Of all the companies the United States government has bailed out during this recession, few have drawn as intense a degree of the public’s ire as American International Group, the company that is commonly known as AIG. Their indiscriminate use of the credit default swap seemingly didn’t include any hedging at all, and thus they were unprepared when values dropped due to delinquency. The insurance monster found itself in a deep grave. It would need more than $100 billion to get out.

As you may know, the government ponied up the money – which means you and I paid to rescue the irresponsible, greedy AIG. Would the government (forget about us, cowboy) ever get its personal loans and cash advances back?

Apparently so

AIG stock could be on the way up soon, as outgoing CEO Edward Liddy believes the company has “an excellent chance” to repay the government, reports Bloomberg. The insurer has plans to pay down its massive Federal Reserve credit line of $25 billion by selling off two of its foreign life insurance interests.

They have to do something. AIG has received four bailouts so far, making their take so far $182.5 billion. Their gambles in the housing market prompted them to turn over majority stake to the government. In addition to a $60 billion credit line (are they worth it, or should they be nationalized?), there’s also $52.5 billion to buy mortgage assets and another investment of $70 billion. It’s truly staggering.

Sell, sell, sell

So far, AIG has put its money where its mouth is when it comes to selling off its interests. They’ve raised $6.7 billion by making deals in a variety of industries, including those with an American auto insurance company, an equipment guarantor, the title-holder for its New York headquarters and the owners of a Japanese office building. AIG is also working to sell off its airline-leasing and consumer-finance businesses, said Liddy.

“We have determined the destinies of nine of our major businesses spanning everything from life insurance in Taiwan to global real estate, and have specific plans for each of those nine,” he said. “We expect this process to advance steadily in the next six months, and may involve public offerings.”

Replacing Liddy, moving forward

Former AIG CEO Liddy no longer holds that position with the company. He has said that he will also step down from his position of board chair. He had come out of retirement to run the company after it was taken over by the United States government. His annual salary was $1. An executive search firm is currently working to find a replace for each position. Liddy urged the company to keep the two positions separate in the future.

Liddy’s departure, as well as a number of high-ranking members of the AIG board, has given investors something this doesn’t exactly resemble new hope, but it is looking upward.

“Goodbye and good riddance,” said Kenneth Steiner, who holds 10,000 AIG shares. “I hope our new directors will do a better job.”

One concerned person in attendance at a recent shareholders’ meeting was retired AIG employee Kathleen Mylott. Her reaction to her once great company and its need for bailouts seems to accurately gauge the temperature of the water: “It’s like watching your house burn down, The emotional toll has been worse than the financial toll, if you can believe that. It’s an American tragedy.”

Related Video:

As many of the nation’s A-List banks including Goldman Sachs decide to pay back government aid, it is a sign of impending doom for the public waiting in line for installment loans. Economists view such a move skeptically. While it may seem to be a sign of strength of the bank, other banks may feel the pressure to follow suit and get out of the government program prematurely.

In fact…

In fact, banks may not be in a position to afford the repayment of bailout funds but may still go ahead with it from a marketing perspective. Returning the Troubled Asset Relief Program money seems like a signal of strong credit in the market.

Are Banks Strong Enough Yet?

To prove this fact, Former Treasury Secretary, Paul O’Neill sent an email to ABC News disclosing the willingness of major U.S. banks to accept money at the beginning of the TARP program. If the banks had not needed the funds in the first place, they could have refused to accept them.

By repaying government aid, banks will be able to portray a stronger financial standing and more importantly, prevent administrative restrictions on executive compensation. Along with Goldman Sachs, Bank of America may also repay the $45 billion received from the government as bailout help. Five smaller banks have also made statements showing their willingness to return the TARP money.

The Government’s Take

Contradicting this move by financial institutions, Obama’s administration has told the banks to look at the welfare of the overall economy and not just their own organization. Driven by the goals of avoiding compensation restrictions or just appearing stronger in public eye seem to be putting pressure on banks to return billions of dollars of money received as bailout aid. In the coming times, this may prove to be detrimental for both the banks and the nation’s recovery from the economic crisis. On the other hand, Americans will have to wait for a long time to gain access to installment loans for handling the financial crisis.

Presently, a bank looking at a refund of TARP money should notify the Treasury Department and the associated federal banking agency about their intentions. After consulting with the primary regulator, the Treasury will contact the bank to discuss the redemption request.

The Final Analysis

Not being a consumer-based lending bank puts Goldman Sachs in a unique position to return its TARP money. They can easily raise money in the market, unlike several other large banks. Perhaps, this is a major reason why institutions are confident of their ability to return government aid and still maintain a good financial position. The real risk faced by banks is not returning the government money for the wrong reasons but the possible changes in bank policy after they repay the funds.

In such circumstances, the people can only wonder if they will ever know the reality of any of the financial institutions and get installment loans to improve their own financial state. As the skepticism rises, President Obama and his administration have been forced to conduct a “stress test”, with the aim to disclose information about the health of American’s 19 largest banks. Only time will tell what’s in store for the TARP program and the US economy.

