The morning news

Four stories that I linked to on the last Belmont Club thread that help paint a picture of where we are heading to.

Banks returning bailouts will face conditions

By JIM KUHNHENN, Associated Press Writer
WASHINGTON – Banks that want to pay back their federal bailout funds and free themselves from government restrictions on compensation and dividends will have to sever their ties to another financial assistance program.

Financial firms eager to return infusions from the $700 billion Troubled Asset Relief Program will have to demonstrate that they can operate without debt guarantees provided by the Federal Deposit Insurance Corp., a senior government official said Tuesday. The FDIC program allows financial institutions to borrow money at lower costs.

The new requirement will make it harder for some institutions to get out from under government rules attached to the bailouts, another shift in a changing landscape for banks. It also illustrates the government's desire not to have banks abandon the bailout program if they are not financially prepared to do so. ...

Once the fish is hooked you keep him from paying the principle. He exists to cough up the vigorish.

Group seeks to block Chrysler/Fiat as Opel heats up

By Emily Chasan and Madeline Chambers
NEW YORK/BERLIN (Reuters) – A group of investment funds sought on Monday to block Chrysler's planned alliance with Fiat SpA, while the Italian automaker advanced its bid to overhaul the industry by setting its sights on Germany's Opel.
The dissenting lenders led by Oppenheimer Funds and Stairway Capital argued in a New York bankruptcy court that the sale proposal was "orchestrated entirely by the U.S. Treasury and foisted upon the debtors."

A lawyer for the group, Tom Lauria, said some identified publicly in the politically charged reorganization have received death threats "which they perceive as being bona fide." Those lenders have notified police and the FBI, he said.
President Barack Obama called the dissenters "speculators" in public criticism last week for refusing to join Chrysler's biggest banks in a government-brokered deal to wipe out Chrysler's $6.9 billion debt and move forward with the Fiat alliance.

"We still have a very fragile coalition to get from here to there," Corinne Ball, Chrysler's bankruptcy lawyer, said near the start of a court hearing on Monday.
Chrysler asked U.S. Judge Arthur Gonzalez to schedule a hearing as soon as May 21 to approve a $2 billion sale of most of the automaker's assets.
"Absent a prompt sale, approved in the coming weeks, the value of the debtors' assets will rapidly decline and the ability to achieve a going concern sale will be lost," Chrysler said in court documents supporting the sale to Fiat.
Gonzalez adjourned a hearing on Chrysler's request until 2:30 p.m. EDT on Tuesday.

JPMorgan Chase Co lawyer Peter Pantaleo, of Simpson Thacher & Bartlett LLP, told the court on Monday that Chrysler had more than the required support from the secured lenders to support the proposed sale.

JP Morgan led a group of banks that control about 70 percent of Chrysler's debt. They've agreed to a deal that would pay lenders $2 billion

Chrysler's bankruptcy, one of the biggest U.S. public company bankruptcies ever, is widely seen as almost a dry run for a potential reorganization of General Motors Corp.

GM, which like Chrysler is surviving on government bailout money, faces its own restructuring deadlines on June 1 and is trying to restructure its business in the U.S. and overseas.

This includes the potential sale of its German-based Opel unit, possibly to Fiat.
Fiat Chief Executive Sergio Marchionne said on Sunday his company could seek a merger with Opel, then spin off and list the combined entity.

Combining with Chrysler as well as Opel, which makes up 80 percent of GM Europe's annual sales of $34.4 billion, fits Marchionne's strategy of bulking up Fiat to survive the crisis engulfing the auto industry.

"Industrial logic-wise, Opel makes a lot more sense than Chrysler. The big hurdle we can see is social cost," Nomura International analyst Michael Tyndall said.
"It's all very well to say they compete broadly in the same markets with similar platforms and there may be economies of scale. But the broad translation of economies of scale is fewer jobs and I'm not sure if the Italian or German governments have the appetite for the job losses a merger would entail."
The biggest opposition to a deal is likely to come from German and Italian unions.

Opel employs around 25,000 people at its factories in Germany.
Germany's finance minister, Karl-Theodor zu Guttenberg, said Fiat's plan was "interesting," but needed a closer look following talks with Marchionne. Guttenberg said Fiat was seeking Europe-wide state guarantees as part of the GM Europe deal.

