Progressive Breakfast: Chrysler Gets the Green Light

After causing a day or so of anxiety and speculation with a hold on the sale to Fiat, said to be vital to Chrysler emerging from bankruptcy stronger, the Supreme Court ultimately rejected the plea by three Indiana state pension funds to block the sale [1]. BBC:

On Monday, the court granted a request to delay the sale while three Indiana state pension and construction funds pursued an appeal against it.

But it has now ruled that a full appeal against the plan is not justified.

The US government, which strongly backed the sale, issued a statement applauding the decision.

"The Chrysler-Fiat alliance can now go forward, allowing Chrysler to re-emerge as a competitive and viable automaker," the statement said.

"We are gratified that not a single court that reviewed this matter, including the US Supreme Court, found any fault whatsoever with the handling of this matter by either Chrysler or the US government."

The sale, if it goes through, means Chrysler will emerge from bankruptcy as the newly formed Chrysler group — mostly run by a UAW trust which will own 55%, while Fiat will own 20%, and the U.S. and Canadian governments will hold minority stakes.

After some serious legal questions [2] about whether the Obama administration overstepped its authority in attempting to save the company, the Supreme Court has cleared the way: Forbes. But considering what might have happened, it was a close call [3]. CNN Money:

If the Supreme Court had agreed to take the case, it would have jeopardized the sale to Fiat and risked Chrysler's ability to restart operations. Chrysler shut most of its operations a few days after its bankruptcy filing and has said that its factories would remain closed until it completed a deal with Fiat.

Filings from the company suggest that Chrysler's distribution centers are already close to running out of parts needed by dealerships to perform regular maintenance on Chrysler, Dodge and Jeep vehicles.

In addition, it is estimated that Chrysler is losing $100 million for each additional day it has to spend in bankruptcy.

The U.S. Treasury has ruled that Chrysler is no longer viable as a standalone company and that it needs a partner to receive additional federal dollars it needs to continue to operate.

Fiat is ready to close the deal [4], according to Reuters, and its shares rose as a result.

Chrysler is one step closer to being the "new Chrysler," and GM has new leadership [5] charged with shaping the "new GM." Forbes:

Edward E. Whitacre Jr., the former chairman and chief executive of AT&T, will become chairman of the reorganized General Motors after the carmaker emerges from bankruptcy, GM said Tuesday.

GM's interim chairman, Kent Kresa, will continue in that role until the "new GM" launches, perhaps as early as this summer. He will remain on GM's board after that, along with Chief Executive Frederick A. Henderson and current board members Philip A. Laskawy, Kathryn V. Marinello, Erroll B. Davis Jr. and E. Neville Isdell.

The House did its part for the auto bailout, passing a $4 billion "cash for clunkers" bill [3] to subsidize new car purchases for owners who trade in gas guzzlers. The bill's fate in the Senate is unclear. CNN Money.

Spelling out Health Reform

Forbes reports that the health care reform debate is heating up, and reaching the point where people "stop being polite and start being real." Or "tweeting real". With a letter to Senators Kennedy and Baucus, President Obama spelled out his positions on health care reform [6], and ended up with another Senator firing potshots from Twitter.

In the letter, he endorsed three controversial tenets that he hoped a final bill will contain. First, he finally came out in favor of a "public plan," where individuals and businesses can buy insurance from a government-run exchange that will pool everyone together and charge low rates.

The second idea Obama endorsed is the "individual mandate," in which, much like car insurance, Americans would be forced to buy health insurance or pay a penalty. This would avoid the problem of only sick people wanting insurance and thus driving up the price. Mandates are controversial among small businesses, who often can't afford to cover their workers, and of course small-government fans.

Finally--and this is more of an inside Washington issue--Obama endorsed ripping Medicare coverage decisions away from Congress. That would mean that lobbies representing different medical specialties, drug companies, device makers, hospitals, home health nurses and other providers would cease to have influence over their own payment rates as they do now.

At the same time as the president was stirring the pot, tension seemed to appear among the competing bill-writers in the Senate. Sen. Charles Grassley, the ranking GOP member on the Senate Finance Committee, has been working with his counterpart Max Baucus to write his committee's bill. Over the weekend, using the Web site Twitter.com, he fired two nasty comments at President Obama, criticizing him for using his radio address to call for urgent health care reform while he himself was touring Europe. Grassley has been outspoken in opposition to the public plan option. Kennedy, on the other hand, is a big proponent, while Baucus appears to be working on a compromise.

The AP reports Sen. Kennedy is handing off health care reform to Sen. Dodd [7], to handle in his absence as he battles cancer.

Meanwhile, Senate Democrats have unveiled their healthcare bill [8], but there are details left to be worked out and the House Democrats' bill to reconcile with. And  so the sausage-making begins. Reuters:

Leading Senate Democrats unveiled on Tuesday a plan to reshape U.S. healthcare that calls for sweeping insurance market reforms and prohibits insurers from denying coverage or charging more due to medical history.

