Very interesting.
Caroline Daniels of the Financial Times writes about interesting goings-on in the Treasury Department. Apparently, Treasury Secretary John Snow had told Dennis Hastert that United Airlines would get its government loan, and had done an end-run to United Airlines behind the back of his own relevant Undersecretary, Brian Roseboro.
Snow either failed to communicate what he wanted done to Brian Roseboro, or Roseboro decided that he was Undersecretary for Domestic Finance and that the Bush administration needed him more than he needed them.
Either way, Snow looks more out of his depth than Paul O'Neill ever did:
Posted by DeLong at August 13, 2004 10:36 PM | TrackBack | | Other weblogs commenting on this postFT.com / Home UK - US airlines $10 billion aid offer lost its way after 9/11: Ned Gramlich, chairman of the ATSB and a Fed governor, and Jeff Shane, associate deputy secretary of the Department of Transportation... the third member of the board, slipped into the room just before 9am. Brian Roseboro, a US Treasury official, had been delayed by a call in his car from John Snow, Treasury secretary, to discuss the impending decision. Taking his seat to Mr Gramlich's right, Mr Roseboro whispered to his colleague that he intended to vote No....
On one side [inside the Treasury Department] were those opposed to loan guarantees on principle and who believed United needed an overhaul to survive. On the other were pragmatists, including Mr Snow and Chris Smith, his chief of staff, sensitive to the concerns of Dennis Hastert, the influential speaker of the US House of Representatives and United's leading political advocate. With more than 60,000 jobs at risk, many in critical swing states in the Midwest, there was more than money at stake. "This was a battle for the soul of the Treasury," recalls one airline executive. "It was about politics, not ideology."...
Mr Roseboro's No vote, backed by Mr Gramlich's, came as a shock. "The ATSB executive director [Michael Kestenbaum] turned white when he did that," says one attendee. Another says: "Either there was insubordination, or there was confusion about what Secretary Snow thought would happen at that meeting."... Treasury officials called Mr Hastert to give him the bad news. "He went ballistic," says one ATSB official. "Calls started flooding the Fed from Treasury officials. They wanted to change Treasury's vote to a deferral, not a denial." Several others close to the discussions confirm that was the Treasury's intention. But it could be done only with the co-operation of Mr Gramlich, the Board's chairman. When he was finally tracked down, he firmly refused.
Just after 6pm the ATSB issued its press release announcing the rejection of United's application. Minutes later the Treasury issued a separate, one-line statement, saying it was open to a reconsideration of United's request - in effect, rescinding its own representative's No vote. Mr Hastert's office followed, noting its "understanding that the ATSB decision may be premature".... That night, Mr Roseboro, furious at the very public overriding of his decision, offered his resignation....
Loan guarantees have been provided before.... Chrysler... further provisions: $500m for oil and gas, $1bn for steel, and $1.25bn for rural television. According to a speech in April 2003 by Mr Gramlich, the Fed representative on all the boards, less than 1 per cent of the energy fund was disbursed, while the steel board approved one application, for a company that was later forced into liquidation. Mr Gramlich's conclusions? Loan guarantee boards are not good vehicles for dealing with emergencies and loan guarantees cannot provide salvation if the industry economics are unfavourable....
On the morning of Monday June 14, Glenn Tilton, United's chief executive, received an unexpected call. It was Mr Snow. "It was," says one person familiar with the call, "a long conversation." The Treasury's opposition to loan guarantees was well known. So when Mr Snow opened negotiations with the airline independent of Mr Roseboro, his own representative, United and other ATSB officials were taken aback. Mr Snow's intervention was triggered by two events. The previous week, Mr Gramlich had indicated he would refuse United's application, on the grounds that credit markets were open and that the carrier's continued problems could not be blamed on 9/11. With the transportation department's Mr Shane expected to support United, the Treasury held the swing vote.
Second, Mr Snow had met Mr Hastert, who expressed his concern that United was being treated unfairly. "At the start of the week all hell broke loose at the Treasury," says one airline executive. "Snow is a political guy and he wanted to get a deal, and by statute he [not Roseboro] has the vote."...
The White House, meanwhile, was wary of losing Mr Roseboro. Even Alan Greenspan, Fed chairman, raised concerns with the Treasury about his potential resignation, according to one official. The Fed declined to comment. Just as United was submitting its revised request, Treasury officials confirmed that Mr Roseboro would stay on the board....
So, are they for free markets or not? Amazing how completely their ideology crumples when its their ass on the line.
Posted by: Alan on August 14, 2004 06:39 AMOne more example of how they have no principles worth mentioning, other than cronyism. File under "shameless."
