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US Treasury Completes Bailout of General Motors 425

Posted by Unknown Lamer
from the just-in-time-for-peak-oil dept.
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.'"
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US Treasury Completes Bailout of General Motors

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  • Union beard
    $10B it's feared
    Need a crony scrape
    Or the market's a jape
    Burma Shave
  • by Ihlosi (895663) on Tuesday December 10, 2013 @09:11AM (#45649435)
    ... does betting almost your entire pension on the fate of one single company seem like a really unwise idea?
    • If I remember correctly, it wasn't just GM that had problems, it was just the only one that got bailed out. One day we heard that housing was a problem, and people's homes were being foreclosed on left and right. The next day we heard the GM suddenly needed $50-Billion.

      It was done in the same manner in which 9/11 was done by terrorists named Al Qaeda, but then the US went and invaded Iraq and outed Saddam Hussein for WMDs that didn't exist.
    • Oh don't worry. Despite GM being bailed, pensions are down the drain.

      • by sumdumass (711423) on Tuesday December 10, 2013 @10:17AM (#45649947) Journal

        In more ways than we realize. The bailout of gm actually followed what Romney said, forced bankruptcy then a cash infusion apon restructuring. The bankruptcy negated a lot of pension liability but part of the cash infusion was paid by Canada's pension funds too. If we are taking a loss, i am almost certain they are too.

        This also neglects all the pension funds that was looted when all of GM's stock and debt where invalidated as part of the bankruptcy. Detroit is even worse as municiple bonds has always been considered a safe bet as the governing authority can raise taxes to satisfy the debt but with its bankruptcy, it looks like it will be pennies on the dollar if anything is paid out. But detroit is another beast altogether.

    • by u38cg (607297)
      It's a complex problem. Without question, pension provision should *somehow* arise from compensation paid for your work. The problem is that you are squirelling away money for long periods, with uncertain returns, and then when you start paying it out, no-one is quite sure how long you'll live for. For the company, paying enough money up front to guarantee a particular level of pension would be a drain on resources, so we let them catch up later. Alternatives, such as just paying a fixed amount into a f
  • I think... (Score:3, Interesting)

    by Andrio (2580551) on Tuesday December 10, 2013 @09:12AM (#45649447)

    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.

    • Re:I think... (Score:5, Interesting)

      by gstoddart (321705) on Tuesday December 10, 2013 @09:18AM (#45649483) Homepage

      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.

      • Re:I think... (Score:5, Interesting)

        by jcr (53032) <jcr&mac,com> on Tuesday December 10, 2013 @09:23AM (#45649521) Journal

        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?

        Patents are assets. Assets are auctioned off in bankruptcy. The owner of a patent benefits from licensing the patent for fees, not from sitting on a patent and preventing anyone from using it.

        -jcr

        • Re:I think... (Score:5, Insightful)

          by gstoddart (321705) on Tuesday December 10, 2013 @09:29AM (#45649565) Homepage

          Patents are assets. Assets are auctioned off in bankruptcy.

          Which, if history is any indication, will go to the existing companies with deep pockets, and will continue to restrict the market to a couple of huge players -- or one smaller one backed by someone with deep pockets.

          A collapse of GM would not magically create a bunch of small startups to fill the void. It would mostly just redistribute among the big players.

          • by khallow (566160)

            A collapse of GM would not magically create a bunch of small startups to fill the void. It would mostly just redistribute among the big players.

            Actually, the collapse of GM, which is something that's been going on since the 1970s, has grown a lot of rival automobile businesses in the US. They're just owned by foreign companies like Toyota [toyota.com] or Mercedes [wikipedia.org].

            I don't know that completing the collapse of GM would create a bunch of start ups, but I do know that bailing GM out won't do that.

        • by jonwil (467024)

          As we have seen when other companies with big portfolios have collapsed or sold off their patents, usually its well established companies that pick them up. Look at what happened to the Nortel Networks patents (that were bought by Microsoft and others)

      • by Ihlosi (895663)

        Because in pretty much every other industry patents essentially prevents that from happening.

        I think in the automobile industry, the high up front investment ist a much greater hurdle than any patents.

    • by stiggle (649614)

      IF GM had collapsed then the remains would have been picked over by the other main car manufacturers and you'd have ended up with the brands being owned by VW, Fiat, TATA, etc. Not good for the America.

      Although Fiat already has strong links with Chrysler (they basically own it)

    • Re:I think... (Score:4, Insightful)

      by DarkOx (621550) on Tuesday December 10, 2013 @09:30AM (#45649567) Journal

      Right and lets not forget either that all that manufacturing equipment does not just get set on fire because of bankruptcy. It would have been sold off cheap to those same start ups. Deflation can be a good thing.

