Gangster Government
Research for Online Investors

by John Dalt

9/21/09

Let’s revisit the auto dealer closings that occurred last spring.  Subscriber T.W. sent a few links last week that had some interesting statistics.  As you recall the government forced Chrysler and GM to shrink their dealer network in the bailout/bankruptcy.

Dealers complained that they did not cost the companies any money; they bought the cars and MADE them money.  My initial reaction was that certain dealers might have been targeted for closure because of historical relationship problems.  Maybe they were just jerks, had excessive warranty charge backs against the company, or would not stock parts as requested.

Every business relationship has its difficulties.  State franchise laws protect dealers; it is very difficult to end a dealership contract, except in bankruptcy.  This may lead some dealers to overplay their hand, letting their ego get in front of their good business sense.  Chrysler had the chance to get rid of the bad apples in bankruptcy and chose to do it, or did they?  Who chose which dealers to close, and what criteria used?

Were dealers closed for good reason, or was politics involved?  I remember dealers complaining that they were profitable and had their licenses cancelled.   Other small competing dealers were left to benefit from the additional business they would have by eliminating the competition.  In some cases, these dealers were very close to each other (across the street).

Newsmax has an article from May 27, 2009 titled, “Republican Donors Hit by Chrysler Closings.”  This article listed only one closed dealer that contributed exclusively to democrats.   Many gave only to Republicans, or to both parties in an attempt to cover their bases.  Two of the biggest winners in the dealer closings were Mac McLarty and Robert Johnson.   Their company has six dealerships in the South.  NONE of their dealerships were closed, but eight of their competitors were.  McLarty was Bill Clinton’s Chief of Staff; Johnson founded Black Entertainment Television (BET).  They started their Chrysler dealerships in September 2007  Talk about timing!

The Washington Examiner’s article, “Furor grows over Partisan Car Dealer Closings” investigates some of the same ground.  Interesting points they bring to light are that the closure list came from the government, not Chrysler and that the Car Czar Steven Rattner is married to Maureen White, former National Finance Chairman of the Democratic National Committee.  She would have access to political contribution levels for principals at all dealerships.

I cannot find any definitive news articles that expose all the facts and break it down for us.  Suffice it to say, consolidation of power like we have seen in Washington is a dirty business.  The most powerful political figures can be the most petty, extracting payback on citizens for exercising their rights.  We all know politics is a dirty business, but destroying a rivals business sets a new low.

Oh, and by the way Car Czar Rattner had to leave his post because he was under investigation by New York AG Andrew Cuomo for political payoffs in previous business dealings with his hedge fund.  Headlines suggest a out of court settlement is in the works.

Is it wrong for moms and dads that lose their dealership,
and employee jobs to be just as upset?

Andrew Cuomo is rumored to be interested in the N.Y. Governor’s office.   This makes sense as he has worked hard to keep himself on TV more than his brother who co-hosts ABC’s Good Morning America.  The White House is pressuring Gov. Patterson NOT to seek re-election as his poll numbers have tanked with the economy.  Patterson was elevated to governor after Elliot Spitzer was caught with his pants at his ankles.  Without any touch of cruelty, it is ironic that New York has a blind governor.  It makes it easier to ignore the red ink that follows progressive world changers. Cuomo is pursuing Bank of America (BAC) on the events surrounding the purchase of Merrill Lynch.  This will keep him in the headlines until he decides what to do concerning the governor’s race.

Last week I passed along Charles Payne’s article as I thought it was very eloquent.  I like to read Charles every morning, this morning he discussed the OH! Bama plan to extend the administration’s control over salaries for bankers at many banks, not just those who take TARP funds.   The administration is seeking to coordinate this with other governments.  The goal is to force wages down globally, so other banks will not raid our top talent.   Charles Payne writes, “I think it's going to be ironic when the Chinese complain that our ideas throw capitalism under a bus and are too restrictive with respect to the ability of economies to live up to potential.”   Well-said Charles, who would have thought the ChiComs would lecture us on capitalism.

On Friday, the Federal Housing Administration (FHA) announced their reserve capital is about to fall under its mandated 2% reserve for the first time. The FHA presently insures 5.3 million home mortgages against default. They have seen their business increase during the mortgage crisis, up over 32% in the last three years. The Mortgage Bankers Association reports 17% of all FHA loans are either; behind in their payments or in foreclosure. FHA loans account for 80% of volume by certain mortgage lenders. Add the FHA to the long list of government agencies that lose money.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

MarketToday Home Page

Back to Top