GM, now 60% owned by U.S. government, is once again contributing to political campaigns, mostly to the CBC

When General Motors went through bankruptcy last year, it suspended its political donations. Now that it's owned by the U.S. government, it's donating to lawmakers' pet projects again.

The carmaker gave $41,000 to groups associated with lawmakers, the vast majority of it -- $36,000 -- to the Congressional Black Caucus Foundation, the company reported on a disclosure form last week. The CBC Foundation is a charity with 11 members of the Congressional Black Caucus on its board.

"We've always given to the Congressional Black Caucus Foundation as far back as anyone can remember," said Greg Martin, GM spokesman. "Our commitment remains unabated, and we continue to be a proud supporter of their work to advance economic development in communities throughout the U.S."

According to its disclosure forms, the company did not give any money to honor lawmakers in 2009, the year of its bankruptcy filing. The U.S. government now has a 60 percent stake in the reformed company.

"By anyone's definition that was an extraordinary time for the company," Martin said. "We did suspend giving for that particular time."

GM's return to the business of donations remained small compared with the giving of some corporations. Overall, corporations and other entities that were registered to lobby Congress gave $10.7 million to honor politicians and military figures in the first six months of the year. That is down slightly from the $10.8 million spent in the last half of 2009. Donations were down 27 percent from the same period two years ago, but there were still 37 entities that gave at least six figures in the latest six-month period.

Defense contractors disclosed some of the biggest gifts. One of the top honorees was Rep. Ike Skelton (D-Mo.), chairman of the House Armed Services Committee, who was a guest at an April gala for the Tragedy Assistance Program for Survivors, a nonprofit group that provides counseling to friends and family who have lost loved ones in the military. BAE Systems donated $150,000 to the event, and defense contractor Science Applications International Corporation donated $100,000, according to disclosure forms. General Motors also gave $5,000 to honor Skelton.

General Motors has not reactivated its political action committee, which can give to election campaigns, according to the latest reports with the Federal Election Commission. The PAC contributions come from senior employees who give to support the company's political goals.

As many as 540,000 students may default on their student loans

Carmen Gardiner, 25, a 2007 graduate of Louisiana State University, is weighed down by her private student loans. Her debt is now about $80,000, and her monthly payments are more than $600. Gardiner's undergraduate degree is in psychology. She lives with her husband, who is still in college, and earns $13 an hour at a call center in Atlanta. They have a 6-month-old daughter.

She hasn't defaulted on her student loan. But she doesn't see much hope. Bankruptcy would not discharge her debt.

"I'm completely sour about the whole idea of going to college," she says. "My future is gone before I have a chance to make one. But if I could discharge this using bankruptcy, it would be better than winning the lottery."

There is little information about unregulated private student loan debt. But during an investor meeting, Sallie Mae, the USA's largest private student lender, recently projected that 40% of $6 billion in subprime private student loans will default, according to Student Lending Analytics, an independent research company. That means 360,000 to 540,000 borrowers are likely to default on their loans, SLA said.

The only way that people with private student loans can get help in bankruptcy is if they can prove undue hardship. And to do that they have to go through a separate trial, which is an extra cost, involves witnesses, legal assistance and extra expertise, says Deanne Loonin, staff attorney at the National Consumer Law Center. It is a huge barrier.

But in April, both the Senate and House introduced legislation to allow for private student loans to be dischargeable in bankruptcy. Before the bankruptcy law changed in 2005, only government-issued-or-guaranteed student loans were protected during bankruptcy.

"The high interest rates on private student loans have made them incredibly profitable for loan companies and saddled students with crushing debt," said Sen. Dick Durbin, D-Ill., who first introduced this legislation in June 2007.

Banker: forget Greece; worry about California

Mr Dimon told investors at the Wall Street bank's annual meeting that "there could be contagion" if a state the size of California, the biggest of the United States, had problems making debt repayments. "Greece itself would not be an issue for this company, nor would any other country," said Mr Dimon. "We don't really foresee the European Union coming apart." The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California however poses more of a risk, given the state's $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.

GM bankruptcy follows "decades of dumb decisions"

"The year was 1998, and the United Auto Workers was striking at two factories in Flint, Mich., that made components critical to every GM assembly plant in the country. The union was defending production quotas that workers could fill in five or six hours, after which they would get overtime pay or just, you know, go home.

Most strikes are forbidden during the life of a labor contract, so to provide legal cover the union started filing grievances. GM lawyers contended the walkouts violated the contract anyway and drafted a lawsuit -- the first by the company against the UAW in more than 60 years. But GM's labor-relations department freaked out because the lawsuit would antagonize the union.

Just think about that. The union had shut down virtually all of GM, costing the company and its shareholders billions of dollars, and yet the company's labor negotiators were afraid of giving offense. After heated internal arguments, the suit was filed and GM seemed on the verge of winning. But the company settled just before the judge ruled.

UAW members marched victoriously through downtown Flint. GM executives who advocated a tougher stand got pushed out of the company.

The picture of a heedless union and a feckless management says a lot about what went wrong at GM. There were many more mistakes, of course -- look-alike cars, lapses in quality, misguided acquisitions, and betting on big SUVs just before gas prices soared. They were all born of a uniquely insular corporate culture."

http://online.wsj.com/article/SB124389995447074461.html

Obama pursues "banana republic capitalism"

"The Chrysler reorganization is shaping up as another milestone in the decline of the rule of law under Barack Obama. We've said for quite a while that bankruptcy is the only viable option for Chrysler and General Motors, not--as Obama claims--because they don't know how to make the right kinds of vehicles, but because their unsustainable union contracts make it impossible for them to be profitable. That reality has now been turned on its head, as the administration has tried to bully Chrysler's secured creditors into going away, while the United Auto Workers Union, solely on the basis of political clout, would be paid at an implied rate of 50 percent and would emerge owning 55 percent of the company, with the government also holding a stake.

This is banana republic capitalism at its worst. Political influence, rather than the law, dictates the rights of the parties. When some of the secured creditors refused to be intimidated, Obama libeled them in the press, saying, outrageously, "I don't stand with those who held out when everyone else is making sacrifices." Actually, under Obama's plan the politically favored parties, principally the UAW, will benefit--will steal money, to put it crudely--from the parties who held out. Those parties call themselves the 'non-TARP lenders.'"

http://www.powerlineblog.com/archives/2009/04/023460.php