    • by gtall (79522)

      Yes, if you ignore the supplier and dealer networks which would have gone titsup and those are not easily established. Just consider the problems Tesla has right now. Starting a new car company is not easy, it takes years. In the meantime, all the pensioners and workers are SOL.

    • It can cost up to $1-6 billion for car companies to come up with a new model ( http://translogic.aolautos.com/2010/07/27/why-does-it-cost-so-much-for-automakers-to-develop-new-models/ [aolautos.com] ) and that is what it costs if you are already a car company and are already making similar cars. If you are a company that has never made a car before then it will cost even more. A lot of foreign car companies only got started because they had help from their governments.

      Two things to keep in mind: entering into a new market

    • by sjbe (173966) on Tuesday December 10, 2013 @09:52AM (#45649721)

      That if GM had collapsed, it would have created a huge vacuum, that would have rapidly been filled with new startups.

      No it would not have. You clearly have NO idea how much capital is required nor how much infrastructure is needed to build an auto company and the supply chain that goes with it. Furthermore you seem to be forgetting that in 2008 there was ZERO capital available. Nobody could get capital from the banks because there was no liquidity to be had. Your notion that a bunch of startups could even begin to fill the void left by a suddenly missing GM is laughable. Even if we could have magically waived a wand and provided the capital the engineering would take years. It takes many years to even build a very small auto company like Tesla.

      GM isn't just an assembly line. It is the keystone in an entire supply chain. GM goes under and so does virtually every Tier 1 supplier as well as Ford and Chrysler. Even the CEO of Toyota admitted publicly that GM being liquidated would have hurt Toyota badly because they depend on many of the same suppliers. My company would have been out of business entirely and we are a Tier 3 supplier to GM. And we would have been just one of thousands of firms that would have collapsed. Even Tesla would likely have collapsed because the supply chain would have imploded. Tesla depends on many of the same suppliers who would now be bankrupt.

      • Re: (Score:3, Interesting)

        by Xest (935314)

        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. I

        • by timeOday (582209) on Tuesday December 10, 2013 @10:56AM (#45650367)

          But all that assumes that for some unexplained reason the demand for cars would just dry up.

          The reason demand suddenly dried up is explained perfectly well - because most people buy cars on credit, and there was a run on the banks (mostly by each other) and thus no money to lend for buying cars. It's the same reason other companies would not have had the capital to step up and take GM's place.

          This experiment has been done before, in the 1930s. Sure, the economy recovered eventually, but the cost was catastrophic - not "just" the human cost, but the entirely avoidable decade-long reduction in GDP. We just re-ran the experiment with a different intervention and a much better outcome, except it doesn't seem like we made any fundamental changes to stop it from happening again.

        • Right, sure, there's still demand.

          And that demand would be fulfilled by Japanese, Korean, or possibly Chinese manufacturers who have their shit together rather than the decaying and bloated corpse that is Detroit. And it most certainly wouldn't be a situation where "startups fill the void".

          Buying up GM's old plants? Why the hell would Nissan, Toyota, Kia, or SAIC want old and busted facilities with only wealthy union workers to hire in a state with strong union laws, in a country with a working EPA? Shippi

      • by bluefoxlucid (723572) on Tuesday December 10, 2013 @12:36PM (#45651399) Journal

        I've been listening to excuses like this for years. "No, it can't be done..." "No, corporate is too tight with money..." "No, the government doesn't care about us..."

        You can shut it. 12 years of the whole neighborhood calling city services to complain about a burned down house and they staunchly refused; in two weeks I had placed phone calls to 5 city offices, my councilwoman, and the mayor, and the house is now scheduled for demolition. People claim security just "makes things too hard" and I build systems that integrate security such that workflows are only affected by minor adjustment and some security administrator gets the job of managing all the big stuff in the background. I've been told time and again that certain tools can't be used because "nobody will buy into that, it's too expensive" or whatever and I've done the analysis and gotten buy-in from parties who stood in staunch opposition just days before.

        Stop telling me what can't be done. Go jump off a bridge, we don't need you.

    • Re:I think... (Score:4, Interesting)

      by johnlcallaway (165670) on Tuesday December 10, 2013 @10:20AM (#45649993)
      Or .. someone would have bought up GM at fire-sale prices, still owned all the patents and brand name but free from the yoke of union blackmail, been able to reduce wages and benefits to be in line with other auto manufacturers, and become a stronger company that is better able to whether economic downturns.

