US Treasury Completes Bailout of General Motors 425
Hugh Pickens DOT Com writes "Jim Puzzanghera writes in the LA Times that the federal government has sold its remaining shares of General Motors stock, ending the controversial $49.5-billion bailout of the automaker begun in late 2008 under former President George W. Bush. Although the GM bailout ended with a $10.5-billion loss for taxpayers, Treasury officials say the goal never was to turn a profit. The rescue prevented further damage to the economy and the potential loss of 1 million jobs says Treasury Secretary Jacob J. Lew. 'This marks one of the final chapters in the administration's efforts to protect the broader economy by providing support to the automobile industry.' At its height, taxpayers had a 60.8% ownership stake in GM. The auto bailout will rank as 'one of the most important interventions, maybe the most important, in U.S. economic history,' says Sean McAlinden, chief economist for the Center for Automotive Research. Without it, 'the upper Midwest would still be a gaping, double-digit unemployment hole in the economy, 600,000 retirees would've lost their pensions.' ... The Cadillac CTS was picked as Motor Trend's car of the year and the Chevrolet Impala was the first U.S. car chosen as the best sedan on the market by Consumer Reports in 20 years. 'We will always be grateful for the second chance extended to us and we are doing our best to make the most of it,' says GM CEO Dan Akerson. 'Today is not dramatically different from the hundreds of preceding days during which we have worked to make GM a company our country can be proud of again.'"
I think... (Score:3, Interesting)
That if GM had collapsed, it would have created a huge vacuum, that would have rapidly been filled with new startups. The automotive industry could have gotten a big injection of "new" and we'd have maybe dozens of Tesla-like automotive companies.
Not just $10.5 billion.... (Score:5, Interesting)
The government previously forgave $15.4 billion in loans to GM: http://www.reuters.com/article/2009/05/19/gm-bankruptcyplan-idUSN1943363120090519 [reuters.com]
In addition, the government would extend a credit line to the new company and forgive the bulk of the $15.4 billion in emergency loans that the U.S. has already provided to GM, the source said.
The government also made a "special ruling" for companies receiving bailout money... http://online.wsj.com/news/articles/SB10001424052748704462704575590642149103202 [wsj.com]
It [GM] won't have to pay $45.4 billion in taxes on future profits.
Not only is the taxpayer out over $70 billion to bail out GM, but the original bond holders who were illegally robbed are still waiting for their money too.
Re:I think... (Score:5, Interesting)
You think so? You don't think the smoking carcass would own all of the patents and make it impossible for a bunch of new startups to get into the industry?
Because in pretty much every other industry patents essentially prevents that from happening.
I'm of the opinion that in many cases, you'd just end up with a huge patent troll which prevents newcomers from entering the market.
There can be no innovation without really deep pockets to cover all of the rent seeking which happens. Because the game has been stacked that way.
Comment removed (Score:5, Interesting)
Re:Campaign Finance Reform, anyone? (Score:5, Interesting)
The Evil Corporations[TM] aren't the problem — GM was bailed out against the wish, desires, and the better judgement of executives and bankers nation- (and world-wide). No, the bailing out of the auto-industry profited unions [wsj.com] — not corporations.
Freshly elected Bush, enjoying the support of the his party's majority in Congress, did not bail-out Enron in 2001. Likewise MCI got liquidated in 2006. What made GM and Chrysler different? Unionized work-force — that's what. But blaming "unionocracy" just does not have the same ring to it, does it?
Why is it...? (Score:2, Interesting)
Why is it that taxpayer money can be used to bail out corporations and banks while not lifting a finger to help "We the People"? _And_ to "forgive" or write-off billions in unpaid debt? I'm shocked the CEO's and corporate officers who drove those companies into the ground haven't been lynched by the citizens of your country.
... which leads me to once again wonder if the bottom 99% in America will ever wake up to discover they have a comment interest and see how powerful they can be when acting together... but that's a topic for another time...
Re:Is it just me, or ... (Score:3, Interesting)
The pensions are insured by the government and you can draw social security upon retirement. It isn't as much as you would have gotten if the company didn't go bust, but it's something.
