential Election, Congress and President-Elect Obama are talking about another bailout for our “beloved” auto industry.  This time around dollar amount is extensively higher to the tune of $50 billion dollars.  Unbelievable!!!!  I can’t believe the Congress and the President-Elect are willing to give away taxpayer money to an industry that resisted altering their business model for the last 20 years.  Guess what…that lack of denial has now come home to roost in Detroit.

I agree with most economist that a company the size of GM is too large to let fail due to the ramifications it could have on the economy – the enormous lost tax revenue, the increase in overall unemployment rate and fuel to this prolonged “Rescission” for several more years. 

Here are some facts to give you an idea how enormous this industry is and what an integrated part of our economy this industry is.  The automobile industry makes up four percent of the U.S Gross Domestic Product and 10% of U.S. industrial production by value.  One out of every 10 U.S. jobs is auto-related.

Yes, it is a big chuck.  However, shouldn’t the market dictate if these companies should survive or not.  Bankruptcy laws were written and passed for this reason, to provide companies a shield to assist them in developing a better business model while negotiating for better leases, labor, etc.  The goal is to emerge as a leaner and stronger company.

This option would be perfect for GM, Ford, or Chrysler LLC.  Filing Chapter 11 Bankruptcy would provide the auto manufacturers the ability to take power back from the powerful outdated labor unions and negotiate a reasonable/fair market wages, close unprofitable factories, secure better/cheaper parts network, and reduce the dealership network to a more manageable number.

Believe it or not, filing for bankruptcy is a better option than using taxpayer money to keep afloat an industry that has a broken business model.  What will keep the this industry from coming back to Congress a one, two, or five years to ask for another bailout. 

Does anyone really think that this money being proposed by Congress would honestly be used to turn things around again.  If you do, then I have some wonderful beach front property to sell you in Nevada.  Remember, bankruptcy worked for the airline industry before and after 9/11. 

If Congress and the President-Elect is willing to provide the auto industry money, what is stopping them from providing bail outs to other industries that are suffering from this economic down turn, bad business models, and/or high commodity prices like – the airline industry, steel industry, satellite radio, farmers, etc.  Heck, how bout Circuit City?  How can we let the second largest electronic retailer fail?  Where will I get my fix of new Simpson DVDs?

If the Feds are willing to hand out money to any company that declares them as a bank a la American Express and Goldman Sacks, then I hereby declare that I am now a bank holding company.   I am ready for my windfall of “lottery” money.”  So let’s make a deal!!!”

With all seriousness, these government-sponsored handouts need to stop.  The market is an extension of Darwinism – survival of the fittest.  It is time for the Bulls and Bears to battle it out!

Our economic philosophy is based on Adam Smith economic model…not Karl Marx!

The Auto Industry Bailout

For the most of the summer and especially these last few weeks, the economy and Wall Street has been in the forefront of everyone’s minds.  This humongous event has been the talk of America from the diners in the Mid-West, to the evening dinner tables of the South East, to the corner offices on Wall Street, and to the halls of Congress. 

Everyone is asking what is going to happen to our economy if this crisis continues and what should be done to stop this runaway freight train?  These are all good questions for our leaders to sort out as they debate the current $700 billion bail out that is proposed by the Treasury Department.  Questions that I not sure will ever be answered to everyone’s liking.

One item that has not landed on the  front page of any new papers as it should — the $25 billion bail out of the “big three” auto manufacturers — Ford, GM, and Chrysler.  

For the past few weeks the “big three” have been lobbying Congress for assistance through a direct loan program that was created by the 2007 energy law.  The original goal of this loan program was to offset the “big three” costs to develop and produce an increase in fuel-efficient cars.

Does anyone believe that this loan will be used to cover cost from switching from SUV manufacturing to hybrids?  No way!  This loan is really a bail out of another mis-managed industry that failed to adapt to the changing needs of the U.S. consumer while supporting a bloated, overpaid work force. 

Where is the outcry in the press and the public about this bail out?  Why should the taxpayers be on the hook for the auto industry?  These companies are bleeding money by their own design by getting in bed with the union more than the last 40+ years, saturating the market with a product that was not needed, failing to be innovated, using non-productive manufacturing processes, and employing a bloated work force (blue collar and white collar workers). 

These failings all add up to a poor business model that is just a stone’s throw away from collapsing.  However, why should these companies change their business philosophies, they all know that a “white knight” will be there to save them in their darkest hour.  Isn’t that what occurred back in 1979 when Congress bailed out Chrysler?  Well, history sure does have a way of repeating….

Like Wall Street, the auto industry will be bailed out by federal government and will return back to the status quo once the crisis has ended.  I guess the questions I need to ask is when will these hand outs end and will the airline industry be next? 

How much can the taxpayers absorb?  When will our government let our capitalist market correct itself through its own form of Darwinism?  I just don’t know….I just hope the Democrats and Republicans wake up and see the big picture before it is too late!