      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.
      • by Alomex (148003)

        but free from the yoke of union blackmail

        GM was brought down more by bad quality cars than anything else. Sure, unions didn't help, but unions in Germany are equally strong and their car manufacturers seem to have no problem thriving.

        A former manager of GM described the culture as one in which they would merrily spend $100M in an ad campaign for a new car but couldn't get themselves to spend $0.15 in a better rear light bulb which was much needed.

        Instead, we have the same company with the same problems just waiting for the same conditions to happen again.

        Say what? Management was replaced and contracts were heavily renegotiated and unions lost lots of powe

    • Re:I think... (Score:5, Insightful)

      by braeldiil (1349569) on Tuesday December 10, 2013 @10:28AM (#45650071)
      No, if GM had collapsed it would have taken the rest of the auto industry with it. See, first GM goes down. Then the GM suppliers start falling, because they're close to the edge and GM defaulting on payments breaks them. There's no funding available to restructure, so they're all getting liquidated at pennies on the dollar (remember, we're in a massive banking crisis with a liquidity crunch). The failures cascade down the supplier chain, and then start taking out other automakers (because they can't get parts anymore). Pretty soon you've blown up most of the industry. The correct anology isn't a a tree falling, making room for new, younger trees. This would be more akin to a massive forest fire (or even a volcanic eruption). Sure eventually you'd recover, but it would take years to decades and meanwhile it leaves a massive patch of utter devastation to deal with.
      • by Microlith (54737)

        So what you're saying is now that GM is independent, they should be broken up so that they can no longer be "too big to (be allowed to) fail."

    • Re:I think... (Score:5, Insightful)

      by FriendlyPrimate (461389) on Tuesday December 10, 2013 @11:06AM (#45650467)
      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.

      Try not to take this the wrong way, but I do find this common libertarian faith in capitalism to be very naive. The belief that letting the market decide everything is the best approach is just bizarre to me. It may be a good way of allocating resources efficiently, but it's also a recipe for economic inequality and environmental catastrophe.

      If GM had collapsed, it's not just GM that would have disappeared. There were MANY perfectly solvent suppliers that would have also gone out of business. These companies employ millions of people. With no cash flow, they cannot survive until these "new startups" get off the ground. How long do you think it takes to create a car company from scratch?

      And what would happen to all of these unemployed workers while all these startups are starting over from scratch? Economists were estimating the unemployment rate would have been around 15%-20% if the entire auto industry was allowed to fail. What effects would this have been on the remainder of the economy?

      Any what makes you believe that this vacuum would be filled with startups in the United States? It's much cheaper to start a company in China where you can simply dump your waste in rivers, and where you don't have to worry about stuff like worker safety. It's been reported in National Geographic that 70% of rivers and lakes in China contain water unsuitable for ANIMAL consumption. Our environmental regulations put the United States at an economic disadvantage since Chinese companies effectively don't have to spend money on reducing their pollution. And their workforce is accustomed to living on slave wages, having to work 12 hours a day, 7 days a week to make enough money to survive. And if a worker gets hurt or dies, there's plenty of replacements ready and able.

      However, from a pure libertarian perspective, you're essentially right. The market would have adjusted and allocated resources in the most efficient way. The winners would have been factory owners and investors in China, and to a lesser extent workers in China whose wages and working environment would have improved somewhat, but still much lower than that enjoyed by American workers. American workers would have been decimated because from a purely economic viewpoint, they simply cannot compete with cheap labor and lax regulation overseas.

      So sorry, but screw your libertarian beliefs if they mean I need to work for slave wages 7 days a week to survive, only to die at a young age due to emphysema or cancer because of pollution.
  • by felrom (2923513) on Tuesday December 10, 2013 @09:15AM (#45649469)

    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: (Score:3, Funny)

      Listen to you get all pedantic. Next you're going to want a proper audit of the Federal Reserve, or something insane like that.
      • Re: (Score:3, Insightful)

        by DarkOx (621550)

        I used to be a big backer of the audit the FED movement but the reality is, if we want a fair economy where everyone gets equal treatment the only solution is END THE FED. What are we going to learn from an audit that could possibly matter when they tell us they are effectively printing $85B every month?

        What they have been public about since the start of QE is so large in comparison to every reference frame we have, no other theft could amount to much of anything; because its a fiat currency reference is a

    • The government can just print more money. Then those dollars go sit in some foreign bank account, so it doesn't affect inflation immediately. Then some electronic currencies appear, make national currencies worthless, and the whole financial world explodes. Then we go back to creating local neighborhood markets, planting food in the backyard, and trading based on barter because no money of any kind is trusted by anyone.

