Archive for December 2nd, 2010

There is an interesting story in today’s Washington Post on a financial fact where the Federal Reserve bought “paper” from Harley-Davidson – 33 separate times in 2008-09, for a total of $2.3 Billion.

This is most surprising!

Clearly the financial crisis went beyond banks.  No surprise there.  The Fed’s efforts to prop up the financial sector are well known, but it turns out that millions of dollars in emergency “aid” went to a broad spectrum of American companies and now we learn it included Harley-Davidson.

Did H-D provide information on the terms of their deal?  Did H-D provide full disclosure of the benefit received through the Fed’s program to ease the market for commercial paper (a form of short-term debt used to fund daily activities)?  Did the Fed’s lower standards for the kind of collateral allowed for H-D to participate?  I’m not aware of any statement or notification made during previous quarterly financial reports/calls, but again I’m not heads down on a daily basis into their financial reports either.

I jumped over to Harley-Davidson’s website (archive tab) to see if their corporate news archive mentioned this arrangement.  I could not find anything.  I reviewed the 2009 report/press release and again could not locate any specific reference to the Fed’s deal.

Is there an issue with this?  Not legally, but it’s hard for me to wrap my head around the “future is so bright” picture of prosperity that CEO Keith Wandell has been projecting recently.  Granted it was extraordinary times in 2008-09 when no credit was available, but this extraordinary $2.3 Billion “aid” package potentially means that H-D got off easy while at the same time they announced life altering employee restructuring activities and requested employee concessions through new labor agreements at York, Pa; Milwaukee and currently ongoing in KS.

Many will see this as a crafty move by the CEO Keith Wandell.  Clearly those lunch meetings at the White House paid off.

Still… does any of this matter?  I suppose not, but the interesting thing is that sometimes Government-related entities (the Federal Reserve is not specifically a branch of the U.S. – it is a privately held bank) will resist your repayment after you have the cash to do so. They do this so that they may continue to excerpt  influence and can apply pressure on a company’s direction.

UPDATE: December 6, 2010 – According to the Milwaukee BizJournal the Federal Reserved reported that all TAF loans (including H-D) have been repaid in full.

Photo courtesy of PiperReport.

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