Category Archives: Business

One Hundred Days

One hundred screwups. And here’s a pretty serious one:

The feds will ask the banks to increase their tangible equity by converting preferred shares to common stock, including the taxpayers’ preferred shares that were purchased with TARP funds. The WSJ editorial board called this a “backdoor nationalization.” That’s exactly what it is. It’s also a nationalization that increases taxpayer exposure to bank losses without recapitalizing the banks, without providing an exit strategy, and without building in effective safeguards against politically directed lending.

The country’s in the very best of hands.

“Card Check”

In action:

Milner says the men demanded that he erase his recording, and one of them took his camera, while Cerbo claims, in the Post’s words, that he “offered to erase his tape because he hadn’t been invited to the event.” No one disputes that Milner was outnumbered, or that it was he who called 911.

If this is what happens to a man at a public event, what do you expect a woman to do when these guys show up at her house with a card to sign?

I’ll be curious to see whether Benedict Arlen flips on this issue.

The Suborbital Space Race

Doug Messier has an analysis of the differences between Virgin Galactic and XCOR’s approach to commercial human spaceflight. A couple nits:

A year after the accident, Scaled brought in SpaceDev to assist with the engine development. The Powoy, Calif.-based company had built the propulsion system for SpaceShipOne, but Scaled subsequently decided to bring the engine development in-house. Bringing back SpaceDev was a tacit admission that this decision had not been a wise one.

It’s not quite that simple. There is some dispute as to who the actual engine provider for SS1 was, and SpaceDev certainly didn’t do it on its own. And one reason that they didn’t get the follow-on work was a rumored falling out between Burt Rutan and Jim Benson, founder and then-head of SpaceDev. In addition to the accident, I would assume that one of the reasons that SpaceDev and Scaled are working together again is a result of Jim’s departure from the company almost three years ago (subsequentprior to his recent death).


XCOR’s gradual approach – flying a small vehicle commercially, then building something larger – is what Scaled Composites might have done absent the involvement of Virgin Galactic. Branson’s company brought the customer experience to the forefront, which led to the development of a much larger – and more complicated – space plane.

It’s not at all clear what Scaled would have done (if anything) absent Virgin’s involvement. It’s unlikely they would have operated the vehicle on their own — that’s not the business they’re in, and they wouldn’t have developed it any further with their own money, because that’s not what they do. They build airplanes to other people’s specifications. Perhaps if Branson hadn’t stepped forward, Paul Allen might have started a passenger business, but we’ll never know now.

The Workers Take Over The Means Of Production

At Chrysler:

The agreement with the union essentially relieves Chrysler of a portion of the $10 billion it owes to the union’s retiree health fund. In exchange for giving up its claims to some of that $10 billion, the union is getting the significant equity stake in the company.

Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass., said that if the union winds up with a majority stake in its employer, that “puts the UAW in a strange position.”

“If it takes company stock as a part owner in the company, it would be bargaining against itself,” he said. “It can never act as adversarial in that relationship. Also it’s in a position that to make the company more stable, it has to reduce health-care benefits of its own retirees.”

“A strange position.” No kidding.

What I don’t understand is why Fiat would want a 35% stake in a company that is owned by the UAW.

[Update a few minutes later]

It seems to me that shareholders of GM, Chrysler, Bank of America and many other companies that have been screwed over by the government have massive grounds for lawsuits. The tricky part, of course, and particularly with this particular government, is getting permission from it to sue it.


The country’s in the very best of hands:

The cavalier use of brute government force has become routine, but the emerging story of how Hank Paulson and Ben Bernanke forced CEO Ken Lewis to blow up Bank of America is still shocking. It’s a case study in the ways that panicky regulators have so often botched the bailout and made the financial crisis worse.

In the name of containing “systemic risk,” our regulators spread it. In order to keep Mr. Lewis quiet, they all but ordered him to deceive his own shareholders. And in the name of restoring financial confidence, they have so mistreated Bank of America that bank executives everywhere have concluded that neither Treasury nor the Federal Reserve can be trusted.

Boy, that’s not a very flattering picture of Hank Paulson. Looks like Darth Vader without the mask.

There’s Something Missing

So the president made (or is making) a speech before the NAS today in which he proposes to increase spending for “science,” and R&D (I wonder if he understands that these are different things?).

Well, no surprise there. Increasing spending is his first resort to every conceivable problem (except when it comes to defending the nation). But do you not see what I don’t see?

Obama said he plans to double the budget of key science agencies over a decade, including the National Science Foundation, Department of Energy Office of Science and the National Institutes of Standards and Technology.

He also announced the launch of the Advanced Research Projects Agency-Energy. It is a new Department of Energy organization modeled after the Defense Advanced Research Projects Agency, that led in development of the Internet, stealth aircraft and other technological breakthroughs.

Look, Ma, no space agency! No mention of NASA at all. This, combined with the continuing absence of an administrator or White House direction, makes me wonder just where space falls in the priorities of this administration.

But actually, what I find much more disturbing is this:

“I believe it is not in our character, American character, to follow — but to lead. And it is time for us to lead once again. I am here today to set this goal: we will devote more than 3 percent of our gross domestic product to research and development,” Obama said in a speech at the annual meeting of the National Academy of Sciences.

Let’s leave aside the arbitrariness of setting a percentage goal at all (why 3%? Why not 2.5% or 5%?). Let us also ignore the fact that at the rate things are going, there’s not going to be much of a GDP to have a percentage of, and that the $420B number makes some optimistic estimates.