    • 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.

      If the government had not stepped in to save GM, how would the bond holders be doing now? I imagine that if GM were liquidated, they would have gotten a few cents on the dollar. So yes, the bond holders got a raw deal, but lots of people got a raw deal during the meltdown of 2008. As the summary points out, the bailout prevented the loss of ~1M jobs and 0.6M people losing their pensions. If the government had not stepped in, most of the rust belt would be in bankruptcy. So all in all, money well spent.

      • by fche (36607) on Tuesday December 10, 2013 @10:37AM (#45650175)

        "So yes, the bond holders got a raw deal, but lots of people got a raw deal during the meltdown of 2008."

        That does not mean that normal bankruptcy law is appropriately abridged just for one group of beneficiaries. The feds didn't change the law - they just bullied secured bondholders into accepting a lot less than they were entitled to (from a selloff of the assets). It's a horrible precedent.

    • by dkleinsc (563838)

      the original bond holders who were illegally robbed are still waiting for their money too

      If a company goes bankrupt, bondholders are among the last people to get their debts paid - payroll, suppliers, bank lines-of-credit, and retirees all get paid before bondholders see a dime. That's at least part of why corporate bonds have an interest rate that is higher than a US Treasury: there's always that risk to bonds that is priced into the interest rate. It's also at least part of why bonds issued by successful and established companies have lower interest than bonds issued by no-name companies.

      GM d

    • by microbox (704317)
      Haha, the government only bailed out GM to the tune of $50 billion, and got $40 billion back [propublica.org]. The entire liability for the entire bail-out program (wall street and main street) is currently $30 billion, and will become smaller in the future. It is possible that there will be a net profit, and that is excluding any good that came from stopping the dominoes from falling, and sending the entire country into a depression.
  • Told you so ... (Score:3, Insightful)

    by Anonymous Coward on Tuesday December 10, 2013 @09:20AM (#45649505)

    " 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 [...] "

    Funny how they don't think throwing 10 billion down a toilet didn't further damage the economy. Even if GM went out of business, which it wouldn't have, someone else would have bought the resources and done something with them. Just flatly stating that 1 million jobs would have been lost is so deceitful.

    I also remember telling people over and over how this was going to be a huge loss since GM would never be able to pay it back and every liberal democrat crawled out from under every rock saying that this was going to be a great profit and win. NOW ... now its "Oh, we never meant to make a profit." Yeah, just like if I liked my health care / doctor I could keep it.

    Just wait till the 2014 elections ...

    • Yeah, we'll vote the other side of The Party in, that's gonna show them. And if that doesn't work, just wait for the 2016 elections when we're gonna vote for yet again the other side. That's gonna show them...

  • From the standpoint of your typical national politician, upon whom the fallout of job loss and economic strife will land, too big to fail is a no-brainer. Whether or not these bailouts are actually good for the citizenry as a whole is entirely another matter. Since national elections are funded on the backs of the Corporatocracy, instead of publicly (and evenly) funded, it would appear prudent at this juncture to assume it will continue.
    • by mi (197448) <slashdot-2012@virtual-estates.net> on Tuesday December 10, 2013 @09:37AM (#45649633) Homepage

      Whether or not these bailouts are actually good for the citizenry as a whole is entirely another matter. Since national elections are funded on the backs of the Corporatocracy, instead of publicly (and evenly) funded, it would appear prudent at this juncture to assume it will continue.

      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?

  • by kenh (9056) on Tuesday December 10, 2013 @09:28AM (#45649559) Homepage Journal

    Although the GM bailout ended with a $10.5-billion loss for taxpayers, Treasury officials say the goal never was to turn a profit.

    Well done - maybe next time you could try and break even? (Depending on how you look at it, AIG was a profitable bailout [marketwatch.com], for example.)

    • They did NOT say that the goal was to realize a loss, just that profit was not the reason for the acquisition.

      It should be noted that the loss realized is probably less than the gross federal revenue of the direct GM employees and supply contractors (parts and services) during that time, not including second tier effects like money spent by the employees or default losses on mortgages owned by fannie/freddy. (figure 200,000 direct and 200,000 immediate contract workers, $60k avg at 10% effective gross tax r

  • The US Economy (Score:5, Insightful)

    by korbulon (2792438) on Tuesday December 10, 2013 @09:37AM (#45649631)
    Socialism for megacorporations (which, after all, are people too!) that have been managed into oblivion, but free-market capitalism for the rest of us slobs.
  • the numbers of correct, the US could have let GM collapse and give ever person directly affected (1 million people) 50,000$ in a lump sum and we (the people) would probably still have come out ahead.

