The Newest Banana Repubic

One of the conditions that defines a "banana republic" is a cavalier disregard for the rule of law by those in power.

While ordinary citizens might pay a price for bad decisions or bad relationships -- or, simply, bad luck -- wherever they live, in a modern, civilized society, at least, they can usually have a measure of faith that wrongs can be righted and that what they have won't be arbitrarily taken away from them without compensation or a means of redress.

Sadly, while few would have considered the possibility that America was in the banana republic category only a short time ago, developments like those described in the following post from Bob Brooks' Prudent Money blog, "The Car CZAR has Spoken," suggest that is no longer the case:

Treasury Secretary Tim Geithner - AKA the Car CZAR, the Bank CZAR, etc.

CZAR - One having great power or authority. Also - also tsar or tzar (zär, tsär) A male monarch or emperor

I wrote a blog Monday about my friend Scott Lau, whose Chrysler dealership has been in the family 42 years and was just forced out of business due to the Government’s “surgical” Chrysler bankruptcy. I interviewed Scott yesterday about his story on Prudent Money. As I was preparing for the show, so many things started to dawn on me about the whole Government involvement and Chrysler.

First, let’s consider Scott’s dealership for a moment. Here is a business that has been a family operated small business for 42 years. It has been a solid business with a great business plan. It has been profitable through the years and was weathering the financial crisis. When it was all said and done, I believe that Preston Chrysler Jeep would have survived the financial crisis. They made the necessary adjustments.

Preston Chrysler Jeep is not closing their doors because they are not a good dealership. They are not closing their doors because they were in trouble financially. They are closing their business of 42 years because the Car CZAR has spoken. Chrysler gave them and 800 plus other dealerships the pink slip and said we no longer have a contract with you. There were no calls from any Chrysler representatives to Scott’s dealership.  There was a UPS letter delivered to the back door of the parts department.

This is a healthy small business with no debt that was forced to shut down because the only product that they sell and service was taken from them due to Government direction through “structured” bankruptcy. Preston Chrysler Jeep is not the reason that Chrysler and the rest of the automotive industry is in trouble. This dealership was nothing more than a small business participating in the American Dream.

The Government is destroying capitalism in a methodical fashion. There was a reason that Chrysler and GM didn’t go bankrupt in December (before we threw billions of dollars of taxpayer dollars down the toilet). Think about it for just a minute. If Chrysler or GM would have gone through bankruptcy in December, there wouldn’t have been as much Government involvement. Instead, the Car CZAR continued to pump billions of taxpayer dollars into these failing companies in order to keep the lights on. This gave the Car CZAR ultimate control. The Government controls the destiny of these automotive companies. Now who answers to who? Just look at what they are doing to the banking system.

You know when you borrow money from a loan shark you give your life away. There is no difference here. So, the Car CZAR has spoken and Scott and the rest of the employees at the dealership that have served this area faithfully were simply on the wrong side of the Washington power grid and out of luck. So much for the American Dream.

So, who is this Car CZAR? Well let’s look past the man, Steve Rattner, who was appointed to head of the task force. Instead, let’s take a look at who makes up the task force.

Members (according to Wikipedia)

• Co-chairs:
  - Treasury Secretary, Tim Geithner

- National Economic Council Director, Larry Summers

• Secretary of Transportation
• Secretary of Commerce
• Secretary of Labor
• Secretary of Energy
• Chair of the President’s Council of Economic Advisers, Christina Romer
• Director of the Office of Management and Budget, Peter R. Orszag
• Environmental Protection Agency Administrator
• Director of the White House Office of Energy and Climate Change
• Senior Advisor on Auto Issues at the Treasury Department, Ron Bloom

You really just need to stop with the first name to see where the power lies. It seems that Tim Geithner remains the man behind the curtain.

Comments

[tjo]

The laws we live by in this nation are not changed by economic condition.
The audacity of hoping to rule by edict is not the change we believed in.
Thank you, Indiana and White & Case, for voicing your opposition.

[Jay Greathouse]

The global financial services industry has been turning small (by United States standards) nations into "banana republics" for decades. This was part of what we were told was official government policy, part of bringing democracy to "backward" states.

The banana in "banana republic" was, after all, put there by United Fruit and other transnational corporations, as first exposed by Major General Smedley Butler and outlined in his book "War Is A Racket" published in 1935.

What really puts the U.S. in the same banana boat is the close ties between the financial services industry and the federal government. As the finaciers have garnered more favors from the government that they finance, keeping profits but shifting debt on to the public, the U.S. is being driven into the receivership of the IMF.

