Obama to appoint panel for auto recovery

[cletus8269]

WASHINGTON (AP) - It will take more than one "car czar" to help get the embattled U.S. auto industry back on track, President Barack Obama has decided. Instead, his administration is establishing a presidential task force to direct the restructuring of General Motors Corp. (GM) and Chrysler LLC, a senior administration official said Sunday night.

Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers will oversee the across-the-government panel, the official said, speaking on the condition of anonymity because no announcement has been made.

GM and Chrysler are expected to submit restructuring plans to the government by Tuesday, the deadline for showing how they can repay billions in loans and become viable in spite of a huge drop in auto sales.

The auto industry task force is just one element of Obama's plan to revive the flailing economy. On Tuesday he's flying to Denver to sign the $787 billion stimulus bill into law, taking his economic message to the American people, who are giving him high marks for handling the crisis.

Obama will also be tackling the home mortgage foreclosure crisis. The direct appeals for public support follow scant GOP backing in Congress for his agenda and increasing partisan bickering.

Passage of the stimulus measure - unprecedented in its cost - was a major victory for Obama as he struggles to lift the country from a financial nosedive unseen since the Great Depression of the 1930s.

"I think it's safe to say that things have not yet bottomed out," press secretary Robert Gibbs said Sunday. "They are probably going to get worse before they improve. But this is a big step forward toward making that improvement and putting people back to work."

The symbolism of the stimulus signing is obvious for Colorado, where a growing green-energy industry will draw major benefits from the plan.

And Obama seems likely to continue selling that recovery by traveling around the country.

"He is determined to keep in touch with the American people who sent him here to do this job," senior adviser David Axelrod said.

With the stimulus victory in hand, Obama planned to shift to the housing crisis with an announcement Wednesday in Phoenix.

Obama was expected to offer help to homeowners on the brink of foreclosure. Details have not been disclosed, but the nature of the crisis suggested mortgage loans would have to be revalued downward along with interest rates.

---

Associated Press writer Philip Elliott contributed to this report from Chicago.

http://apnews.myway.com/article/20090216/D96CLG6O0.html

[gm4life]

Just peachy more politics with-in GM just what we need. File chapter 11 and get on with it.

[balthazar]

There is no way in hell this is going to work like supporters of the Corp would hope it would.

[turbo200]

There is no way in hell this is going to work like supporters of the Corp would hope it would.

there is no way in hell GM would survive without his support right now. given his propensity for carefully constructed thought and integrity I await with optomism

Edited February 17, 2009 by turbo200

[balthazar]

Still on the honeymoon, eh?

[hyperv6]

Ruling things by committe by accountants is what got GM into this mess in the first place.

"Given his propensity for carefully constructed thought and integrity"

Wow that must have been some good Kool Aide! It's time to wake up the dream is over. Nancy P is running your lives.

[Drew Dowdell]

None of it is going to matter anyway. GM needs to declare bankruptcy now. We're just in the eye of the storm. The worst of the current batch of bad mortgages has already passed. What isn't being reported is that there is a larger wave of what are called "Option ARM" and "Alt-A" mortgages due to start resetting en mass beginning late spring to early summer with the peak happening mid winter next year.

If you thought the past 12 months were bad, wait till ya get a load of the next 18.

*continued after I find a place to plug my laptop in*

[evok]

None of it is going to matter anyway. GM needs to declare bankruptcy now. We're just in the eye of the storm. The worst of the current batch of bad mortgages has already passed. What isn't being reported is that there is a larger wave of what are called "Option ARM" and "Alt-A" mortgages due to start resetting en mass beginning late spring to early summer with the peak happening mid winter next year.

If you thought the past 12 months were bad, wait till ya get a load of the next 18.

*continued after I find a place to plug my laptop in*

If only the Treasury could guarantee the financing.

BTW Don't forget the commercial property market - that is about to go boom too.

[gm4life]

None of it is going to matter anyway. GM needs to declare bankruptcy now. We're just in the eye of the storm. The worst of the current batch of bad mortgages has already passed. What isn't being reported is that there is a larger wave of what are called "Option ARM" and "Alt-A" mortgages due to start resetting en mass beginning late spring to early summer with the peak happening mid winter next year.

