Opiniion: Government's GM Plan Requires Political Will

The United States government is essentially taking on the role of bankruptcy court as General Motors works to salvage and restructure the venerable – and now very vulnerable – American business, says Ray Hill, a former investment banker and assistant professor in the practice of finance at Emory University's Goizueta Business School who teaches managerial economics and finance.

"The government has the chance to do it right and help GM avoid bankruptcy, but the question is will they have the political will to do so – for example, can they push the UAW hard enough to bring labor costs into line with the global industry? In addition, can they avoid too much interference with business decisions?" Hill says. "The problem is when political considerations get in the way of good business decisions. For example, you don't want the government telling car companies to make little cars that no one wants."

The government may end up concluding that bankruptcy is the only way to achieve the drastic changes that are required, Hill says.

Winners and losers under the government plan include bondholders, who will lose regardless, but could come out better under the government's plan. If the plan fails, the United Auto Workers have the most to lose under standard bankruptcy laws since they will be in line with other creditors, Hill says.

Rove: Is the Administration Winging It?

Karl Rove, former senior advisor to President George W. Bush, provides his opinion on the early leadership shown by President Barack Obama. His words appear to echo so much of what is being said out and about in local communities.

Is the Administration Winging It?
Karl Rove
Wall Street Journal Editorial
February 18, 2009

Team Obama demonstrated remarkable discipline during the presidential campaign. From raising an unprecedented amount of money to milking every advantage from the Internet to grabbing lots of delegates from inexpensive caucus states, they left nothing to chance.

And now the administration has scored a major legislative victory in an extraordinarily short period of time. Less than 700 hours after taking the oath of office, President Barack Obama signed the largest spending bill in American history.

Nevertheless, this fast start can't overcome a growing sense the administration is winging it on issues large and small.....
http://online.wsj.com/article/SB123500260310017735.html?mod=djemEditorialPage

Bailout for Defaulted Homeowners? Not so Fast, says Survey

Americans are weighing in with opinions on bailouts and mortgages. Will Congress and the Obama Administration listen?

Here is the story:

Majority Opposes Using Bailout Funds to Help Defaulting Homeowners

/PRNewswire-USNewswire/ -- As a new Congress and the incoming Obama Administration prepare to tackle record numbers of foreclosures that have depressed real estate values, a new national survey released today by the Reecon Advisory Report found that a majority of Americans, 51 percent, opposes using Federal bailout funds to help pay the mortgages of homeowners who are in default. Forty-three percent of those surveyed favor helping homeowners in trouble.

The survey found that opposition to using bailout money to help defaulters is greatest among men (58.3 percent), elderly (56.2 percent) and those living in the Northeast (56.1 percent). Support for helping defaulting homeowners is greatest among young people age 18 to 24 (69.1 percent) and those earning less than $20,000 a year (60.1 percent).

"These findings indicate that there are significant political barriers to proposals now being drafted in Congress to use some of the remaining $700 billion of bailout funds to help stem foreclosures by helping defaulting homeowners with their mortgages," said David Lereah, president of Reecon Advisors Inc., an independent real estate economics and information company.

"As a new Federal foreclosure policy unfolds in the months to come, public opinion will certainly play a central role. It's clear that people have strong opinions and a candid and vigorous debate will improve the chances for a successful outcome. The outcome could shape the real estate markets for many years to come," added Lereah.

The survey also found that consumer confidence in real estate is significantly higher than the stock market, despite the depression in property values. By a margin of 53.7 percent to 30.8 percent, those surveyed think real estate is a better long-term investment than the stock market, considering the current economic situation. Confidence in real estate is highest in the South (58.6 percent) and West (58.4 percent), and among young people 18 to 24 (63.8 percent). The stock market ranks highest with those age 35-49 (34.7 percent).

However, public opinion on whether the stock market or real estate will recover first is much more evenly split and falls within the survey's margin of error. Forty-six percent predict the stock market will recover first; 43.2 percent believe real estate will be first. Real estate ranked highest with young people 18 to 24 (57.3 percent) and Southerners (50.6 percent).

The telephone survey, by GFK Custom Research North America, was conducted December 19-21, 2008. A total of 1,004 interviews were completed, 524 with female adults and 480 with male adults. The margin of error on weighted data is +3 percentage points for the full sample. All completed interviews are weighted to ensure accurate and reliable representation of the total population, 18 years and older.

The poll is the first in a series of opinion surveys on issues critical to real estate markets to be conducted by Reecon Advisors, Inc. for the Reecon Advisory Report, a weekly newsletter being launched today, to provide insight, analysis and intelligence on residential real estate.