The measure also would require individuals to buy insurance, provide subsidies to help make coverage affordable and set up a new government plan to help provide medical coverage for the uninsured.

The Senate Health, Education, Labor and Pensions Committee's bill is one of at least three healthcare proposals brewing in Congress, which Democrats hope will lead to legislation that President Barack Obama [9] can sign into law by October.

...Obama has called on Congress to pass legislation this year to overhaul the $2.5 trillion healthcare system, aiming to cut costs and ensure that millions of Americans now without health insurance get coverage.

But many congressional Republicans have criticized Democratic proposals for including a public insurance program that would compete with private insurers.

In a bow to Republican concerns, Kennedy's committee bill leaves open the details of how such a plan would operate. Panel Democrats and Republicans are set to meet this week to try to work out differences over the public plan.

Also still to be worked out are details on whether employers would be required to offer insurance to workers.

Time says the House Democrats' plan is more conservative than expected:

For all the uncertainty surrounding health-care reform, most observers thought they could count on at least one thing from Capitol Hill — that the proposals coming out of the House of Representatives would be bolder and more liberal than those from the more moderate Senate. But as the first details of the actual bills begin to surface, that's no longer so clear. On Tuesday, the same day that the Senate Health, Education, Labor and Pensions (HELP) Committee released some of its bill's language, the first outlines of the bill being drafted by the three key committee chairmen in the House — Energy and Commerce's Henry Waxman, Ways and Means' Charles Rangel and Education and Labor's George Miller — showed that while the two chambers are going along generally parallel tracks, it may well be the House that is taking the more cautious approach, at least for the moment.

That important details are still unresolved suggests that lawmakers are still unsure how to navigate the tricky terrain between here and there [10], "there" being health care reform that covers everyone. Washington Post:

Passage of a health-care bill of the scope Congress is contemplating would be an extraordinary feat, but it is fraught with political peril, win or lose. It may require Obama to backpedal on his campaign pledge not to tax employee health benefits. The Democrats' House and Senate majorities are only slightly larger than 1993 margins and may prove just as illusory, given the large number of Democratic moderates who are trying to hold on to swing seats.

 Congress has been riven by increasing partisanship in recent years, and both sides have shown an appetite for tackling policy challenges in incremental bites rather than bold strokes. Big, ambitious bills need big, bipartisan margins not only to pass but also to earn credibility with voters. Republican lawmakers know that the more GOP votes Obama can secure, the more he will shield Democrats from another electoral backlash in 2010.

 Given the stakes, Democrats are surprisingly upbeat about their prospects for delivering a bill to Obama this fall, as the president has requested. "It's a given. It's inevitable," said Senate Finance Committee Chairman Max Baucus [11] (Mont.), a lead negotiator. Baucus said yesterday that he expects to unveil a measure next week that would tax employer-provided benefits above a certain threshold.

That terrain is made tricky by what Slate's Timothy Noah [12] describes as "the paradox of health reform."

Polls tend to show [13] that while a significant majority of Americans favors a more aggressive role for government in controlling health care costs and extending coverage to the uninsured, a majority simultaneously pronounces itself satisfied with its own health insurance, which typically is provided by employers. A March poll conducted by CNN found an overwhelming majority (77 percent to 23 percent) dissatisfied with the health care costs borne by the country as a whole, but also found a narrow majority (52 percent to 48 percent) satisfied with the total cost of its own health care. It's a baffling but not unusual discrepancy. As journalist David Whitman noted [14] in his 1998 book The Optimism Gap [15], Americans tend to take an unrealistically sunny view of their own circumstances compared with those of other people. (A familiar illustration is the way the public consistently condemns Congress yet re-elects congressional incumbents year after year. Congress may be terrible, but my representative is the greatest!)

Just to make it interesting, Blue Dog Democrats could be a major influence in shaping health care reform [16]. McClatchey:

A group of 51 fiscally conservative and moderate "Blue Dog" Democrats could have a major say in the final shape and price tag of the legislation. That's because the administration would need two-thirds of the coalition members to pass a bill in the House without any Republican support, a growing possibility in light of Republican opposition to creation of a government insurance entity and imposition of employer mandates to provide insurance.

With the economy in a deep recession and the government headed for a $1.8 trillion budget gap this year, deficit hawks say it would be irresponsible to commit from $1 trillion to $1.5 trillion for expanded health care coverage in the coming decade, as the president and many in Congress appear braced to do.

A new Gallup survey shows the public divided over Obama's handling of the budget deficit, with 48 percent disapproving and 46 percent approving

Over the past week, Obama has vigorously wooed fiscally conservative Democrats with proposed rules that would force the government to pay for expanded health care now.

But the NY Times says Democrats are close to consensus [17] — albeit a "broad consensus" — on health reform:

Democratic leaders in both houses said they would require individuals to carry insurance and employers to help pay for it. But they have yet to decide how to raise the necessary tax revenue.