If you thought the past 12 months were bad, wait till ya get a load of the next 18.

*continued after I find a place to plug my laptop in*

Totally agree.

[Drew Dowdell]

Correct, the commercial wave starts in the middle of the Option Arm/Alt-A pop. I hear the John Hancock tower in Chicago is in foreclosure already.

Here is the difference between what has happened and what is about to happen.

In the past 12 months, most of what has failed has been fairly standard adjustable rate mortgages. You get a $180k mortgage for a $200k home and get an adjustable interest rate that resets every year after 5 years or so. You paid the standard principle + interest + escrow. What has happened is the first bunch of homeowners who's mortgages reset could no longer afford the new payments. Some refinanced, but a good many went into foreclosure. The foreclosures put downward pressure on home prices. When this happened, even fewer people could refinance their homes because the values of the home often fell below the amount of the first mortgage. The vicious cycle started and that's how we got where we are today.

Keep in mind that 12 months of that have brought down the largest investment banks in the country, put Bank of America, CitiGroup, and Wells Fargo on the ropes, and forced mergers of banks that never would have happened in a normal climate.

Here is the fun part.

With an Option ARM loan you have the option to make partial principle and partial interest payments. What you don't pay gets amortized back into the principle of the loan up to a maximum of 115% or 125% of the original loan value or once 5 years has been reached. Many people pick these types of loans because it was the only way they could afford the monthly payments on their McMansion. In the meantime, property values have fallen across the board making refinancing out of these loans virtually impossible. Once these loans are recast (similar to the resetting of the interest rate in an ARM), the home owner goes from making a minimum payment that doesn’t even cover interest to a fully amortizing payment that covers all interest AND principal. And remember, principal is 15-25% higher than the original loan balance. Most people with these types of loans also put no money down or got a second mortgage to pay for their money down. They owe 25% more than their home was valued at way back at peak housing prices. The resulting payment shock—imagine your monthly mortgage payment suddenly increasing 3x—leads these loans into default like none other.

Now, with all that in mind. Lets look at the numbers.

The end of 2008 was the time period where the highest dollar value of standard ARM loans was due to reset. At the peak, about 36 billion dollars per month in loans reset. There is a lag with standard ARMs because the payment shock is anywhere between 0% and 20% increase in monthly payment. Many families can handle it for a short while before they start falling behind.

May/June 2009 is when the Option ARMs begin to reset. This wave has 3 small dips. The peak of the first wave hits us in December 2009 and reaches $25b per month in recasts. It drops off for a bit then shoots up to $30b a month in recasts around June 2010. Drops back to $20b per month in December 2010 and then surges to $40 billion per month in June 2011. Now when these loans recast, there will be a lot less lag time because the monthly payment will jump anywhere from 80% to 200% of what the homeowner is used to paying. With no way to pay and no ability to refinance, homeowners will throw in the towel much faster.

Are you ready for the punchline? As of December of 2008, a stunning 28% of option ARMs were delinquent or in some stage of foreclosure. This is before any recasts have even kicked in!

Remember, the banks have already failed and consolidated from just the first mess. Bank of America, Wells Fargo, and Citigroup are already dangling on the cliff.

GM..... all of us... have much bigger things to worry about than this committee.

P.S. If this thread gets political it's getting moved.

[evok]

In the meantime, property values have fallen across the board making refinancing out of these loans virtually impossible. .

Yes - and the talk about renegotiating the terms of the mortgages has been shown to be a bust. Somewhere recently I read, the banks that have done this have only delayed the inevitable. The banks pulled owners out of ARMs/Interest Only and put them into 40-50 year fixed and they still could not afford the payments.

[Drew Dowdell]

Yes - and the talk about renegotiating the terms of the mortgages has been shown to be a bust. Somewhere recently I read, the banks that have done this have only delayed the inevitable. The banks pulled owners out of ARMs/Interest Only and put them into 40-50 year fixed and they still could not afford the payments.

60% of renegotiated mortgages end up back in default in 6 months.

[evok]

60% of renegotiated mortgages end up back in default in 6 months.

That looks like the numbers I saw.

Now - In the early 1980s recession, pick up truck sales picked up with new construction starts earlier than the traditional passenger car fleet.

