Tag Archives: Bankruptcy

If The Economy Is Strong, Why Are So Many Businesses Going Bankrupt?

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On Thursday, The Conservative Playlist posted an article about the state of the American economy.

The article reports:

(The Economic Collapse Blog)—Businesses are declaring bankruptcy at a much faster rate than they did last year.  Thousands upon thousands of once thriving businesses are failing, but this just must be another sign that the economy is “fine”.  No matter how bad the numbers get, we are assured that the people running things have everything under control and that the outlook for the future is wonderful.  Of course I understand that this is an election year and virtually everyone is trying to put their own unique spin on things.  But there is no possible way that you can make numbers like these look good…

Personal and business bankruptcy filings rose 16.2 percent in the twelve-month period ending June 30, 2024, compared with the previous year.

According to statistics released by the Administrative Office of the U.S. Courts, annual bankruptcy filings totaled 486,613 in the year ending June 2024, compared with 418,724 cases in the previous year.

Business filings rose 40.3 percent, from 15,724 to 22,060 in the year ending June 30, 2024. Non-business bankruptcy filings rose 15.3 percent to 464,553, compared with 403,000 in the previous year.

Business bankruptcy filings were up by more than 40 percent in just one year. But don’t worry. Everything is “fine”.

The article concludes:

Employers all over the country are conducting mass layoffs, but the government is telling us that unemployment is low.

Thousands upon thousands of businesses are declaring bankruptcy, but the government is telling us that the economy is booming.

You can believe them if you want.

But they aren’t going to be able to hide the truth for long.

Decades of very bad decisions are starting to catch up with us in a major way, and unprecedented chaos is ahead.

You can believe what you see or what you are being told. It’s that simple.

The Impact Of Bidenomics

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On June 18th, Just the News posted an article about the impact of Bidenomics. Essentially Bidenomics is excessive spending creating inflation and rising federal deficits combined with interest rates rising in an attempt to curb inflation without dealing with the spending.

The article reports:

More companies are declaring bankruptcy and shutting down operations, citing inflation and high costs. Inflation and the economy remains a top issue among all voters, according to a recent The Center Square Voters’ Voice Poll.

Retailers are closing nearly 3,200 stores this year, according to a recent analysis from CoreSight Research. The closures are a 24% increase from 2023.

U.S. drug stores and pharmacy closures led to 8 million square feet of shuttered retail space this year, the research company said. It also notes that retailers are losing inventory and customers due to retail theft. “Retail shrink” is closely connected to “organized retail crime,” it notes.

Out of the 3,200 being closed, the majority are being closed by roughly 30 retailers, with Family Dollar closing the most of over 600, according to the data, CBS News reported.

The article concludes:

One key indicator of economic health is consumer spending, and while it hasn’t yet slowed, warning signs are there because it’s largely being financed by debt, economists have explained. And consumers are also struggling to pay it off, they add. Earlier this year, economist David Rosenberg of Rosenberg Research warned that as total credit card debt reached a new all-time high of $1.13 trillion, credit card and auto loan delinquencies were also up. “As far as consumer credit is concerned, the default cycle isn’t merely looming, it’s arrived,” he wrote in an economic report.

According to a recent The Center Square Voters’ Voice Poll, conducted in conjunction with Noble Predictive Insights, inflation/price increases (45%) and the economy/jobs (24%) are top concerns among voters.

“Inflation is a high-ranking issue among Democrats and Republicans and True Independents,” David Byler of Noble Predictive Insights told The Center Square. “Every political group thinks this matters.”

The rise in retail theft is also a factor in store closings. How much does it cost to put candy behind plastic so that it cannot be stolen? How many extra man hours are needed to help customers access products that are now locked away? These are also things that lead to higher prices and continuing inflation. Curtailing government spending and prosecuting retail theft would be a good first step in lowering prices for consumers.

I Totally Agree

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Yesterday the U.K Daily Mail posted an article about some recent comments by Senate Majority Leader Mitch McConnell. The Senator made it clear that the federal government was going to help the states with financial problems caused by the shutdown of the economy but not with financial problems caused by bad management.

The article reports:

Mitch McConnell said Wednesday that he is OK with states going bankrupt instead of increasing federal bailouts even further – as Democrats demand more money for state and local governments be included in the next coronavirus relief bill.

‘My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that,’ McConnell lamented.

‘That’s not something I’m going to be in favor of,’ he continued in an interview with conservative radio talk show host Hugh Hewitt Wednesday.

‘I would certainly be in favor of allowing states to use the bankruptcy route,’ the Kentucky Republican senator said. ‘It saves some cities. And there’s no good reason for it not to be available.’