What is terrifying is all of the public employee pensions that are under-funded by municipalities on the brink of bankruptcy. Those pensions are not required to be insured, and often are not. Meanwhile, the unions themselves opted out of social security and the premiums there applied to the pension. Which means pensioners are ineligible for social security.
Detroit? That's just the tip of the iceberg. As city after city goes bankrupt from their legacy costs and erosion of tax bases, you are going to see something of a crisis where all of THOSE pensions go belly-up.
Re:You have no idea... (Score:3, Interesting)
But all that assumes that for some unexplained reason the demand for cars would just dry up.
There seems no reason to think that if GM disappeared that demand for cars would also vanish too. More realistically the slack would just be picked up by the other auto manufacturers who'd see a drastic increase in demand as they filled the void.
There may be a temporary supply shortage as they struggled to meet demand, but this would likely be met quite quickly by established firms simply buying up GM's old plants. It may even be the case that they'd buy up the entire end-to-end IP and production chain for some of GM's offerings. This is after all what GM itself did with companies like Vauxhall.
It sounds like the argument against decreasing executive wages - that we have to pay that much to get top talent, it's similarly false because it's based on the false premise that such top talent is rare. It's not. You could sack the entire top tier of every Fortune 500 company tomorrow and there'd be plenty enough equally or even more competent people lining up to replace them for only a fraction of their salaries.
I'm not saying it'd be smooth running, there would be a fairly noticeable impact of GM's demise without a doubt, but it wouldn't be an end of world scenario, and frankly the forced re-organisation of the industry away from such a monolithic dinosaur being at the core of it would almost certainly be more healthy for the industry long term.
Re:I think... (Score:4, Interesting)
Instead, we have the same company with the same problems just waiting for the same conditions to happen again. One that screwed some minor unions and dealers that didn't have political backing in the process that no one seems to care about and the media doesn't seem to want to point out.
Why is it that the banks were able to pay back their infusion of cash, but not GM??? Because it's not the economic powerhouse we have all been mislead to believe it is. The 'what if' story is spread as if it is the truth, when in fact it's just what someone wants us to believe to make themselves look good.
I will never buy a GM car again. Thousands of Americans feel the same way. I'm sure at some point our memories will fade, but Toyota, Honda, and Ford all offer fine US made cars so it's going to take a long time.
Re:Not just $10.5 billion.... (Score:5, Interesting)
Dunning-Kreuger. As D&D players know, there's a reason why INT and WIS are separate stats.
Re:Campaign Finance Reform, anyone? (Score:5, Interesting)
Even Lehman Brothers was allowed to go under as late as September 2008 — under Bush.
Interesting example - because that's exactly what caused Bush and Paulson to panic and start handing out goodies to the rest of the finance industry.
The subsequent TARP was a bow to Congress
Really? The same TARP that was the brainchild of Bush's SecTreas Paulson? The one that congress initially rejected because it was a few pages that basically said give the SecTreas $700B and he pink swears to do the Right Thing with it (the same SecTreas who'd was chairman and CEO of Goldman-Sachs).
the taxpayers recovered 97% of the monies given to the evil "banksters" under the program. Compare to the figures of the auto-bailout
Ok. Auto-bailout: $10.5B. TARP: $24B (read the 2nd paragraph of your own link - that 97% number is very deceptive). For bonus points, discuss how much of the TARP money was paid back because the Fed loaned the banks money at an even lower rate. It doesn't take a financial genius to realize that it makes sense to payoff loan A using the loan B money, if loan B is at a lower rate.
Go back to the auto-bailout (and the subsequent cash-for-clankers fraud). Nothing represented as blatant a wealth-transfer from taxpayers to "workers" (or, indeed, to anyone else) in recent history.
Nice of you to limit transfer of taxpayer's money to only that received by "workers". You conveniently left out bank executives, bank shareholders, highly speculative "investors", etc.
The bottom line is that you are obsessed with how much money "workers" get from taxpayers, regardless of the fact that much more was transferred to people who aren't "workers". Your ideology blinds you to any real concern for the taxpayer's money. You may call yourself a Libertarian, and you may even vote that way, but considering your agenda and your defense of Bush, it's obvious that you're a Republican in libertarian's clothing. A corporatist (not excusing Democrats here) is as far as you can get from a genuine libertarian.