This is a core condition that defines a "banana republic" and we are virtually there already. An honest accounting is all that is required, not that we will likely get one.

[Boom2Bust.com]

Seems like the influence of Geithner and Summers is growing these days...

"Economic Advisers Or Rubber-Stamp Committee?"
http://www.boom2bust.com/2009/05/20/economic-advisers-or-rubber-stamp-committee/

[no eyeballs]

Well, it's a shame about his dealership - I know a ruined Chrysler dealer myself, and it's painful to see. But the same approach, taken with the banks, might be exactly what's needed. No, really. The banking oligarchy is more private than public at this point, and one of the few ways government regulators can assert control is with soft credit and concomitant extortion. Look at Russia: Putin can control his plutocrats only by framing them and locking them up, or by assassinating them in a pinch. Too bad for the rule of law, but they never had it there anyway. Same here. We've been a lawless, oligarchical banana republic for years. We need to accept that fact and ask, How do we stop the corruption now? When a country's this far gone, autocratic dirigisme may the only way. It might not work, but the private sector's turned malignant, the invisible hand is fisting you.

[Tax Lawyer]

I have to disagree with you here. If it were not the government that terminated the dealership agreements, it would have been the foreclosing bondholders. They both have the right to terminate dealership franchises in bankruptcy. Also, with Chrysler making a vastly shrunken number of vehicles, there is no way that they could support the hundreds of dealerships that are out there.

A better target for your article would be the megabanks, WHO HAVE YET TO FIRE A SINGLE CEO despite the staggering messes they have made. Plus, at least the auto companies received loans rather than outright goverment handouts (ala AIG CDS's). If anything, the auto companies are being treated too harshly compared to the kid glove treatment the megabanks are getting--and at least auto manufacturers make something useful for society, rather than harmful like CDO's CDS's SIV's, etc.

[mary]

imho:
we cannot overhaul this system completely at this time - but individuals can pull out of the system to a large degree and that will start the change - and in the coming decades it will no longer be the same system - it may seem like small steps but some things we can do: turn off the tv, get out of and stay out of debt, no credit cards, get out of the investment system, be a low-level consumer, use holistic medical,question everything, don't support their war on terror (total bs), become survivalist (hear survival podcast - good info there)- we live in a military empire run by elites - first stop believing the lies - then begin the divorce procedure.

[roger]

(One of the conditions that defines a "banana republic" is a cavalier disregard for the rule of law by those in power.) By this definition, we where a Banana
Republic way back when Bush and Cheney where in commend

[Old European]

There could be a backfire: if I was a GM/Chrysler dealer thrown out of business I would ask some of them nice Asian carmakers if I could distribute THEIR cars instead of American ones.

For I think this will happen more than once there's a good chance that the gas-saving affordable cars from Asia will eat further big chunks of the 3 'Big Ones' of Detroit if they get support from local dealerships.

'Un-American', you say ? maybe, but that's how globalization works.

[Woz]

Who is going to by cars produced by the Obama Workers Auto Collective (aka GM and Chrysler)?

Start with the fact that mostly Red State consumers buy these vehicles, historically. The Coastal Elites love BMWs and Mercedes if they are rich, and Hondas, Nissans, Toyotas and VWs if they are left so.

RedState domestic auto buyers are conservative. They are sceptical of things like fast-talking, paper-shuffling, Wall Street types telling themm that bankruptcy means nothing.

Many people may boycott as buying a GM/Chrysler is now a POLITICAL decision. You are siding with Obama and the UAW and against free market capitalism, the rights of bond holders, the rule of law, and conservative economics. It's good for Obama and bad for the GOP.

The highly publicized fact that most of the dealers being shut down were GOP supporters adds clarity to this.

Unless a lot of East Coast yuppies are going to give up their Priusi for Chevy and Dodge economy models (not likely!) I think it's pretty much OVER for these two companies.

The antics of Zero have aliented the potential customers and a unspoken boycott of these companies will ensue.

[fj]

You are out of your mind. Chrysler, the auto manufacturer, was a failed business. Your example dealership would be no better off if Chrysler was forced to liquidate (which is what would have happened without the government's help). The entire American auto industry is a prime-example of American waste and excess, they displayed neither the vision nor the execution to be competitive, or even compelling, and bankruptcy is exactly the end they deserve. I have a small regret that their demise is being forestalled by the government, but given the sad state of things in general, attempting a diving save is a necessary evil.

It is exactly the attitude of entitlement that you display in this post that doomed the American car makers 30 years ago.