Many of the states looking for bailouts need bailouts because of unfunded liabilities such as pension funds and retiree medical expenses. The only way these problems are related to the coronavirus is that there is reduction of tax revenue coming in. However, these problems were eventually going to occur with or without the coronavirus.

The article notes:

He also insisted, however, that he didn’t want to send money to states just to have them used the money to bail themselves out of preexisting issues, like a pileup of pension debts.

‘You know, we’ll certainly insist that anything we’d borrow to send down to the states is not spent on solving problems that they created for themselves over the years with their pension programs,’ McConnell told Hewitt.

‘There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations,’ he continued.

The Senate Majority Leader said he knows that states’ would rather have money given to them by the federal government in another large-scale coronavirus stimulus package.

I agree with Senator McConnell. Each state is responsible for its own financial situation. That’s part of what federalism is about. States who have managed spending better will come through this crisis in better shape. It is my guess that states that have consistently mismanaged money and raised taxes will have people moving out of their states in the coming months.

The Auto Industry Has Lost A True Innovator

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CNN is reporting today that auto industry icon Lee Iacocca has died. He was 94. He is credited as having played a major role in the creation of the Ford Mustang and the Chrysler minivan. As someone who has driven Ford Mustangs since the early 2000’s, I am grateful for his inventions.

The article reports:

Born Lido Anthony Iacocca in Allentown, Pennsylvania, on October 15, 1924, to Italian immigrant parents, he would go on to lead two major American car companies.

Iacocca started working at Ford Motor Company in 1946, and was a major figure in the development of the Ford Mustang — the first vehicle of its kind. He was named president of Ford in 1970, but was fired by Henry Ford Jr. in 1978.

“I began my life as the son of immigrants, and I worked my way up to the presidency of the Ford Motor Company,” Iacocca wrote in his 1984 autobiography. “When I finally got there, I was on top of the world. But then fate said to me: ‘Wait. We’re not finished with you. Now you’re going to find out what it feels like to get kicked off Mt. Everest!'”

He was then hired by Chrysler Corp. in 1978 and became the company’s CEO in 1979. He is credited with saving the company from bankruptcy.

Iacocca urged Congress to authorize the Treasury Department to guarantee $1.5 billion in bank loans for Chrysler. Chrysler needed the bailout to survive back to back recessions in the early 1980s. Chrysler repaid the loans early. Treasury made money on the stock it received as part of bailout packages.

With the help of more fuel efficient and competitive products such as the so-called K-cars — which included the Dodge Aries and Plymouth Reliant — Chrysler became strong and profitable again.

Iacocca led Chrysler during an era in which Asian and European imports first started to take a significant share of the US automakers’ portion of the American car market.

During the 1980’s and 1990’s, my husband was commuting 50 miles to work each way. We owned a significant number of K-cars during that time. I hope Lee Iacocca is spending his time in heaven designing a new breed of sports cars for angels to take for a spin!

He was truly an American success story.

As People See The Results Of Democrat Policies, They Begin To Wake Up

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CNS News posted an article today about California’s vanishing middle class. Being middle class in California is not a successful long-term plan.

The article reports:

A survey recently released by the Public Policy Institute of California found that President Donald Trump is more popular in the deep blue state than the Democratic legislature.

Democratic consultant Steve Maviglio recently told the Los Angeles Times, “All they hear from Sacramento are proposals for more taxes and more spending for everyone except the middle class. And they rightfully wonder where the high taxes they already are paying are going.”

While the president’s approval ratings are underwater with only 38 percent of Californians approving of his job, this pales in comparison to the state legislature having only 34 percent among likely voters having confidence in them.

With voters still anxious about a gas tax hike pushed through last year, recent suggestions of a $2 billion tax hike on everything from water to phones by California Gov. Gavin Newsom hasn’t eased that apprehension.

Newsom holds a job approval rating of 45 percent among likely voters with 29 percent disapproving and a 26 percent responding “don’t know.”

California’s fiscal policies are going to result in bankruptcy at some time in the not-so-distant future. The bad news is that the rest of the country will be required to bail them out. The major cities in California, San Francisco and Los Angeles, have areas that look like third-world countries–unsanitary conditions, homeless people living in tents, and needle-strewn streets. Diseases that America has not seen for decades are cropping up in these areas. Meanwhile, the state government continues raising taxes and doing business as usual. There will be a tipping point fairly soon. People are leaving the state in droves. The only thing keeping the population stable is the flow of illegal immigrants who are generally not contributing to the economic well being of the state.

Avoiding Responsibility As A Way Of Life

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Hot Air posted an article today about General Motors’ return to bankruptcy court. Yes, you read that right. General Motors has returned to bankruptcy court to request that Judge Gerber enforce the liability shield it constructed during its 2009 Chapter 11 bankruptcy proceedings. What General Motors wants is to insure that any lawsuits dealing with the ignition switch defect can only be brought against the Old GM shell.