Payday loans are still a trustworthy bailout option for American taxpayers. The Recovery Plan included a huge $767 billion bailout for the struggling banking industry. With the affects of rising unemployment and the lending crash, the economy needed a hefty revival to bring it out of the recession. But where does that leave the taxpayers? It leaves them with debt, and a shortage of ways to pay it.

Lenders are standing frozen, waiting to see how the stimulus will benefit them and how the banking industry will regain its footing. Even good-credit borrowers are searching for funding opportunities. Most Americans don’t fall into the good-credit category and are left to fend for themselves.

Payday loans are the American taxpayer’s bailout plan

Many are choosing to look to payday loan options to get them through the cash crunch. Payday loans are quick loans with very simple structures. Normally all you need to apply is to fit the requirements of being over 18 years of age, being employed and having an active bank account.

If you’re accepted, the lender will tell you how much you qualify for, and it will be deposited into your account within the next few days. Repayment happens automatically on your next payday. To qualified applicants this service is a lifesaver, because it allows them to cover bills that are due without having the funds in their account upfront. With traditional lenders putting a hold on underwriting, payday loan options are becoming a standard alternative.

Taxpayers need to educate themselves

Federal Reserve Chairman Ben Bernanke said that as the economy continues to be unstable “the need has never been greater for initiatives that help consumers learn to manage their money wisely.” He was starting off a series of conferences focused on “financial literacy” which just began at the Federal Reserve Bank in Chicago. He stated that the government’s goal is to educate taxpayers on where their money is being spent, where it’s being invested and what the return on investments truly are.

One backlash of the foreclosure market is a myriad of new loan modification companies advertising themselves as “bailouts” for homeowners under stress. Too many companies are taking advantage of vulnerable Americans, who believe they have few options to save their homes. Out of desperation they take aid from these companies, normally with a hefty fee attached, and end up suffering even greater losses. Bernanke stated that people need to understand finances as a whole, “from taking out a mortgage or car loan to selecting a certificate of deposit or other investment.”

Much of the mortgage mess is attributed to lax lending policies that sold loans to people who were unable to repay them. Unfortunately, people were not aware of the situations they were putting themselves in and ended up suffering for it. Bernanke’s goal is to bring financial literacy to the general public through these conferences in hopes to help the economy change for the better, one taxpayer at a time.

So where does that leave the average American

The average American is suffering financially and looking for family loans, payday loans and extreme budgeting to get them through the recession. The government feels that the best way to avoid this situation again is to thoroughly educate taxpayers. The conferences Bernanke kicked off are aiming to do just that. They are to discuss “best practices” on financial maneuvering and how to apply them to the global marketplace effectively. The only way to recover, he believes, is for the government to learn from mistakes and empower people with information. “Only by joining forces will we be successful,” he adds.

The average American is left to pick up the pieces of his or her finances as best they can. It is true that a new level of financial literacy is needed to move ahead as a culture and introduce a post-recession market. Until that time, payday loans remain a reliable option to help fend off late-fees and unplanned for debts.

With the Fed’s coffer shrinking faster than ever, President Barack Obama has now made it clear that the cash advances that he is offering to corporate America will not be for free. In his recent speech at the Georgetown University, while he defended his economic policies on one hand, on the other hand, he warned people of tough choices ahead. Providing a justification for his moves, he said that each policy “is driven by a larger vision of America’s future, a future where sustained economic growth creates good jobs and rising incomes; a future where prosperity is fueled not by excessive debt, reckless speculation, and fleeing profit, but is instead built by skilled, productive workers.”

Job losses and foreclosures ahead

President Obama’s clear message for corporate America was that the careless usage of the bailout money will not be tolerated any more. Pointing at more job losses and foreclosures in the wake of a major restructuring in the U.S. auto industry and troubled insurance giant, American International Group, Obama talked about implementation of “difficult and unpopular choices.” He also said that hard times are not over yet. As per him, “2009 will continue to be a difficult year for America’s economy. The severity of this recession will cause more job losses, more foreclosures, and more pain before it ends.”

Banks are to be saved

Though a lot of discussion is going on at present about the results of the official ‘stress test’ that was carried on 19 giant banks of the U.S., Obama seems to have a soft corner for the banks. But then, that’s not without any reason. As per his Georgetown University speech, “Of course, there are some who argue that the government should stand back and simply let these banks fail – especially since in many cases it was their bad decisions that helped create the crisis in the first place. (But) The truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.”

Is it for banks?

Definitely, Mr. President understands the value of a sound banking system, but the question in everyone’s mind at the moment is whether he will commit further cash advances to those banks that will fail the stress test? Well, the answer may be ‘No’, but if he does, then soon we will get to see lot more restructuring and job cuts.

Time for America to come forward

Many will agree that extra-ordinary time requires extra-ordinary governance. Similarly, President Obama’s tough stand can actually be the bitter pill that can cure the economy. But then, he alone cannot do it, the whole of America has to come forward for the cause. And it is more applicable for corporate America, which is getting the bailouts. Companies like AIG should have understood by this time that the billions of dollars that they have got is taxpayers’ money and they have no right to waste it. That’s why President Obama is now all set to make them understand the facts by his tough stand. But even then he needs corporate America and for that matter the whole of America to come forward to make his cash advances work.

