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.'"
Re:10B net loss? (Score:2, Insightful)
No, you're wrong.
There is a lot of supporting industry around automobile manufacturing. You can't just put it off to the side like you did. Also, if automobile manufacturing shut down the entire region would be thrown into deep economic turmoil that would spread to completely unrelated sectors.
Told you so ... (Score:3, Insightful)
" 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 ...
Re:I think... (Score:1, Insightful)
What a cute and naive view of the world. Ah to be an undergrad again...
It is OK. They can print more money. (Score:2, Insightful)
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.
Re:Told you so ... (Score:0, Insightful)
Actually ... think I am going with the third option. Both the establishment republicans and liberal democrats despise the Tea Party even though this is just another "crazy" prediction they made that has come true. How many times do they need to be right before they aren't fringe extremists anymore? How many times do liberals/progressives have to be wrong before people stop listening to them?
Re:I think... (Score:5, Insightful)
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.
Re:I think... (Score:4, Insightful)
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.
Re:Is it just me, or ... (Score:3, Insightful)
Re:Not just $10.5 billion.... (Score:3, Insightful)
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 all the matters.
The US Economy (Score:5, Insightful)
You have no idea... (Score:5, Insightful)
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:10B net loss? (Score:5, Insightful)
The auto industry has a massive supply chain with dozens of companies involved at each stage from collecting raw materials all the way up to manufacturing finished parts, as well as a massive dealership organization. If any of the major automakers were to just shut down, their own employees would be a drop in the bucket compared to the overall employment effects. Many of those supporting companies would be forced to close altogether.
Re:Obama (Score:5, Insightful)
Damn Democrats always messing with the free market.
Um, this started under GWB -- it's even in the summary. I doubt it mattered who was in office at the time, as the major parties are basically the same on all but cosmetic issues, but if partisan trolling is your thing at least get it right.
And the birth certificate thing... Really? Still?
Re:Is it just me, or ... (Score:5, Insightful)
The unspoken reason (Score:5, Insightful)
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.
Re:I think... (Score:5, Insightful)
Re:Not just $10.5 billion.... (Score:4, Insightful)
"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.
Re:Obama (Score:3, Insightful)
½ right. Bush stared the process but Obama finsihed it - and Obama did make some of the decsions.
My biggest grip is that Obama reward the union by putting their claims ahead of the other unsecured borrowers and bullied those who opposed them. If you want to argue that pension benefits should be ahead of unsecured debt that’s fine – please change the bankruptcy law – don’t retroactively change the rules to benefit your constituents.
Too big to fail == too big (Score:5, Insightful)
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.
Re:Is it just me, or ... (Score:5, Insightful)
Re:Obama (Score:5, Insightful)
The market has been fine since the beginning of human history. Leave it alone
The Free Market saves! The Free Market has no flaws! Trust in the Free Market, and you will be able to buy Paradise(tm) some day!
Market failure is both a hard fact of reality and, apparently, anathema to the dumbest religion in history.
Re:I think... (Score:5, Insightful)
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.
Comment removed (Score:4, Insightful)
Re:Is it just me, or ... (Score:4, Insightful)
Well, to be fair, the world has changed but the Unions have not.
Or at least not the tradtional American unions. I can point to other examples where unions have changed and done well.
Re:Is it just me, or ... (Score:4, Insightful)
Actually, GM has had problems since the 70s. It has been a long slow decline. Sadly, no one had the courage to make the radical changes that were needed.
Re:Obama (Score:4, Insightful)
He is a lot like Barrack Obama. The guy who created entirely new sections of government to rule over our freedoms.
They are different.George seemed to have a bit more respect for the people. Nice enough guy I would guess. But they both are responsible for spearheading a campaign to remove freedoms from the people. They both damaged the country. The real difference is that Obama still has time to screw more stuff up.
Re:Obama (Score:3, Insightful)
The market has been fine since the beginning of human history. Leave it alone
The Free Market saves! The Free Market has no flaws! Trust in the Free Market, and you will be able to buy Paradise(tm) some day!
Market failure is both a hard fact of reality and, apparently, anathema to the dumbest religion in history.
The Free Market is about profit and loss. Risk and reward. There is no such thing as "Too big to fail" in the Free Market. GM should have failed. Let it be refactored to be profitable without a big bailout, or even sell off it's assets.
Bailing out companies that make poor decisions because they are "Too big to fail" is crony-capitalism. It allows companies to make poor decisions and get away with them, and promotes brib^H^H^H^HPolitical Contributions.
Re:The US Economy [Antitrust] (Score:4, Insightful)
The government should not have allowed mergers into just 3 companies anyhow. If there were say 7 or so car companies, then one or two failing wouldn't topple the whole north.
If you let oligopolies form, then you get Too Big To Fail. We still have banks that are Too Big To Fail. Nobody has the guts to slice them up.
Re:Obama (Score:2, Insightful)
That all sounds grand in Libertarian Heaven, but the reality is letting them go down would have been a devastating impact on the economy and probably enough to make recession far worse. BTW, I don't know if any of those links made the point but the estimated costs for social services for all those laid off employees would have been over $100 BILLION.
Re:You have no idea... (Score:4, Insightful)
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:Is it just me, or ... (Score:5, Insightful)
Theoretically the bailouts were necessary, but the survival of those banks was not.
Re:Obama (Score:5, Insightful)
Considering over $1 TRILLION was spent bailing out the banks and Wall Street, that doesn't seem too bad.
Re:You have no idea... (Score:2, Insightful)
Somebody once had a good idea. Therefor all new ideas are good.
Fucking idiot.
Re:Obama (Score:4, Insightful)
Interesting article in the Guardian this weekend which talks about the failings of capitalism:
http://www.theguardian.com/world/2013/dec/08/david-simon-capitalism-marx-two-americas-wire [theguardian.com]
I think the Pope has it right... we have gone off the cliff worshiping the golden calf.
Re:GM liquidation would not just affect GM (Score:4, Insightful)
In the real world however a GM liquidation would have destroyed the entire supply chain. GM doesn't exist in a vacuum. Ford would have gone bankrupt as well because they share the same suppliers. Even Toyota would have taken a hit.
Or perhaps GM would have been calmly restructured according to law, but apparently we don't care too much about the rule of law.
Re:Is it just me, or ... (Score:2, Insightful)
Re:Obama (Score:4, Insightful)
Of course not, but then again the bond holders also had a contract with GM.
In bankruptcy law there is an order of payment.
Payroll (as you mentioned in the AIG case) and taxes are first,
Secured lien holders are second.
Unsecured lien holders – which includes pension obligations - are third.
Stock holders are last.
Obama jumped the pension obligation ahead of the secured lien holders. There was no legal reason for this and it was wrong.
If you think the order of payment is wrong then get the law changed. Don’t retroactively change the rules because you have political debts to pay off.
Re:Obama (Score:4, Insightful)
Which sections of government did Obama create? I'm assuming you meant Homeland Security for Bush.