Saturday, May 9, 2009

2.5% of USA GDP Loss Attributed to Changing the Rules

I am posting a comment I read over at Little Green Footballs:
Cato5/08/2009 10:40:16 am PDT

The other day I attended a conference sponsored by a major bank's private banking group for its high net worth clients in the real estate industry. I saw there probably a dozen people and families that at one time or another had a billion dollar net worth. The most recognizable name was Sam Zell, but to me there were a lot more interesting people whose exploits have become the lore of the business in NY. I wanted to share some of the discussion because even I had not appreciated how in 100 days the president had permanently alienated this group.

The conference started with a professor of the Wharton School noting that: "The US is now no different from Russia or Zimbabwe in the eyes of investors since no one can rely on the law anymore."

He said this started with Bush but quickened with Obama. Using some econometric models he demonstrated that 2.5 pct GDP loss was contributed by changing the rules alone.

A variety of other speakers from public and private institutions demonstrated how capital was flying from the US as we speak.

But the most interesting was lunch. There were probably 90 people at lunch. Someone asked a couple of questions and then asked how many people voted for Obama. About 80 pct raised their hands. Then they asked whether they would do it again. No hands.

He asked for volunteers to explain why. In a word, the answer was Chrysler. Knowing the people involved, Israel would be the answer next time.

"The rule of absolute priority has been violated. If the government can change my lien's priority, I won't lend and I won't borrow."

"He's a thug. What president inserts his office into a bankruptcy?"

"I hear that the company doesn't have to pay back the TARP money that Congress voted against giving them. So my tax money went to buy the UAW control."

"Yeah," responded another. "I am not going to pay my taxes to go to the union. I hear Namibia doesn't have extradition laws. Screw the government."

One guy who voted for McCain and who was a lawyer who became a developer said, "I didn't vote for him because he could have done anything out of law school, but instead became a community organizer. It means he wanted remain uneducated about either business or the law. He is purposefully unknowing."

"He has violated his fiduciary duty to the people. He permitted that atrocity of a budget and now he gives tax money to a union"

"I hate the crazy religious republican nuts and I'm forced to give money to them."

Since I never supported the President, I do not feel betrayed. But there was a palpable sense of betrayal by this very, very rich group who largely voted for him.


Robert said...

Fascinating article, Perpetua! Interesting to get a take from people who know business ethics after a constant gush about BO's heroic endeavors! Also, .. Err.... You hang out with billionaires?

Perpetua said...

Hi Robert,

No, I don't hang with billionaires. This comment was posted by someone named Cato over at Little Green Footballs.

There are two important issues about Chrysler that are mentioned here:
1) the bondholders legal rights were not honored, and
2) taxpayer money was used to front the unions stake in the company.

With regard to the bondholders, apparently the White House Threatened to Destroy a Bondholders Reputation, using the White House Press Corp, if the bondholder wouldn't accept less than they were legally entitled to receive.