The article reports:

There are at least 59 potential class-action lawsuits in the works seeking economic loss damages, but to get them, they will have to unwind the liability shield somehow.

One way to do that would be to demonstrate that GM had committed fraud by concealing the ignition switch defect before the bankruptcy. Another potential avenue would be to establish that the bankruptcy shield had denied the plaintiffs due process by depriving them of their day in court now that the ignition switch defect has been made public.

The court proceedings mark the sixth ongoing probe of GM, following investigations launched by Congress, an undisclosed state attorney general, the U.S. Attorney’s office, the SEC, and the NHTSA. GM also has an internal probe trying to determine who knew or should have known about the problem that has claimed at least 13 lives and cost GM car owners millions of dollars.

There are some real questions about who knew about the ignition problem and when they knew, but the bankruptcy proceedings of General Motors were not your ordinary bankruptcy proceedings from the beginning. Taxpayers lost nearly $10 billion in the bailout (see rightwinggranny.com). The rules of bankruptcy were not followed, and essentially the company was turned over to the unions. Evidently the unions had no more regard for the safety of the average American than did the corporate executives.

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Detroit Goes Under

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The Washington Examiner is reporting today that the city of Detroit is filing for Chapter 9 bankruptcy.

The article reports:

According to the bankruptcy filing, Detroit now has more than $18 billion in unfunded liabilities. The city’s population has dwindled from 1.85 million in 1950 to under 700,000 today, and its tax revenues have shrunk accordingly even as the average tax burden has risen to the highest level of any town in the state. A deficit estimated at $237 million in June was too much for the once-mighty industrial town to handle.

A website called Pensions & Investments posted the following on July 11:

Mr. Orr (Kevyn Orr, the city’s emergency fiscal manager) has proposed that city employees with less than 10 years of vested service be taken out of the defined benefit plan and be moved to 401(k)-style savings plans.

There’s no way employees or unions will bargain away pension benefits, said Michael VanOverbeke, a lawyer for the general employees retirement system, after the meeting. Michigan‘s constitution prohibits changes in accrued pension benefits, Mr. VanOverbeke said. Mr. Orr has said that a bankruptcy filing would negate the state protection.

This is a problem a lot of cities, states, and municipalities are going to be faced with in the very near future. For years unions have negotiated contracts that included retirement plans that were totally funded by taxpayer money. As private companies have converted to 401k plans where employees contribute to their retirement, public employee unions have not followed suit. The bankruptcy of Detroit is not really a surprise to anyone. You can’t continue to spend more than you take in without running out of money at some point. As the jobs left Detroit, the city had no way to make up the lost income. It attempted to raise taxes to generate income, but that simply drove people out of the city.  It’s just a shame that the leadership of the city couldn’t have done more to avoid the problem.

 

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Would You Trust These People With Your Investment Portfolio ?

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Yesterday the Daily Caller posted an article about the investments the Obama Administration has made in alternative energy companies.

The article reports:

The Romney campaign later clarified that he was talking about the DOE’s 1705 loan program which doled out $16.1 billion to green energy companies, accordingto the Washington Post. Of the 33 companies that received 1705 loan guarantees, only three have declared bankruptcy.

The article further reports:

The blog Green Corruption’s “Obama green-energy failure” list contains 23 bankrupt and 27 troubled green energy companies which were backed by the federal government. This list uses data compiled by the Heritage Foundation, but also includes some things the conservative think tank doesn’t.

According to the Heritage Foundation, $80 billion was set aside in the 2009 stimulus package for clean energy loans, grants, and tax credits, and 10 percent of these funds have gone to companies that have filed for bankruptcy or are in dire straits.

As I have said before, I believe there will come a day when green energy makes sense. I also believe that day will come after the free market has culled out the technologies that do not work and the technologies that do work have naturally risen to the top of the pile. Government subsidies interfere with that process and actually slow down the successful development of green energy–not to mention the amount of money the government has lost in picking winners and losers (mostly losers).

As taxpayers, we have the right to invest our money where we chose to invest it. There is nothing in the Constitution that gives the government the right to make investments in green energy for us.

 

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Your Taxpayer Dollars At Work

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Bloomberg.com is reporting today that A123 Systems Inc. (AONE), the electric car battery maker that received a $249 million federal grant, has filed for bankruptcy protection. The company says that it will sell its assets to Johnson Controls Inc. (JCI).

The article reports:

The company listed assets of $459.8 million and debt of $376 million as of Aug. 31 in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware.

