Friday, July 10, 2009

A Big Day for America's Sovereign Debt Fund

America's investing government had a banner twenty four hours, investing in PPIP and a relaunched GM. The U.S. Sovereign Debt Fund (USSDF)started PPIP (public private investment partnership) with the goal of buying $40 billion in financial instruments. The number sounds large until one considers the existence of over $3 trillion in toxic commercial and mortgage backed securities.

GM's Fritz Henderson announced a streamlined exit from bankruptcy. He sounded almost schitzophrenic in his remarks. He said GM's people are the company's greatest asset, but he had to let large numbers go. Those that remain have to change fast.

He said they eliminated their matrix management structure. Then shared that management with functional responsibilities also needed to be responsible for U.S. operations. Is that the shadow matrix?

America's Sovereign Debt Fund has a very short term investment horizon. It's ready to give back warrants to TARP recipients. Fritz wants to pay off GM's greatly reduced debt by taking to company public within a year. Heaven forbid the taxpayer participate on the upside.

"Socialize the losses, privatize the profits."

Meanwhile AIG, placed in conservatorship by the government last fall, considers bonus payments for top executives. With estimates of negative equity, it will be interesting to see how much the USSDF funnels to management and derivatives traders who imploded the firm. Obama loves pay for performance, despite being bad leadership theory and repeated failures in federal execution. Federal employees under P4P find it unfair and a source of suspicion and mistrust. Contractors paid under P4P guidelines were paid regardless of performance.

"Ignorance is as ignorance does."-Forrest Gump

"Subsititute leadership!"-Dr. Wl Edwards Deming