Number crunchers at GM think bankruptcy may be the only way out.

General Motors is proving to be a good example of what can happen if you take on more debt than you can handle. Unfortunately for the automaker, I don’t think any amount of debt consolidation can dig this company out of the hole.

GM has a $1 billion debt payment coming up; it’s due June 1. Finance Chief Ray Young says GM might not be able to make the payment and is instead relying on a debt-for-equity exchange.

Headed for

GM will need to undergo some serious credit repair if it does default on a $1 billion payment. That $1 billion is only a small fraction of the company’s total debt, which is $28 billion.

GM spokeswoman Renee Rashid-Merem says that the company won’t be able to pay if the debt-for-equity exchange doesn’t go through or if the company goes bankrupt before the June 1 deadline.

Bankruptcy rumors

Young told reporters at a Chinese auto industry summit in Detroit that bankruptcy is “probable” for GM. The U.S. government is backing the company, and Young said that GM will get back on track “in court or out of court.”

Goldman Sachs also said today that both GM and Chrysler will likely file for bankruptcy in coming weeks.

“While there is significant operating upside at GM …, we see a high likelihood that the current class of common shares will be terminated through bankruptcy, [or significantly diluted in a best case],” Goldman analyst Patrick Archambault told clients in a note.

What about the bailout?

The government has been in talks with GM regarding more funding from the White House for the flailing corporation. However, GM’s CEO Fritz Hendersen has said that because of the Obama administrations demands and conditions regarding the funding the company will most likely go bankrupt.

GM already received $13.4 billion from the government, and it is vying for another $5 billion to stay afloat. He said reports that the automaker had been approved for the funding were premature.

“One of the things that was clear … from the task force findings [in February] is that we needed to go deeper and faster with respect to balance sheet restructuring, and so, anything that had been on the table up to that point was off the table,” Henderson said.

Chrysler prepares for merger

Chrysler is also reportedly facing the possibility of bankruptcy. However, the government previously agreed to supply funding aid if the company reached a deal with Fiat by the end of this month. Those negotiations are on track.

If GM and Chrysler go bankrupt, that will leave Ford Motor Co. in the position to capitalize (big time) on the market-share front.

Niel Barofsky

So there’s good news and bad news. Obama is making good on his promise of transparency when it comes to distribution of TARP funds via Inspector General Neil Barofsky. The bad news is Barofsky has opened 20 criminal investigations to see whether tax dollars are being misused.

Barofsky is also conducting six audits. He says his goal is to “to inform, bring transparency and make appropriate recommendations.”

Job description

Barofsky has been appointed special inspector to oversee the Troubled Asset Relief Program. He says he wants taxpayers to understand where their money is going. He has detailed his concerns in a 250-page report.

Barofsky says he will expose any weaknesses in the TARP that could invite fraud.

TARP overview

TARP is mainly used to buy up defaulted personal loans and other bad accounts and assets that are hampering financial institutions. The 20 investigations Barofsky has opened could potentially lead to criminal charges if they find tax dollars are being pilfered or wasted.

What are the charges?

The investigations specifically address whether decisions about how TARP funds were awarded were influenced by people who stood to benefit from them. He is also looking into whether companies that received bailout funds are adhering to the policies regarding executive pay caps.

Additional duties

Barofsky has also compiled a list of recommendations for Treasury Secretary Tim Geithner and other officials involved with implementing the TARP.

His recommendations include requiring companies to report their usage of TARP funds. To me, this is a bit confusing because I thought they were already required to do that. Let’s hope this is just a reminder. Another recommendation is that officials should “safeguard a new mortgage rescue effort against scams.” Amen!

Protesters at a "tea party" in Raleigh, N.C., last month said they were "tired of pork."

Public and legislative outcry regarding government spending has led to a new grassroots movement, called “The Tenth Amendment Movement.” Others refer to it as the New Boston Tea Party.

Whatever you call it, it means that state lawmakers and citizens are asking for their 10th Amendment rights back. The 10th Amendment states:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Texas signs state sovereignty resolution

Texas Governor Rick Perry today signed a resolution that reaffirms his state’s rights under the 10th Amendment.

“Millions of Texans are tired of Washington, D.C. trying to come down here to tell us how to run Texas,” Perry said in a speech supporting House Concurrent Resolution 50.

This new movement seems mostly spurred by the trillions being spent by the federal government on installment loans for insurance companies, bailout money for banks and the stimulus package.

On the bandwagon

Last month, the House of Representatives in Oklahoma and South Dakota signed sovereignty resolutions as well. Some Florida residents are working on getting a similar resolution passed in their state.

Several “tea parties,” or tax protests, are scheduled this week in Florida. This time around, protesters say, “tea” stands for Taxed Enough Already. Five protests will take place in one county, Brevard.

Brevard a microcosm for country

The Republican Liberty Caucus of Central East Florida has organized the tea parties for Brevard County. Organizers say one of the main goals of the protests is:

Calling attention to and collecting signatures for a petition to Gov. Charlie Crist and the Florida Legislature to reject stimulus funds on 10th Amendment grounds.