Posted by: Susie from Philly on August 14, 2004 07:54 AMWhy didn't the Democrats nominate someone credible for a Republican like me to vote for? It's stuff like this that makes voting for Bush so unpleasant.
Posted by: Chris on August 14, 2004 09:00 AMI'm astounded that anyone, Republican or no, finds Bush more credible than Kerry. How in the world does Bush's string of upward failures make him in the least bit credible?
Do the nation a favor, Chris: stay at home this election.
Posted by: Bhaal on August 14, 2004 09:35 AMI think we have reached the point where we need to admit that deregulation of the airlines was a noble endeavor, but won't work. We will bailing these people out forever. Face it. Reregulation is the only answer. At least then we can go back to decent meals.
Posted by: tstreet on August 14, 2004 11:23 AMSorry, tstreet, but the Civil Aeronautics Board used to regulate the thickness of sandwich served onboard precisely so that airlines could not compete to give you a better meal. (Seriously.)
Posted by: Gary on August 14, 2004 11:29 AMChris: I assume that you are concerned about some of President Bush's decisions. You cannot believe in the face the ideological intransigence of the administration, that things will get better in the next four years, can you? How badly off will the nation be after four more years of this kind of stuff? Who is there that will be able to fix things after four more years? You have to be honest enough to admit that the administration has failed the most basic test: they let bin Laden get away and reform Al Qaeda.
Just what good thing do you expect from the President that outweighs whatever concerns you might have about Kerry?
Posted by: masaccio on August 14, 2004 12:04 PMWell, I live in California so it doesn't matter anyway who I vote for.
If only I had a free-market candidate to vote for who had a credible record regarding security. Neither major candidate this time around seems particularly fond of intelligent economics (in particular, both candidates promising extravagant budget plans that don't add up). And the libertarian candidate (Badnarik) is out of the question because the LP wants to pretend that 9/11 or, indeed, the cold war and Pearl Harbor never happened.
What ever happened to the other small-government Republicans like me? As strange as this sounds, this almost makes me long for the days of Newt Gingrich and Bob Dole. For all of their faults, at least they didn't engage in the kind of rent-seeking that Hastert & Co. enjoy so much today.
It wouldn't have been so hard for the Democrats to nominate someone I could vote for. Lieberman perhaps--wouldn't the French go nuts then? Hatred of George Bush is not an agenda. Kerry has done nothing to convince me that he's any better than Bush.
Posted by: Chris on August 14, 2004 12:05 PMChris, you've already got one Republican candidate for president; asking for a second is too much. As for the competancy of that candidate, talk to the GOP.
Posted by: Barry on August 14, 2004 12:39 PM> I think we have reached the point where we
> need to admit that deregulation of the airlines
> was a noble endeavor, but won't work.
That's debatable, but the root cause at the moment is that there is one too many major. Either United or USAir needs to declare Chapter 7 and liquidate. That would take care of the last of the post-9/11 overcapacity.
Whether there is a structural issue could then be realistically debated. I don't think Southwest or JetBlue would agree to reregulation.
Cranky
Posted by: Cranky Observer on August 14, 2004 01:49 PMBrad, would it be possible to explore what it would take to replace the income tax by a VAT?
It appears that this is the "new" plan that the republicians wish to float. I'm especially interested in a comparison of costs for a lower-middle income level person
Thanks
link to story
http://www.chicagotribune.com/news/nationworld/chi-0408140163aug14,1,4411551.story?coll=chi-news-hed
ron, it's a fantasy. no exploration necessary.
Posted by: asdf on August 14, 2004 02:57 PMChris, you're right, hatred of Bush is no agenda.
As it happens, that isn't kerry's agenda, with which it is a realtively easy matter to familiarize yourself. If, after that exercise, you still don't believe kerry should be president, fine, but if you're sincere in what you write, failing to make the effort to understand is inexplicable.
Anyone who claims to be serious about the future of the republican party but who votes for bush is, in fact, not serious about the future of the republican party.
Posted by: howard on August 14, 2004 06:36 PMasdf
re VAT being a fantasy. I thought the national sales tax was a tad over the top too. Especially with some indications that consumer spending was showing signs of wilting.
Then it struck me that this idea could be born out of desperation; that the deficits had finally crossed some threshold that required some tax changes to ensure the continued support of our T-Bill purchasers.
So the confidence in consumer strength by those that are advancing the VAT is higher than their confidence in the current accounts picture.
Hard to believe adopting any sales tax won't adversely affect demand.
So will it go like the Canadian's? Introduce it as a temporary measure? Start low and build to 7 or 8% and bank on it for eternity?
VAT a fantasy? Hunh?
How can anyone be against a tax on lawyers, "massage therapists," dude ranches, maid services, and all the other persiflage consumed by the undertaxed ninth and tenth income deciles?