With all the forclosures out there and soon to be out there, does anyone expect that to happen any time soon?

There goes the Detroit 3 cash cow. GMs revenue was all about the 900s.

Cool site with map function to see how bad it really is.

http://www.realtytrac.com/

[balthazar]

Anyone know the mix of ARMs to fixed ?

-- -- -- -- --

Both my morgage broker, and a professional accountant advised against me pre-paying on my morgage.

If I had gotten a 30-yr fixed morgage, I'd have 14 more years to go.

If I had merely run the course on my bi-weekly, I'd have 6 more years to go.

Instead I pre-paid regularly, and have been morgage-free since 2004.

I am very thankful for my innate fiscal conservatism.

[HarleyEarl]

Yep the fox is in the henhouse. Finally the leftists have GM and the auto industry just where they have always wanted them. Just the saddest of times.

Just the thought of GM groveling to these people is frankly humiliating.

Edited February 19, 2009 by Oldsmoboi
If you want to be political, sign up for a premium membership and join the Politics forum.

[balthazar]

It's going to be a pretty thin line separating 'politics' from GM when politics is now so deeply ingrained into GM in 2009. Perhaps a clear definition of what constitutes 'politics' as perceived by the mods is in order, to avoid spot administrative editing of member's posts. Just a suggestion.

[biff]

Ironic that the US government, who is nearing 11 trillion in debt and can't manage itself, is going to be overseeing the GM turnaround now.

[HarleyEarl]

Yep the fox is in the henhouse. Finally the leftists have GM and the auto industry just where they have always wanted them. Just the saddest of times.

Just the thought of GM groveling to these people is frankly humiliating.

How bizarre. Frankly this is really quite silly.

I've always tried to be reasonable in my posts.

I've seen some of the most hateful, vulgar posts on C&G and nothing said or edited.

And with that I'm finished with C&G.

I've had mostly good times here and enjoyed the insights of a few great people here...they know who they are.

And I wish those individuals much good fortune in the years ahead.

But there is a limit to one's patience.

[hyperv6]

Yep the fox is in the henhouse. Finally the leftists have GM and the auto industry just where they have always wanted them. Just the saddest of times.

Just the thought of GM groveling to these people is frankly humiliating.

Sorry to see one of the stable and informitive go but I can understand. I would have liked to seen your full post. What was left is so true.

As stated above Poltics and GM are now one so C+G needs to learn how to deal with it. Just look at the thread topic, it does not get more politcal than that.

Edited February 20, 2009 by hyperv6

[Drew Dowdell]

How bizarre. Frankly this is really quite silly.

I've always tried to be reasonable in my posts.

I've seen some of the most hateful, vulgar posts on C&G and nothing said or edited.

And with that I'm finished with C&G.

I've had mostly good times here and enjoyed the insights of a few great people here...they know who they are.

And I wish those individuals much good fortune in the years ahead.

But there is a limit to one's patience.

I'm sorry you feel that way. We had an exception to the political rule during the election season, but once the election was over the Politics rule was reinstated. Since their appeared to be a demand for an area for politics to be discussed, we created a section for it if people chose to join in that discussion.

General government policy as it pertains to GM is not the same as partisan politics.

[balthazar]

And with that I'm finished with C&G. I've had mostly good times here and enjoyed the insights of a few great people here...they know who they are. And I wish those individuals much good fortune in the years ahead. But there is a limit to one's patience.

Well this absolutely SUCKS (tho I understand completely).

If you pop back in, shoot me a PM, HE.

If not, anyways; thanks for some great conversation from the Same Page.

[Teh Ricer Civic!]

What ever happened to mortgage insurance that people have to pay?

[turbo200]

I'm sorry you feel that way. We had an exception to the political rule during the election season, but once the election was over the Politics rule was reinstated. Since their appeared to be a demand for an area for politics to be discussed, we created a section for it if people chose to join in that discussion.

General government policy as it pertains to GM is not the same as partisan politics.

while your point is not lost, i feel your handling of the situation was just this side of overbearing. harley expressed an extreme political opinion, in the past we would have had a few uninformed trade retorts, some ignorant catcalls, and then it would have all died down. besides some confusion no one was hurt. i generally and unwaveringly feel the moderation is self-sustained here and that we are able to keep polite and respectful tones, which works better than the almost opressive tone some of the modding has taken, which i admit i've only noticed in spontaneous bursts....no doubt due more to gentlemanly behavior by most of my fellow posters.