Similar movements are happening in many states. Check out full coverage at Pajamas TV.

Chevrolet Lumina

General Motors is recalling 1,497,516 cars because of an oil leak that could start an engine fire. The company says the root of the problem is the plastic spark plug retention channel.

GM dealers will replace the defective part with two new spark plug wire retainers for free.

Affected cars

The GM recall affects the following vehicles, all of which have a 3.8-liter engine, are being recalled:

• 1997-2003 Buick Regal
• 1998-2003 Chevrolet Lumina
• 1998-2003 Chevrolet Monte Carlo
• 1998-2003 Chevrolet Impala
• 1998-99 Oldsmobile Intrigue
• 1997-2003 Pontiac Grand Prix

Details on defect

GM explains that some of the vehicles drip oil on the exhaust manifold if the driver slams on the breaks.

That could start a small fire that could spread to a plastic spark plug wire channel and beyond, increasing the risk of an engine compartment fire, The National Highway Traffic Safety Administration says.

Already in hot water

It’s no secret that automakers in general are in trouble. GM has already taken $13.4 billion in short-term loans and bailout money from the government. It seems this little glitch couldn’t come at a worse time for the company. To quote ConsumerAffairs.com:

To put it mildly, automakers don’t like to conduct recalls. They are very expensive and don’t exactly do wonders for marketing efforts.

Changing bailout terms?

To complicate matters more for GM, the government is considering changing the terms of the company’s bailout. Bloomberg.com reports:

The U.S. government is considering swapping some of the $13.4 billion it lent General Motors Corp for an equity stake in a stripped-down version of the carmaker.

Read full article : Obama Auto Team Considers Swapping GM Loan for Equity.

It’s true that the cash advances given by the government to the economy seem to be working, but now the government seems to be overdoing it. The latest in the long list of bailouts and blueprints for the next year is the approval of President Obama’s mega budget plan of $3.5 trillion by Congress. The approval came just before Congress went on its regular break.

Though details of the budget are not yet available, it is for sure that President Obama has high hopes with the budget and he is sure that the plans would help stabilize the shaky U.S. economy. Following his footsteps, different states too have announced their own packages and measures.

Size does matter…

These plans, including that of President Obama, are certainly big enough to make a difference. But the problem at this point of time is that we just can’t afford to face a difference that is negative. With every new plan, the deficit levels are widening.

For this reason at least, it’s all the more important that these cash advances produce the desired result to bridge the widening deficits. But if they fail, then very soon these deficits will swallow the whole economy. That is why the margin of error and ineffectiveness has to be very less, perhaps next to zero; otherwise what is being done to save the economy may throw the economy into a deeper mess.

…and so does flexibility

After coming up with a huge package under the bailouts, President Obama is trying to be proactive in dealing with the crisis. One step in the direction has been the approval that he received from Congress. Now, how this whole budget thing actually works depends on various factors including how it is being dealt with by the respective states.

Many have come up with their own plans and the list includes names like the State of Maryland. The state is going ahead with its general fund budget of $13.5 billion. It is definitely a welcome step. But the effectiveness and flexibility are the issues of concern. They have to be well planned with a good estimation of their repercussions. And of course they have to be flexible enough to generate multiple positive outputs.

Wise use of the cash advances is the key

Upbeat with some good signs in the manufacturing sector, President Obama is now planning big on his economic cash advances. But the problem associated with it is that every penny he is advancing to the economy is making a deeper hole in the pockets of taxpayers. Now, after approval of the new budget, analysts have estimated that the taxpayers would have to pay $356 billion more than the earlier estimates of $167 billion.

And as the taxpayers are bearing the burnt, every penny needs to yield the desired result. Not just job creation and restoration of the defunct lending system, the government must also look into matters like increasing public spending in automobiles and housing sectors. As people start spending more, the manufacturing sector will jump on the bandwagon to produce more and meet the demands, which will create even more job opportunities giving a complete boost to the economy. Thus, the need of the hour is well calculated, wise and flexible use of the huge amount of cash advances that are getting infused into the economy to get the desired positive result.

2008 Jeep Grand Cherokee

Chrysler has a lot on the line as it unveils its 2011 Jeep Grand Cherokee. Unless the company can reorganize debt, win labor concessions and form a partnership with Turin, Italy-based Fiat before May, the U.S. president has said he will allow the company to go bankrupt.

More efficient vehicles

Besides the specific requirements the government has outlined in order for Chrysler to receive bailout money, it has also put pressure on the company to make more fuel-efficient vehicles. Chrysler touted the 2011 Jeep Grand Cherokee in its recovery plan for its improved gas mileage.

The mid-size SUV gets up to 23 mpg.The company hasn’t revealed the price of the new model, but average consumers probably will need personal loans in order to afford them. Previous Jeep Grand Cherokee models have sold for $30,000 to $45,000.

Big car, big promotion

In its viability plan, Chrysler said the 2011 Jeep Grand Cherokee would be one of the “most successful, most iconic” models yet. The viability plan was submitted to the government in February.