The Waltham, Massachusetts-based company said yesterday it expected to fail to make an interest payment due yesterday on $143.8 million of notes expiring in 2016.

The article further reports:

Electric-vehicle sales since 2011 totaled fewer than 50,000 through September, just 5 percent of Obama’s target to have 1 million such vehicles on U.S. roads by 2015.

The debtors’ two largest customers are Fisker and AES Energy Storage LLC and its affiliates, which accounted for about 26 percent and 24 percent of their total revenue during the year ended December 31, 2011, respectively, court papers show.

Republican presidential candidate Mitt Romney said last month that Obama has picked “losers” for alternative-energy loans and grants. His running mate, Paul Ryan, has called for all green-energy subsidies to be eliminated.

A123 has posted at least 14 straight quarterly losses. Its shares have fallen 85 percent this year to 24 cents at yesterday’s close in New York and traded at 16 cents at 8:29 a.m. before the start of regular trading.

I am really glad these people are not managing my stock portfolio; unfortunately, they are managing my country.

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We’re Still Not Done With Solyndra

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On Wednesday, the Washington Times posted an article about the bankruptcy of Solyndra.

The article states:

The Internal Revenue Service urged a bankruptcy judge to reject solar panel maker Solyndra LLC’s bankruptcy plan Wednesday, saying it amounts to little more than an avenue for owners of an empty corporate shell to avoid paying taxes.

“The undeniable conclusion is that tax benefits drive this plan,” attorneys for the IRS wrote in a bankruptcy pleading.

The attorneys for the IRS stated that that the tax breaks would be worth more money than funds set aside for creditors.

The article explained the bankruptcy plan:

Under Solyndra’s reorganization plan, two big investors in the company, Madrone Partners LP and Argonaut Ventures, together would own nearly all of a shell company formed in the wake of Solyndra’s bankruptcy reorganization.

But the IRS said in court papers that there was little reason for the shell company to exist other than to help the owners avoid taxes. Argonaut is the investment arm of a family foundation headed by Oklahoma businessman George Kaiser, a fundraiser for Barack Obama’s 2008 presidential campaign. Madrone has ties to the family that owns Wal-Mart Stores Inc.

The article concludes:

The government attorneys said that while the reorganization plan had “some marginal benefits,” there was no doubt that the most important priority was to “preserve a shell corporation to be able to reduce future tax liabilities by hundreds of millions of dollars.”

This is what crony capitalism looks like.

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Another One Bites The Dust

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A website called GlobalWarming.org reported on Friday that the Las Vegas Sun reports that Amonix, Inc., a manufacturer of solar panels that received $5.9 million from the Porkulus, will cut two-thirds of its workforce, about 200 employees, only seven months after opening a factory in Nevada. Earlier last week, Ener1, a manufacturer of batteries for electric vehicles and recipient of Stimulus largesse, filed for bankruptcy.  Evergreen Energy , also a recipient of stimulus money, has also declared bankruptcy. These companies are not even viable when the government is writing them enormous checks! When you consider the amount of stimulus money spent on pet projects of President Obama, it is scary. He could have simply given each taxpayer $100,000. I suspect that would have truly stimulated the economy!

The interesting part of the article linked above is the comments. There are definitely some people out there who are paying attention and who are angry that taxpayer money is being spent in this way.

 

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Who Is Paying For This ?

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A photovoltaic (PV) module that is composed of...

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The Contra Costa Times reported on Friday that Solyndra has asked its bankruptcy judge to pay remaining employees up to $500,000 in bonuses.

The article points out:

Senior executives at Solyndra collected hefty quarterly bonuses — ranging from $37,000 to $60,000 apiece, with some executives receiving both rounds of bonuses — within six months of the company’s closure last August, when about 1,100 workers were laid off without severance.

According to the article, the bonuses requested would “go to workers lower on the food chain than the sizable bonuses handed out to key executives in the months before the company’s bankruptcy — 13 of the 21 possible recipients the Associated Press listed were equipment engineers and facilities workers.”

There are a few things at work here. What kind of responsible executive takes a huge bonus as the company is going under? What about taking the bonus and then laying off workers without severance? I am all in favor of people making money–I just think we need to bring the concept of ethics back into our business model.

The kind of abuses we have seen in the financial sector of our economy will not be fixed by increased regulation–they are indications of a lack of morality and accountability that is currently running rampant in our society. Until we get back to our national roots as a Judeo-Christian country, we are not going to solve our problems–financial or otherwise. The reason the Ten Commandments were posted in our schools was to let students know that at some point in their lives they would have to answer to a higher authority. When we removed the concept of a higher authority, we opened the door for the financial collapse that we have seen. When our financial moguls do not realize that they are accountable for their behavior, they don’t bother to play by the rules.

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