published Friday, May 11th, 2012

A bailout success?

There seems to be confusion about whether Congress’ multibillion-dollar bailout of the auto industry worked.

It didn’t.

Supporters of the bailout — made necessary by poor management, unsustainable union contracts and other factors — cite the fact that companies such as General Motors still are cranking out vehicles.

But they conveniently gloss over the ongoing costs of the bailout.

Taxpayers involuntarily hemorrhaged almost $50 billion into GM to save it, and they were saddled with 60 percent ownership of the company in mid-2009. Naturally, those costs became part of our staggering national debt, on which we pay copious amounts of interest every year.

Today, we are told that GM — unaffectionately nicknamed Government Motors — is having one profitable quarter after another.

But with one gigantic caveat: Three years after GM emerged from bankruptcy, courtesy of the taxpayers, more than a quarter of the company still is owned by the government. And there seem to be few prospects that it will cease to be at least partially government-owned anytime in the near future.

The Obama administration doesn’t dare sell its 500 million shares in GM at present, because their current value means taxpayers would lose an estimated $15 billion. And no one is predicting a massive short-term jump in the value of those shares.

By what logic can GM be said to have become once again a “profitable” company when it has not yet repaid billions of dollars that it received not from consumers freely purchasing its vehicles but from taxpayers who were overwhelmingly against bailouts in the first place?

And that does not even touch on the bigger principle: that government does not exist to prop up failing businesses, which only discourages the entry of new, nimbler competitors. It also discourages the bailed-out companies from taking real steps to reconfigure their business models. (Washington’s idea of holding GM to tough standards is restricting corporate jet use and limiting pay for executives.)

In addition, bailouts send a signal to other large companies that they will have a taxpayer cushion to rest on if they perform poorly. That is scarcely likely to generate the building of better mousetraps.

Protecting businesses from the consequences of their actions is not and never has been a proper, much less a constitutional, function of the federal government.

But since when did propriety and constitutionality inhibit congressional mischief?

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You lost your chance to make this argument when it was George W. Bush's ball.

But really, Obama's doesn't dare do something stupid? And this is a problem in your mind? How long ago were Republicans demanding that Obama divest those stocks, despite the losses? You can take it as a sign against Obama, but I think the opposite is true.

But I'm glad you admit the poor management was a problem. Too bad you still try to blame it on the unions.

Still, you say the populace is against bailouts, but how sure are you that they'd really want the consequences? I've seen people be against paying for insurance, paying to fix problems, and their resentment is almost never trumped by the thanks they have for things being done right. Even though it should be.

But hey, I'm sure the government could reduce the size of large companies like GM so they didn't cause problems on such a huge scale when they messed up. They could do the same to Exxon's, Enron's, Apple's, Microsoft's, Wal-Mart's, ADMs...

You will endorse that, right? You do have a problem with the bailouts, right? So you want to prevent the circumstances that lead to them? Well, why do I get the idea you wouldn't take to this solution??

May 11, 2012 at 12:17 a.m.
nucanuck said...

It should be much easier for us to support the auto bail-outs that saved so many blue collar jobs than the on-going bank bailouts that have allowed outrageous bonuses and poisonous derivative leverage to continue for insolvent banks.

Allowing our banking excesses to go unpunished and unreformed will cost us our entire economy...soon.

May 11, 2012 at 1:28 a.m.
EaTn said...

Whether Mitt, Barack or even GW takes credit, the fact is the auto bailout is one of the few success stories coming out of this near depression. It's true if the auto industries had failed the slack would have been taken-up with the current foreign vehicles mostly made in this country, but one of the symbols of our country's endurance would have been lost.

May 11, 2012 at 5:54 a.m.
joneses said...

If you own a GM vehicle and they have your email address, you’ve gotten a nice email in the past few days that they paid back their bailout loan from the federal government. A lie. Well, technically true, but a lie. Turns out they took money out of one pocket and put it into the other. More precisely, GM took TARP money to pay off the auto bailout money and now must pay off the TARP money. GM, since being taken over by Obama, is now acting like the Obama administration. GM and Chrysler were really corporate pass-through entities; in reality this was a bailout of the UAW. Hence the extra-legal preferential treatment that the UAW got … with proceeds strong-armed from bondholders by the Obama administration. Another example of Obama’s practice of “redistributive justice.” Next up — they’re already floating the idea of a taxpayer bailout of the UAW pension fund. Since I’m already contributing to the UAW through my taxes, henceforth I decline to further contribute to them by refusing to purchase any UAW-assembled vehicle. I recommend that you do the same. The sooner the UAW dies, the sooner it’ll stop feeding off of the taxpayers.

May 11, 2012 at 6:33 a.m.
joneses said...

California research group, J.D. Power & Associates, in their annual report on such developments rated Ramos Arizpe Numero Uno among G.M. plants, which averages 86 glitches per 100 cars. The current industry average in the entire U.S. auto industry is 140 glitches, down dramatically from a few years ago. The Ramos Arizpe plant produces Buick Centurys and Chevrolet Cavaliers. Not just for Mexico. These cars are now sold in the U.S. and Canada -- 234,895 last year to be exact. Buyers of these models are the luckiest of all General Motors buyers, because their vehicles were made in Mexico. Fewer than eight percent of all U.S. buyers of these models had any claims against the warranties! The brutal fact is that either of these Mexican-made models is a better buy than an identical car made in Ste. Therese, Quebec or in Oklahoma City.

May 11, 2012 at 6:36 a.m.
joneses said...

Today

"Obama nets $15 million at gala Clooney fundraiser"

I wonder if these one per center obastard supporters that support obastard raising taxes on them will deduct from their taxes this 15 million dollars of donations to avoid paying taxes?

Another fine example of liberal/dummycrat hypocrisy.

May 11, 2012 at 6:50 a.m.
conservative said...

"By what logic can GM be said to have become once again a “profitable” company when it has not yet repaid billions of dollars that it received not from consumers freely purchasing its vehicles but from taxpayers who were overwhelmingly against bailouts in the first place?"

By what "logic", by the logic of a Lieberal, you just redefine the word profitable just like you redefine the word marriage.

May 11, 2012 at 8:13 a.m.
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