“It’s a critical, core product that has to be done right,” said Stephanie Brinley, an analyst at Autopacific Inc. “You can’t mess up a Wrangler and you can’t mess up a Grand Cherokee. They are too important to Chrysler.”

Aaron Bragman, a product analyst with IHS Global Insight Inc., doesn’t think the new Grand Cherokee is messed up.

“It’s remarkable in terms of the progress they’ve made, especially on interiors. They are trying to move Grand Cherokee upscale. The interior on this Grand Cherokee looks like you could have lifted it from an Audi,” Bragman said.

More work to do

2007 Fiat 500

Chrysler must reach a deal with Fiat by the end of the month, President Barack Obama says. Otherwise, the company will be allowed to go bankrupt and will be sold off in pieces.

Chrysler Vice Chairman Jim Press said the end-of-the-month deadline gives the company plenty of time to strike a deal with Fiat.

Signs of partnership

Press showed up to the unveiling of the 2011 Jeep Grand Cherokee, at the New York International Auto Show, driving a Fiat. Press says Chrysler has had “nothing but good news” this month. If the companies reach an agreement, Chrysler will get $6 billion in bailout funds from the federal government.

Finally, the verdict has come out and President Barack Obama has said a big ‘no’ to any kind of payday loans to the troubled automakers. Considering the fact that General Motors and Chrysler are surviving on the bailout money that they received in December 2008, their latest requests for another round of bailouts were definitely nothing less than payday loan applications.

But the Obama administration has shattered their hopes by stating that both the auto makers have not done enough to save themselves since the last bailout. However, the underlying truth is that the government has actually bowed down to Main Street standing against Wall Street at the moment.

Taxpayer’s outrage

Opinion polls conducted after President Obama gave more time to GM and Chrysler, for restructuring themselves to be able to justify the additional investment of taxpayers’ money, had clearly suggested that the majority of the Americans were strictly against funding the US automakers any further. Many even opined that if the government goes ahead with the plan, it would be like cheating the taxpayers.

A CNN/Opinion Research Corp. poll conducted prior to the news of Rick Wagoner’s exit under White House pressure had revealed that 49% of the respondents were against Obama’s auto plans compared to 46% who supported it. Whether the government expresses it or not, such outrage has definitely worked somewhere or the other leading the government to deny yet another round of virtual payday loans to the automakers.

What Obama wants

Rejection of GM and Chrysler’s plea for additional aid clearly suggests that the last minute arrangements made by the two automakers have failed to impress the government. Perhaps the top brains sitting in Detroit have not understood until now what Obama wants?

Meanwhile, to cut their task short, Mr. President has said on the CBS program ‘Face the Nation’ that without any ambiguity he certainly wants to keep the US auto industry alive, “But it’s got to be one that’s realistically designed to weather this storm, and to emerge at the other end much more lean, mean and competitive than it currently is.” And this actually means, “Sacrifices from all parties involved — management, labor, shareholders, creditors, suppliers, dealers. Everybody is going to have to come to the table and say it’s important for us to take serious restructuring steps now, in order to preserve a brighter future down the road.”

Detroit’s last hope

Despite the rejection, Obama has still left a trail of hope for both GM and Chrysler, who had applied for $30 billion and $9 billion respectively to see through the worst time for the automakers in the last 30 years. The government has now given 60 days and 30 days to GM and Chrysler respectively to prove that they are worthy enough to get a chunk of the taxpayers’ money.

This means, it is the last chance for both of the auto giants to understand that now if they fail to act fast and accurate, their last hope to get official payday loans will be destroyed leaving just one option for them, filing for bankruptcy.

President Obama’s cash advance bailout of America’s automobile industry giants has left a sour taste in the mouths of many. Why should financially irresponsible automakers that flood the market with metal hulks that lose value fast be allowed to spend the taxpayers’ money in ways that fail to fix the original problem?

The Mainstream Conservative Blogs like http://mainstreamconservative.blogspot.com/2009/04/obama-orders-gm-and-mopar-out-of-nascar.html say that President Obama is cracking down on yet another way GM and MOPAR have continued to abuse the public trust by using their money for purposes other than bailing out the brand. Obama says NASCAR participation and sponsorships by GM and Chrysler must end at the close of the current stock car season if the automakers hope to continue to receive government aid. Beyond the advertising for the automakers, the companies (and America itself) are not reaping the benefits of NASCAR technology, said Obama:

Automakers used to operate on the principle of “win on Sunday, sell on Monday,” but the Auto Task Force’s research just doesn’t validate that as true. NASCAR is a racing series that regulates down to the smallest detail of the cars, where a car badged a Chevrolet or Dodge differs only marginally from a Ford or a Toyota. There’s no technological development to speak of…

In order to receive the government’s money, corporations must demonstrate they will spend it wisely. Racing has been said to improve on-road technology, but frankly, NASCAR almost flaunts its standing among the lowest-tech forms of motorsport. NASCAR is not proven to drive advancements that transfer from the racetrack to the road, and this nation’s way forward does not hinge on decades-old technology. We need new, and we need innovation.