    Something to think about...

    • Have you ever heard the phrase "Give a man a fish and he'll eat for a day. Teach a man to fish and he'll eat for a lifetime?" That's exactly what's wrong with your proposal.

      Give a man $50,000 and he'll be set for another year - maybe two. But, if instead you use that many to provide him a job, then he'll have a much better chance of being set for a lifetime. A steady source of income is much, much more important than just giving people a short-term amount of money (and $50,000 really isn't a lot of money fo

  • Why is it...? (Score:2, Interesting)

    by ImOuttaHere (2996813)

    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.

  • Without it, 'the upper Midwest would still be a gaping, double-digit unemployment hole in the economy
    Like Detroit?
  • ...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

    A lot of Americans will not be proud of GM no matter what cars they build. They've been instructed not to because of the insidious union operating there.
  • by 0xdeadbeef (28836) on Tuesday December 10, 2013 @10:24AM (#45650041) Homepage Journal

    We bailed out the automakers for the same reason we subsidize food production - there is a strategic value in being self-sufficient. If there was another world war or a global catastrophe, we'd be fucked if all our cars and trucks and armored vehicles and tanks were manufactured elsewhere. And what's $10 billion compared to the trillions we already throw away to make sure the oil keeps flowing.

  • by gman003 (1693318) on Tuesday December 10, 2013 @10:50AM (#45650305)

    The fundamental principle of capitalism is "good* companies succeed, bad companies fail". Without that, capitalism breaks down.

    If a company is "too big to fail", that breaks capitalism. No company should ever get to such a position (even if it gets there legitimately), because when it does eventually fail, it's going to do too much damage.

    That may not have been easy to see before the economy shit itself, but it was definitely something anyone could see while the bailouts were happening. It should have been MANDATORY for any company that accepted bailout money to be broken up into pieces that were small enough, individually, to fail without destroying the entire economy. The fact that this did not happen means that we're just waiting for them to fail and ask for a bailout again.

    That said, I can think of a few situations where such a bailout would been justified. If the company's failure were caused by something truly unpredictable (meteor impact), or if it were not too-big-to-fail beforehand (eg. a military-equipment manufacturer could become essential to the nation if WW3 started up), it could make sense to do a bailout. It's not pure capitalism, but I'm not a pure capitalist. But these bailouts? None of them were at all unpredictable, and most of these companies have been "too big to fail" for longer than I've been alive (and that's not just because I'm young - AIG predates WW2, and GM predates WW1).

    * I'm using a non-cynical definition of "good companies" and "bad companies" here - for my purposes, a good company is one that offers a product that is in demand at a price customers can afford while turning a profit (or at least breaking even), while a bad one either offers something nobody wants, cannot do so at a price customers can afford, or can only do those two things by burning through cash.

    • by T.E.D. (34228)

      That said, I can think of a few situations where such a bailout would been justified. If the company's failure were caused by something truly unpredictable

      Like say perhaps all credit disappearing due to the credit suppliers own malfeasance in a completely different industry (mortgage lending)? Or does it have to be a meteor?

    • The fundamental principle of capitalism is "good* companies succeed, bad companies fail". Without that, capitalism breaks down.

      If a company is "too big to fail", that breaks capitalism. No company should ever get to such a position (even if it gets there legitimately), because when it does eventually fail, it's going to do too much damage.

      Teddy Roosevelt knew this. But this was before our current religion of capitalist economics. People actually think that Wall Street is required to keep the economy going, whatever that means. It's pretty bizarre.

  • Classy (Score:4, Insightful)

    by benjfowler (239527) on Tuesday December 10, 2013 @11:06AM (#45650469)

    While few normal people would begrudge the bailout for saving everyone even greater costs down the road, Anglo Saxon style capitalism has a BIG problem holding while-collar bludgers and thieves accountable for taking profits in good times, dumping liabilities, socialising losses and making society pay for their fuckups.

    Failure must be punished ruthlessly, but we fail to do so miserabley.

    The government should've rounded up all the senior managers, and garrotted them all in public for their crimes.

  • by JoeyRox (2711699) on Tuesday December 10, 2013 @12:32PM (#45651345)
    As harsh as it is for those on the losing side of the ledger, capitalism requires failure for those who misallocate resources. Periodically disrupting Adam Smith's "invisible hand" is very tempting and can be rationalized in countless ways, some intellectual, some humane, but in the end the result is weaker economy that is less able to compete on its own against other countries without continued subsidy from the government.

    Humans would have turned out rather differently if mother nature had decided to take the kind route and let some of our mutations survive and procreate.

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