Chrysler got more tough love from the Obama administration yesterday: As the automake tries to work out a deal to be acquired by Italy’s Fiat, the Treasury Department has told Chrysler execs to start getting their bankruptcy papers in order. The Fiat deal is still expected to go forward, but in the meantime, according to the NYT story linked above, “Treasury now has an agreement in principle with the U.A.W., whose members’ pensions and retiree health care benefits would be protected in the event of a bankruptcy filing, said the people with knowledge of the discussions…”
It’s a sign of the times that Ford actually saw its stock prices rise after posting a smaller-than-expected first quarter loss of $1.8 billion and declaring that it sees no need for federal bailout dollars on the horizon. (Analysts had thought Ford’s Q1 losses would be more like $2.5 billion.)
The other big story of the day was credit card companies. American Express reported first quarter operating profits of $443 million–down 58 percent from a year ago, but likewise better than expected, and thus the spur to a 14 percent jump in AmEx’s stock price.
Politically, though, the credit card companies are in hot water with the public thanks to the many hikes in fees and interest rates they’ve undertaken lately to gouge their way to profitability. And Barack Obama is desperate for an issue that will win back some of the populist credibility he’s lost through the bailout program. Yesterday Obama met at the White House with executives of the largest credit card issuers–many of which also happen to be major recipients of federal bailout funds–to tell them that fresh regulatory curbs on rates and fees are forthcoming.
But let’s wait and see what the new credit card regs look like when they’re delivered. The industry’s sure to argue that putting some limits on usury would undermine their profitability and exacerbate the financial crisis–and the Obama administration has yet to make a firm stand against any such argument.
Finally, a must-read from Martin Wolf on all the talk of green shoots and glimmers of hope: “Is the worst behind us? In a word, No. The rate of economic decline is decelerating. But it is too soon even to be sure of a turnround, let alone of a return to rapid growth. Yet more remote is elimination of excess capacity. Most remote of all is an end to deleveraging. Complacency is perilous. These are still early days.”