This is an obvious cut to make, but it is not an easy one. This administration is not ignoring the tremendous sentimental value and emotional appeal NASCAR holds for so many Americans. But now is not the time for sentiment and nostalgia; now is a time for decisive financial action. If our automotive industry is to emerge from this recession intact, then these difficult decisions must be made.

Save $250 million taxpayer dollars now

Automakers worldwide are cutting their racing operations in the face of plummeting sales and their own mismanagement. NASCAR itself has mandated reductions in team spending. With GM and Chrysler out of the picture, it is estimated that $250 million can be saved between them. Their departure will leave only Ford as the lone domestic name in NASCAR.

Oh, I bleed for you, NASCAR. I can think of nothing more boring than one of your Sunday telecasts. That $250 million (part of it my own) should no longer feed that which makes America mediocre.

Related Videos:

Goldman Sachs

The man responsible for advising one of the richest men in the United States is leaving his job to start his own merchant-banking fund. Byron Trott is financial adviser to Warren Buffett. He has worked at Goldman Sachs for 27 years.

More about Trott

Trott lives in Chicago, and he is a vice president of investment banking. He plans to start a merchant-banking fund that will invest in and advise private companies, specifically those controlled by families or entrepreneurs.

Starting a trend?

Managing partner at recruitment company Higdon Partners LLC Henry Higdon believes the banking industry will see a lot of defection as a result of the regulations imposed on banks that get cash advances from federal bailout funds.

“Nobody’s having fun at these banks if they’ve taken a nickel of government capital,” said Higdon, who is based in New York. “The place to be over the next two years is going to be private companies. The guys with the confidence, who are true entrepreneurs, are going to start their own companies.”

Trouble at Goldman Sachs

Trott is not the first big-time executive to leave Goldman Sachs this year. The bank’s co-president, Jon Winkelried, resigned last month. A story from February says he retired with the desire to spend more time with his family. He is 49.

Goldman Sachs was the biggest and most-profitable securities firm until it converted to a bank in September, a week after Lehman Brothers Holdings Inc. went bankrupt. Goldman Sachs was among the first nine banks that received capital injections from the U.S. Treasury in October, receiving $10 billion. The government has since enacted laws that restrict compensation at banks that have taken government money, according to Bloomberg.com.

Trott’s beginning and end

Trott started working for Goldman Sachs in 1982. He recently helped line up a $5 billion capital injection from Berkshire Hathaway Inc., Buffett’s insurance company. Buffett says he will invest in Trott’s new firm.

In the middle of talk about government loans, the question may be whether short term loans would be a better solution to the crippling effects the current economic downturn is having on the automobile industry.

The President of the United States has requested the resignation of the current CEO of General Motors as part of some management changes that are part of the government’s recovery plan for the auto industry. Whether this is because of suspicion of mismanagement or just a way to cut costs will probably not be known for months, if at all. However, there is no doubt something must be done quickly to save the auto industry from bankruptcy.

Short and long-term effects of a declining auto industry

When you look at the short-term picture in regards to the auto industry, it may not appear very bleak. So what if Chrysler and General Motors shut down—that still leaves Ford and the import market. However, it isn’t as easy as that because the demand for cars will remain the same leaving the remainder of auto manufacturers to pick up all of the slack from the demise of two giants.

The world today relies on motor vehicles and the loss of two of the largest manufacturers would cause a more severe economic downturn than we are now suffering. Without the auto industry, raw goods would not be able to reach their destinations which in turn would push us back a couple centuries. Certainly that seems like a healthier choice but it is not one the country could endure quickly.

What is the right solution to the problem?

As one continues to follow the newspapers and sees the effect such a decline will have on the country and even the world’s global economy, we have to be honest and agree there must be a workable solution to the problem. The answer lies within the larger sphere that is the world and what is the best solution for everyone.

Whether that answer is short term loans or a complete economic government bailout remains in the hands of economists and those better able to analyze the long-term effects that may be felt if we allow even one of the automobile giants to fail.

The world’s entire economic structure depends on making the right decision and providing assurance that the auto industry returns to a stable condition. It is not something that will happen in the next few weeks and maybe not in the next few months, but it’s essential that the solution be forthcoming and a commencement of plans to rebuild the stability of the industry top the agenda.

Economists predict a turnaround the early part of 2010, but the auto industry needs recovery before then or there is not likely to be a turnaround for them. There is not likely to be any other industry that has such an impact because the auto industry is the means for delivery of goods from every other industry. Without it nothing else can survive.

The numbers in bailout and corporate fraud cases lately is staggering. How do people like you and me begin to comprehend what $1.9 billion looks and feels like? I’m far closer to needing a cash advance loan than I am to building an addition on a bungalow in the Caymans…

The Associated Press reports that Lance Poulsen, the founder of National Century Financial Enterprises in Columbus, Ohio, has been sentenced to 30 years in prison for perpetrating a $1.9 billion corporate fraud. According to the prosecution, this is the largest case of fraud ever committed at a privately held company in United States history.

Notably, Judge Algenon Marbley of Federal District Court said Poulsen is “the architect of a fraud of such magnitude that it would make a sophisticated analyst shudder.”