Edited February 20, 2009 by turbo200

[gm4life]

How bizarre. Frankly this is really quite silly.

I've always tried to be reasonable in my posts.

I've seen some of the most hateful, vulgar posts on C&G and nothing said or edited.

And with that I'm finished with C&G.

I've had mostly good times here and enjoyed the insights of a few great people here...they know who they are.

And I wish those individuals much good fortune in the years ahead.

But there is a limit to one's patience.

Sorry to hear this HE. I wish you the best, if you stop back PM or let me know! I always enjoyed your views, and most often agreed with them. You will be missed.

Edited February 20, 2009 by gm4life

[hyperv6]

while your point is not lost, i feel your handling of the situation was just this side of overbearing. harley expressed an extreme political opinion, in the past we would have had a few uninformed trade retorts, some ignorant catcalls, and then it would have all died down. besides some confusion no one was hurt. i generally and unwaveringly feel the moderation is self-sustained here and that we are able to keep polite and respectful tones, which works better than the almost opressive tone some of the modding has taken, which i admit i've only noticed in spontaneous bursts....no doubt due more to gentlemanly behavior by most of my fellow posters.

[Drew Dowdell]

What ever happened to mortgage insurance that people have to pay?

Many of those insurance companies have since gone bust.

[Satty]

I have the perfect "Car Czar" to head this up. His name is Ralph Nader.

[vonVeezelsnider]

And with that I'm finished with C&G.

I've had mostly good times here and enjoyed the insights of a few great people here...they know who they are.

Hopefully we see you again... pop me a PM whenever you wish.

[daves87rs]

The sad part is that GM IS politics now....there is no way around that, once the government is involved.

Should be interesting....

[daves87rs]

Will he be arriving at the job in his environmentally friendly minivan?

[cletus8269]

P.S. If this thread gets political it's getting moved.

hmmm i am not quite sure what my post has done because i have been on vacation and this is the first time i have checked back. not that i am really even interested int eh topic itself i just posted because i thought it was worthy news. If this does get moved to the "political" thread i wont be able to read it as i am not premium member.

[NOS2006]

On the radio this morning, they announced that of the 19 people appointed to this panel for "auto recovery," all but 3 of them drive foreign vehicles...

[Teh Ricer Civic!]

On the radio this morning, they announced that of the 19 people appointed to this panel for "auto recovery," all but 3 of them drive foreign vehicles...

Well duh, what do you expect?

[balthazar]

Never mind that- how many, if any, have any experience to speak of in running a business ????

[Satty]

Given the way many businesses have been run in the past...oh, let's say history of the world, I'd be inclined to say the fewer the better.

[balthazar]

Likewise- given the way the government has been run in the past (and present), I would vote for a few who have at least a basic understanding of how a business works, as opposed to those who have no earthly idea.

[Satty]

Knowing how a business works and having experience running a business are two different things.

[balthazar]

Right- and how is having neither a plus, again?

[Satty]

You're the only one saying they have neither. All I said was that business have been run poorly for just about forever, after you said :

how many, if any, have any experience to speak of in running a business

I didn't say they should send used car salesman and gas station cashiers in there, you merely chose to interpret it that way. I meant they should use intelligent people able to analyze industry, and make recommendations based on what has worked, and what shows potential to work. People who have been running businesses aren't likely to do that, they're more likely to make recommendations based on what they've done, regardless of results.

[balthazar]

My fear is the people appointed will be politicians first & foremost, people who's relative intelligence is highly in doubt, and such that it is, in areas that have nothing to do with the needs of the auto industry.

Are there any names floating around in public of potential panel members yet??

