The Sale Of Volvo--Further Insight

Simon Johnson at Baseline Scenario provides more detail, actually chilling detail, about the purchase of Volvo from Ford.

Geely Automotive has acquired Volvo from Ford. This is a risky bet that may or may pay off for the Chinese auto maker – after first requiring a great deal of investment.

Goldman Sachs’ private equity owns a significant stake in Geely, with the explicit goal of helping that company expand internationally. Remember what Goldman is – or rather what Goldman became when it was saved from collapse by being allowed to transform into a Bank Holding Company in September 2008 (which allowed access to the Federal Reserve’s discount window, among other advantages). Goldman’s funding is cheaper on all dimensions because it is perceived to be Too Big To Fail, i.e., supported by the US taxpayer; this allows Goldman to provide more support to Geely (and others).

Our Too Big To Fail banks stand today at the heart of global capital flows. People around the world – including from China – park their funds in the biggest US banks because everyone concerned believes these banks cannot fail; they were, after all, saved by the Bush administration and put completely – gently and unconditionally – back on their feet under President Obama. These same banks now spearhead lending to risky projects around the world

In other words, if this deal ends up going titties-up, the American taxpayer could again be on the hook to rescue Goldman and its investors from the consequences of a mistaken decision.

('ScuzMe while I gather my thoughts: !!!!!******!!!!!***%%%%!!!!!****&&&&&!!!!!: !!)

There. That's better.

This stuff is making money for some folks now, but will hasten the day when my children will have both a lowered standard of living and significantly higher tax burdens.