The wolf blaming the hens

This is not the first sign of trouble from National Century. Since an F.B.I. raid in 2002, a minimum of  nine executives have been convicted of corporate fraud. In what I consider a satisfying turn of events, Judge Marbley responded to claims that the investors should have seen trouble coming by saying “That’s the wolf blaming the hens for getting out of the hen house.” Thank you for common sense, your Honor.

For the record, Poulsen, 65, was convicted on 12 counts of securities fraud, wire fraud and money laundering. He declined to make a statement following sentencing, yet his defense attorney claimed his client was “disappointed” and would appeal. Awww, that’s horrible. Things must be tough for you, defrauder.

Poulsen will have company

Along with Poulsen, former company VP Rebecca Parrett, 60, was sentenced to 25 years. She was convicted on 13 counts of securities fraud, wire fraud and money laundering… yet she is “apparently out of the country,” according to the AP. Of course her lawyer has no idea where she may be.

Karl Demmler, a man accused of bribing the key witness in Poulsen’s trial, was convicted to seven years in prison. According to the judge, Demmler was “a puppet manipulated by Mr. Poulsen.”

Related Video:

When President Barack Obama signed his mega stimulus package in February, it was nothing less than a big cash advance for ‘keeping the American dream alive in our time.’ Since then, Mr. President has left no stones unturned to bring the economy back on track. Plan after plan has flooded from his desk to push the economy out of the mess.

The latest, of course, is the plan for toxic assets. The plan, which involves private-public participation, aims at creating some liquidity for about $1 trillion worth of toxic assets. These assets have not only burdened the banks for quite some time now, but are also hindering the confidence of the global financial system. But the million dollar question remains, are these plans really working?

A confident President

Well, Mr. President certainly believes so, though he also admits the fact that it definitely needs more time and patience. In a recent news conference, President Obama said, “It’s important to remember that this crisis didn’t happen overnight and it didn’t result from any one action or decision. It took many years and many failures to lead us here. And it will take many months and many different solutions to lead us out.” Yes Sir! That’s true for sure.

However, it is possible only when your cash advance flows in the market enriching its liquidity, and not when it just enters the deep pockets of top executives as bonuses. But then, considering it as just one of its own kind, one must set it aside and evaluate all other aspects of the stimulus package before passing any opinion.

Some success

Meanwhile, Obama’s mega bailout package launched last month seems to be doing well at few fronts like saving the jobs of teachers, and police officers. And going by Obama’s words, “it’s creating construction jobs to rebuild roads and bridges.”

Definitely, this will help in adding stability to the financial health of a small portion of the mass. This success, immaterial of its size, must have added some positive energy in Obama’s heart in his battle against the economic turmoil. But it’s just the beginning; he has a long way to go.

The final bolt

The second stage of the ambitious plan is definitely going to be a real challenge as it aims at achieving the dual goal of stabilizing the housing market and cleaning up the mess from the banking system. In the meantime, as Obama confirms that up to 40 percent of all mortgages are now eligible for refinancing and the house prices are now stabilizing after a long time, it definitely boosts the confidence levels of those who believe in the stimulus package.

But all eyes are now set on the new plan for toxic assets because if it comes out good, it can really bring a great turn around in the current gloomy conditions. However, its success depends a lot on private investors’ interest in buying those toxic assets. Which means recovery of the banking system now actually depends on cash advances from the private investors to the banks.

Wells Fargo Mortgage rates are at historic lows. The bank’s 4.89 percent interest rate sent it to the No. 1 spot on the list of new mortgages. Furthermore, Wells Fargo took bailout money from the Troubled Asset Relief Program and used it for its intended purpose: to give people personal loans for homes.

Bailout done right

Wells Fargo got $25 billion in October when it sold shares to the government through TARP, and it gave out $24 billion in mortgage loans in January. While AIG is using taxpayer money to give executives “retention bonuses,” Wells Fargo is using mortgage rates and bailout money to put people in homes.

Second place

Bank of America gave out $22.9 billion in new home loans in January. That’s 48 percent more than it lent in December. Most large banks are lending at the current mortgage rates, averaging less than 5 percent.

Third place

JP Morgan Chase, which also received bailout money from the TARP fund, gave borrowers $9.6 billion in mortgages for new homes.

High demand for refinancing

Banks are also using the lower interest rates to help people struggling with payments or in danger of foreclosure. Loan modification and refinancing account for much of the 21 percent jump in mortgage applications.

“Wells Fargo is experiencing a significant increase in contact from customers who want a responsible lender to help them with a refinance or home purchase. This is a great time for customers to achieve homeownership in a way that is sustainable for the long-term,” said Greg Gwizdz, executive vice president, national sales manager, Wells Fargo Home Mortgage.

Personal Money Store can help you with loan modification, too. Check it out: 5 Things You Should Know About Foreclosure Prevention.

Lending on track

Wells Fargo mortgage rates aren’t the only thing driving borrowers to take out loans. Auto, student, and other personal loans increased by huge amounts. The bank gave out $2.4 billion worth of student loans in January.

