Obama: Helping or Hurting the Unions?

In what makes absolutely no sense but all the sense in the world it appears that Mr. Obama, despite being a supporter of unions, is substantially hurting their future success.

In an article from Bloomberg http://www.bloomberg.com/apps/news?pid=20601087&sid=asXxg9ZZRjv4, Hedge Fund Manager George Schultze says he will be more wary of lending to unionized companies after being burned in Chrysler's bankruptcy by the Obama Administration. In a similar article out of the Indianapolis Business Journal, http://cms.ibj.com/ASPXPages/6iframes/FrontEndArticlesDetailPage.aspx?ArticleID=38147&NoFrame=1 Indiana Treasurer Richard Mourdock said he wouldn't invest any more money in the debt of companies receiving federal funds.

Essentially what is happening is these creditors feel their legal rights under bankruptcy law have been stolen from them by the pro-labor political motivations of the government.

Normally the way it works in a bankruptcy case (simplified for easier explanation) is priority claims (taxes, lawyer fees, etc..) are paid first, followed by secured creditors, unsecured creditors, and then equity holders. Regardless, of whether you believe these unsecured creditors are being treated fairly or not, the perceived unfairness money managers, like the two mentioned above, have toward government interference will make it harder for union companies to borrow debt. In order to borrow these companies will now have to pay a risk premium to service their debt. This risk premium will increase their cost of doing business and on a macro scale force many more of them into bankruptcy than would otherwise be there.

Ironically Obama's actions are hurting the unions and the companies they work for. Makes perfect sense doesn't it?

Jeff Macke = Mr. South Carolina

Jeff Macke sums it up quite nicely in one of the best things I've heard since Miss South Carolina.

Funniest stuff on CNBC to date. Oddly enough despite not knowing what he said I find myself agreeing with him in entirety.

Ridiculous Things in Bizarro World

1) Timothy Geithner on whether Federal money was going to be available to cities and states - "As for any assistance, I wouldn't use the words 'bailout' or 'federal,' I would say we're in close consultation with people who are looking at ways to make sure these markets are working so states and municipalities can meet their needs."

Translation: Federal Bailouts of states and municipalities are on the way

2) Unlike the rest of us the Federal Reserve is not interested in money. Accordingly it has postponed considering Goldman Sachs, Morgan Stanley, and JP Morgan's request to repay the TARP until the week of June 8. http://www.bloomberg.com/apps/news?pid=20601087&sid=a7MkO._fo1fw&refer=home

3) Senate Passes Credit Card Bill - In a bid to further reduce credit the Senate has overwhelmingly passed "a credit-card “bill of rights” that would curb fees and limit contract changes." http://www.bloomberg.com/apps/news?pid=20601087&sid=aPFv1avGReog&refer=home . It is interesting that the government along with the Federal Reserve is doing everything it can to increase the supply of credit in the market, and then they go and pass a bill which will undoubtedly make it harder for credit card companies to stay in business and will most assuredly decrease the supply of credit. Which is it guys?

4) New Housing Starts and Permits Fall to Record Lows. Mr. Stock Market is confused all day. He can't decide whether this is a good thing or a bad thing. On the one hand it means new inventory won't increase housing supply down the road on the other it means "green shoot" recovery isn't happening at all and it still sucks to be a construction worker.

5) One of my all-time favorites....the administrations goal of making housing more affordable. To this end the federal government subsidizes houses with tax credits, deductions, the FHA, Fannie Mae, Freddie Mac, ZIRP (Zero Interest Rate Policy), 1.2 trillion of GSE debt purchase courtesy of Mr. Bernanke, and many more. My question: If you want to make housing more affordable why are you trying so hard to stop prices from falling? Isn't that what affordable means...low price?

More to come later....