As well as Fiat, Austrian-Canadian car parts maker Magna International Inc has expressed an interest in Opel. Magna declined to comment on Monday.
In fresh reminders of the dire state of the global auto industry, French new passenger car sales fell 7 percent in April and Belgium reported a 22.8 percent drop.

Spanish automaker association Anfac said car sales in the country fell 45.6 percent in April, declining faster year-on- year than in March, which saw a 38.7 percent drop.

It is inconceivable to me that all this lightening fast special handling to grease the system for Fiat by the Chicago crowd and European politicians could occur without massive corruption. What are the payoffs? The KGB used to insist that assets take money, even if the sums were small. A documented corrupt traitor was more reliable to them than an ideological enthusiast.

NATO holds Georgia war games, Russia critical
By Matt Robinson

TBILISI (Reuters) – NATO launched military exercises in former Soviet Georgia on Wednesday after heavy criticism from neighboring Russia and a brief mutiny in the Georgian military.

Georgian President Mikheil Saakashvili accused Russia, which fought a war with Georgia last year, of trying to foment a coup after a local tank battalion rebelled against the Tbilisi government on Tuesday. Moscow denied involvement.
The mutiny ended without bloodshed but cast a shadow over the start of the month-long exercises, in which over 1,000 soldiers from NATO countries including the United States and allies will practice a crisis response and train peacekeepers.

The Georgian Defense Ministry said NATO would spend the next few days setting up a staff headquarters at the Vaziani base outside Tbilisi ahead of field exercises next week.

Russia has strongly criticized the exercises on its southern flank as "muscle-flexing." Its envoy to NATO Dmitry Rogozin told Reuters on Tuesday the alliance would be better off holding the maneuvers "in a madhouse" than in a country where troops were "rioting against their own president."

...

Russia crushed a Georgian military attempt to retake the pro-Moscow separatist region of South Ossetia last August, routing Tbilisi's army and prompting criticism in the West for a "disproportionate response."

NATO said this month's exercises should not be misused.
"This exercise has nothing to do with Georgia, it has nothing to do with Russia," said a spokeswoman for NATO Secretary-General Jaap de Hoop Scheffer. "Georgia is just hosting the exercise and nobody should interpret the exercise in a different way and use it for other purposes."

Further souring the mood, Russia announced the expulsion of two Canadian staff at NATO's information center in Moscow on Wednesday -- a response to the Western military alliance's decision to throw two Russian diplomats out of Brussels last week over a spying scandal.
...

NATO SOLDIERS ARRIVE
...
Armenia, Russia's closest ally in the South Caucasus, on Tuesday joined Moscow's friends Kazakhstan, Serbia and Moldova in pulling out of the NATO exercises they had been invited to join despite not being members of the alliance.

Georgia and Azerbaijan, also not in NATO, are the only former Soviet republics left taking part.

Kazakhastan pulling out underlines that the effort to create a Northern supply route for Afghanistan is probably unsustainable in the face of Russian or Chinese opposition.

Now for the Pièce de résistance

Secret U.S.-Israel Nuclear Accord in Jeopardy
Obama's efforts to curb the spread of nuclear weapons reportedly threaten to expose and derail a 40-year-old secret U.S. agreement to shield Israel's nuclear arms from international scrutiny.
The Washington Times
FOXNews.com
Wednesday, May 06, 2009

President Obama's efforts to curb the spread of nuclear weapons threaten to expose and derail a 40-year-old secret U.S. agreement to shield Israel's nuclear weapons from international scrutiny, former and current U.S. and Israeli officials and nuclear specialists tell The Washington Times.

The issue will likely come to a head when Israeli Prime Minister Benjamin Netanyahu meets with Mr. Obama on May 18 in Washington. Mr. Netanyahu is expected to seek assurances from Mr. Obama that he will uphold the U.S. commitment and will not trade Israeli nuclear concessions for Iranian ones.

Assistant Secretary of State Rose Gottemoeller, speaking Tuesday at a U.N. meeting on the nuclear Non-Proliferation Treaty (NPT), said Israel should join the treaty, which would require Israel to declare and relinquish its nuclear arsenal.
"Universal adherence to the NPT itself, including by India, Israel, Pakistan and North Korea, ... remains a fundamental objective of the United States," Ms. Gottemoeller told the meeting, according to Reuters.
She declined to say, however, whether the Obama administration would press Israel to join the treaty.

A senior White House official said the administration considered the nuclear programs of Israel and Iran to be unrelated "apples and oranges."