Leaders in both chambers said they wanted to establish a new public health insurance program, which would compete with private insurers. But they have not settled on the details.

The chairman of the Senate Finance Committee,

Max Baucus [18], Democrat of Montana, affirmed his desire to begin taxing some employer-provided health benefits, as a way to help pay for coverage of the uninsured.

After slamming the door on that idea last month, the chairman of the House Ways and Means Committee, Representative Charles B. Rangel [19], Democrat of New York, opened the door a crack on Tuesday.

Not that everyone thinks health reform is a good idea. Ezra Klein [20] picks apart the WSJ's long, strange case against health care reform:

It's a bit hard to know where to start with the Wall Street Journal's long argument [21] against health care reform. Our health care system, they argue, is worth the money we pay for it. It is a dazzling achievement, ensuring not only longer lives, but better lives. The problem with the Obama administration's health care plans? They want to extend those benefits to those who can't currently afford them.

Reform would be perfectly acceptable if it was "merely trying to defossilize Medicare and save the federal fisc," says the Journal. The problem comes elsewhere: The attempt to "pass the largest entitlement expansion since 1965."

This, the Journal argues, will prove unaffordable. It will make our health care system too expensive. This country -- the richest on earth -- cannot foot the bill for universal health care. But that, of course, is untrue. Even a high cost estimate -- $120 billion in 2010, say -- is not that large in the scheme of the federal treasury. It's not much larger, for instance, than the outlays directed towards the Iraq War, which the Journal enthusiastically supported. It's certainly nothing that can't be raised with the imposition of some new taxes, as the seventh graph on this page [22] neatly shows.

Rather, the Journal is arguing that we should not spend that money on universal health care. It is an audacious argument. Elsewhere in the editorial, the Journal commends a study by David Cutler and Mark McClellan that found the benefits of lower infant mortality and advances in the treatment of heart attacks "have been sufficiently great that they alone are about equal to the entire cost increase for medical care over time."

Corporate Pay Revealed

The administration is set to reveal new rules for bailed-out firms [23] by the end of the week. BBC.

Those new rules probably won't cover some things, like Bank of America — which has taken $45 billion in taxpayer aid — ponying up for former Countrywide CEO Angelo Mozilo's legal fees [24], in his fraud case. CNN Money:

The largest U.S. bank said Mozilo is covered by an indemnity clause in place when he ran Countrywide, which Bank of America acquired last July 1. Mozilo had co-founded Countrywide in 1969.

The Securities and Exchange Commission filed civil charges against the 70-year-old Mozilo last Thursday, saying he made made more than $139 million of improper profits by exercising stock options in 2006 and 2007 while the nation's housing market and Countrywide's finances were deteriorating.

"Under the agreement that he had when Countrywide was an independent company, Countrywide continued to be responsible for his legal expenses for actions taken while he was an employee," Bank of America spokesman Robert Stickler said.

Angelo Mozillo is getting his legal bills picked up, but that isn't the only executive perk surviving in the midst of the downturn. Corporate executives are still flying high [25] — even over the wreckage their own business decisions and practices created — in every way they were before the rest of the economy crashed. AP:  

Throughout Corporate America, many companies require top executives to use company planes for all travel, including vacations. They argue it is a safety requirement for high-profile business leaders rather than a perk, and that private flights are more efficient for busy executives who don't have time to waste waiting in airports.

Some companies have stopped underwriting these personal flights in recent years amid shareholder scrutiny of executive pay practices, but overall CEO aircraft perks are showing no signs of fading, according to a study released on Tuesday by executive pay consultant Equilar.

The report found that the value of CEO airplane perks in 2008 was at the highest level in the last five years, with the median value for CEOs in the Fortune 100 -- the biggest 100 corporations -- jumping nearly 29 percent to $141,477 from $109,743 a year earlier.

Also last year, 79.2 percent of the Fortune 100 reported allowing personal use of corporate aircraft, up from 74.7 percent in 2007, Equilar said.

As ten of the nation's biggest banks prepare to return $68 billion in bailout money [26], there's some question as to whether it amounts to a losing deal for taxpayers. But according to Elizabeth Warren [27]— head of the congressional panel overseeing the bailout — it's a sign of progress, but Paulson was wrong about the stability of some banks. AP:

Elizabeth Warren says the approval of a repayment to the government of $68 billion by several of the banks receiving taxpayer assistance amounts to "phase two of the economic recovery" in the system.

But at the same time, Warren said in an interview on CBS's "The Early Show," that then-Treasury Secretary Henry Paulson last year erroneously proclaimed banks to be stable when the government initially put some $350 billion into these institutions.

She said that Paulson at the time said "they were all healthy banks. ... It just really turned out not to be the case."

Breakfast Side

Confirmation hearings for Judge Sonia Sotomayor [28], President Obama's Supreme Court Pick, will get started on July 13. USAToday.