Jane Hamsher reports for firedoglake that 20,000 signatures from readers of the finance blog have been presented to the House Financial Services Committee in time for the AIG hearing.  Like millions of Americans, they’re outraged over the liberties AIG has taken with taxpayer bailout money for executive bonuses. They want increased transparency in President Obama’s bank bailout, and they want it now. The money must stimulate further lending or it will all be for nothing; it must be a cash advance to restart America’s economy.

Hamsher laments that despite wide-ranging media coverage, neither Treasury Secretary Timothy Geithner and White House Press Secretary Robert Gibbs seemed to know much about what AIG was doing with executive bonuses. Nevertheless, firedoglake has a team in place outside the AIG hearings who will raise awareness for those who lack. They will achieve this via a questionnaire for the House Financial Services Committee. What follows are just a few of the questions from their extensive document. Call it AIG’s luck seven…

The kind of questions they SHOULD be answering

• Please provide a timeline of how bonus contracts were originated and why.

• Did the United States Treasury do their due diligence on these AIG bonus contracts? Was the Treasury aware of contract terms prior to payout?

• Was Treasury Secretary Geithner aware of the terms of the AIG contracts when he was distributing funds as head of the New York Federal Reserve?

• When was President Obama informed AIG’s bonus payout terms?

• Was anyone who negotiated these bonuses on behalf of AIG also recipients of said bonuses?

• Did AIG CEO Edward Liddy, a former employee at Goldman Sachs, ever make contact with current Goldman CEO Lloyd Blankfein, or anyone else at Goldman, about AIG or the $20 billion in bonds Goldman would have lost out on if AIG collapsed?

• Did Mr. Liddy own any Goldman stock whose value would have been protected by the government’s AIG takeover? Did Mr. Liddy have a severance package or personal holdings in Goldman that would have made propping up Goldman Sachs via AIG in his interest?

The AIG hearings will tell us a lot about the intestinal fortitude of the Obama administration. If it can be proven that he and Timothy Geithner knew about this before it happened but didn’t stop it, America’s president and Treasury secretary will have the American taxpayers to answer to.

Related Videos:

Freddie Mac, a company that has already received billions of dollars of government funding, is asking for another $30.8 billion from the U.S. Treasury.

Right now taxpayers own 79 percent of the company, after the government moved the company into conservatorship in September.

Troubled times

Freddie Mac says it needs the $30.8 billion in cash advance loans because of deep losses it sustained fourth quarter of its fiscal year. The company says it lost $23.9 billion in three months. Over the year in 2008, the company lost $50.1 billion.

Only a week ago, Freddie’s CEO David Moffett, who was appointed in September, announced he would step down from his post. John A. Koskinen was named interim chief executive and Robert R. Glauber interim nonexecutive chairman on Wednesday — the same day the company asked for the additional aid.

Pre-emptive strike

Freddie Mac seems to be preparing for backlash. It already issued a statement regarding the new request for aid:

“Freddie Mac is working hard to serve our expanded mission in this historic crisis, by doing all we can to help stabilize the financial markets and hasten the recovery in housing. We absorbed heavy financial losses last year, driven primarily by mark-to-market items and credit-related expenses. But we also provided vital liquidity to the strapped housing market — injecting more than $460 billion in mortgage funding in 2008.”

Loan refinance program

Freddie Mac plays a big role in Obama’s recently revealed foreclosure prevention plan. People who have mortgages held by Freddie Mac or Fannie Mae can apply for new loan terms to get lower interest rates or longer terms. This is a special privilege for Fannie and Freddie customers because only homeowners who are delinquent on their loans can apply for the other portion of the government’s loan modification program.

There’s no word yet on whether or how the new government aid will affect the loan refinance program.

U.S. Rep. Barney Frank on Monday said (see http://abcnews.go.com/Business/Economy/WireStory?id=7040710&page=2) Bank of America Corp. must provide more details on $6.9 billion in bonuses the company paid in 2008. Because the bank got quick loans from the government, officials say it must disclose who got what.

Bank of America accepted large amounts of bailout money, and Frank and others are saying taxpayers have a right to know the details of how the company is using its money.

Ordered to the court

New York Attorney General Andrew Cuomo has headed the fight to reveal the details behind the bonuses. The case wound up in state court. A representative for Bank of America said to the judge that the company would suffer “grave harm” if it had to reveal bonus data.  Bank of America said it would be an invasion of privacy, and it was worried that competitors would attempt to poach its staff members.

No longer a company

Bank of America bought Merrill Lynch last year as the company faced bankruptcy. Of the bonuses now on Bank of America’s budget sheets, $3.6 billion was awarded to Merrill Lynch executives before Bank of America bought out the company.

House Financial Services Committee Chairman Frank says the company must provide details on every bonus of $1 million or more. Bank of America has gotten $45 billion from the Troubled Asset Relief Fund.

Transparency

Barney Frank

Cuomo has been charged with assuring that all institutions that accept bailout money disclose their finances and make all bonuses and salaries public.

Cuomo is even trying to find out whether B of A broke securities law regarding public disclosure of executive pay. A New York state judge will hold a hearing March 13 to determine whether the company must disclose the information.