[Satty]

Let's put this in terms you're better with. Lets use my brake lines to represent the auto industry. Now lets say those brake lines have been cut, probably by a poster on C&G. Putting industry veterans on the auto recovery panel would be like having the guy who engineered my car's braking system take a look at it. He could tell me what I already knew, that my lines were cut, but offer no new advice. Putting politicians in charge would be like having my brother-in-law look at my brake lines. He'd say, "Yep, they're cut" then give me difficult to follow instructions on how to either repair or replace the lines, putting more emphasis on cost and time than on results. What the auto recovery panel needs is someone in between, someone who understands the basics of a braking system AND how to replace the lines. That person would, in my metaphor, be a certified mechanic. In the auto recovery panel, it would probably be experts in economics, your Paul Krugman and Edmund Phelps types.

And in case any of you has any designs on cutting my brake lines, I'm pretty sure the Prius doesn't have any, it is stopped by unicorns.

[balthazar]

>>"Putting industry veterans on the auto recovery panel would be like having the guy who engineered my car's braking system take a look at it. He could tell me what I already knew, that my lines were cut, but offer no new advice."<<

To diddle around in your metaphor : Why do you assume the engineer would be unable to tell you how to replace the lines (there not being a recommended procedure to repair damaged brake lines)?

But agreed; a mechanic would be ideal- one who knows what needs to be done & how to perform that procedure. I just have no faith a person meeting those requirements will be on the panel.

[daves87rs]

On the radio this morning, they announced that of the 19 people appointed to this panel for "auto recovery," all but 3 of them drive foreign vehicles...

Well, that's great news...

[vonVeezelsnider]

Dave you should be happy, one of them has a Cavvie (1998)

[Satty]

To diddle around in your metaphor : Why do you assume the engineer would be unable to tell you how to replace the lines (there not being a recommended procedure to repair damaged brake lines)?

Because the engineer didn't necessarily decide where the brake lines run in the car.

[hyperv6]

If the president was wise and wanted all the info he could get he would have appointed one person from each company to represent all sides of this issue not just DC side.

I would have one from Ford, GM and Chrysler and also a independent person from the industy possibly a retired automotive chief {Lee Iaccoca?} or the like. This panel needs balance to show what is possible and what is not.

Right now we have a group of intelopers from DC going to tell a troubled industry how they need to do their buisness. Detroit has enough problems already with out an uninformed advisory group. Like Joe Biden has a grip on what is going on in Detroit or that your going to get an unbiased opinion from the eviromental rep. All sides need to be represented at the table not just one side.

THis is a group that needs to work together not one over seing the other. That is already what is wrong in Washington alrready. Too much them and us and both parties are at fault.

[ocnblu]

Why shouldn't we have a panel appointed to direct the auto industry's recovery? Have hope, man! The country that invented the automobile deserves nothing less!

[Drew Dowdell]

Why shouldn't we have a panel appointed to direct the auto industry's recovery? Have hope, man! The country that invented the automobile deserves nothing less!

What recovery? The fundamentals of the economy are strong.

[hyperv6]

I wonder how many on this commitee have worked in a large corperation?

I wonder how many have a real working knowledge of the auto industry and how it really works.

I wonder how if any have agendas more than to save the industry and have taken money from a lobbiest?

I wonder howe many have correctly paid their taxes? LOL

To be fair on this the president should have people that have worked around or have a good working knowledge of how the Auto industy works and it history good and bad that lead up to this problem.

I would think the president would only want the best people on this and most informed giving him advice?

I am sure if called upon people like a Roger Peskie could help advise or even recomend people to ask if he is unable. Their are good qauilty people in undustry that are more than qualify to help advise how to turn these companies around.

No knock to Joe Biden but he is a good example of who not to pick. He has mostly only served in the Senate and has little experiance outside DC. He has a great working knowledge of how the Senate works but even admits he has to learn how the House on Capital hill operates.

I have no problem with most of these people here if the president wants them but I just thinks some trusted captains of industry should be present to provide first hand knowledge to what needs to be done.

I guess if you go to war you would pick your best generals who have faced war to advise you not people who never served in the military? Or a Treasury Secritary with a great knowledge of Wall Street?

So would you not want a few people with a good knowledge of industry or auto industry?

[balthazar]

>>"Because the engineer didn't necessarily decide where the brake lines run in the car. "<<

Immaterial to your analogy.

hyperv6- good points, and logical. Hope to hell someone involved in calling the panel shots thinks the same way, but I doubt it. The current appointment track record does not reassure me in the least.