Why set the goal as a percentage of GDP? Why not as a percentage of the federal budget, something over which a president and a government has at least theoretical control? The implication is that he doesn’t just preside over the government and its spending priorities, but that he commands the entire national economy, and can, should and does dictate how others are to spend their own money, which apparently is no longer their own money. It implies a conceit of omniscience on the part of him and his advisors about how much we should be spending on R&D as a function of domestic product, and how we should be spending it, when he has no useful control over what non-governmental entities are spending.

Or does he? Just what does he have in mind?

Oh, and note the latest gratuitous slap at the previous administration, without which, apparently, no Obama speech is complete:

In recent years, he said, “scientific integrity has been undermined and scientific research politicized in an effort to advance predetermined ideological agendas.”

He then drew chuckles, commenting: “I want to be sure that facts are driving scientific decisions, not the other way around,” Obama said.

Yes, there will be no predetermined ideological agendas in an Obama administration.


Oh, one other thing. I don’t have the time to run the numbers right now, and it obviously depends on how you categorize things, but I’d wouldn’t be surprised if we don’t already spend more than 3% of the GDP on R&D. It’s just not being spent the way The One wants it to be spent.

[Update a few minutes later]

This brings to mind some thoughts that I had last summer on the ability to command and control R&D, with bad Apollo analogies.

[Late afternoon update]

One of Clark Lindsey’s readers makes a good point about the non-mention of NASA:

Perhaps, as the reader suggests, if NASA had not dropped most of its R&D in favor of funding a handful of giant development projects like Ares I, it would get more backing for such activity.

Of course, Ares 1 is R&D, technically speaking. But almost all other, more diverse and certainly more useful R&D has been sacrificed to fund it. But somehow, I actually doubt that this is the reason for the apparent oversight. It think it’s just an oversight.

[Update a few minutes later]

OK, NASA didn’t go entirely unmentioned. He did repeat the flawed Apollo analogy again (it’s one of his favorites), and then said this:

My budget includes $150 billion over ten years to invest in sources of renewable energy as well as energy efficiency; it supports efforts at NASA, recommended as a priority by the National Research Council, to develop new space-based capabilities to help us better understand our changing climate.

That little whirring windy sound you hear is my upright forefinger twirling around and around.


Good News On The Electorate

Support for a free-market economy is high, and increasing:

Seventy-seven percent (77%) of U.S. voters say that they prefer a free market economy over a government-managed economy. That’s up seven points since December.

The latest Rasmussen Reports national telephone survey also found that just 11% now prefer a government-run economy, down from 15% four months ago.

Funny what a few months of seeing a government attempt to run an economy can do. The other encouraging news is that the support is even stronger (though probably within the margin of error) among voters under thirty. “Capitalism” gets less support, but it’s good to see that people make a distinction. The other interesting result is the number of people who recognize that big business tends to capture the regulators, while free markets are better for small business:

Seventy percent (70%) of voters believe that big business and big government are generally on the same team working against the interests of consumers and investors.

A plurality of voters (46%) say that small businesses benefit more from free markets than big business. Thirty-five percent (35%) hold the opposite view. Most Democrats think big businesses benefit more from free markets, while most Republicans and unaffiliated voters say small businesses are more likely to benefit.

By a 62% to 23% margin, voters also believe that small businesses are hurt more by regulations than big business. This finding is likely driven by public understanding of the way Congress works. Earlier surveys found that 68% say most business leaders contribute to political campaigns primarily because the government can do so much to help or hurt their business.

Which just shows, once again, the result of government, and particularly the federal government, having too much power. And, as would be expected, Republicans and Independents are more sensible on this than Democrats, who (conveniently) fantasize that small business does better under more regulation. Mark Steyn has some related thoughts:

There was an old joke in Britain: “Why is there only one Monopolies Commission?” In fact, it’s a profound observation about the nature of government. We wouldn’t like it if there were only one automobile company or only one breakfast cereal, but by definition there can only be one federal government – which is why, “when the Government’s monopolizing”, it should do so only in very limited areas.

This isn’t an abstract philosophical point, but a very practical one. Fans of big government take it for granted that Barack Obama, Timothy Geithner, Barney Frank and a couple of other guys can “run” the financial sector better than 8,000 US banks all jostling for elbow room like bacteria in a petri dish. Same with the auto industry, and the insurance industry, and the property market, and health care, and “the global environment”. The skill-set required to run a billion-dollar company is the province of very few individuals. The skill-set required to run a multi-trillion-dollar government is unknown to human history.

And speaking of not understanding how economies work, Instapundit has an observation on the president:

…when Obama says “We’re not producing enough primary care physicians,” he’s making a mistake. We don’t produce doctors. They’re not widgets. People choose to become doctors — or something else — based on their analysis of what will produce the best life. Medicine has gotten less pleasant, and less financially rewarding, really, over the past several decades as it’s become more bureaucratized and subject to the whims of third-party payors. So will Obama’s plan fix that? Seems doubtful. Will he recognize that you don’t produce doctors the way you produce, say, cars? That’s doubtful, too.

Of course, as James Joyner points out, we don’t exactly have a free market in the medical profession, either.

[Update a few minutes later]

You already knew this, but Eleanor Clift and Jim Warren are economic morons. Not to mention Obama sycophants. It’s a perfect illustration of Rasmussen’s gap between the voters and the Washington elite.